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Picture this: Despite you and your listing agent’s best efforts, your home didn’t get any interest from buyers. It’s been a couple of months and your contract is set to expire, meaning that your agent is no longer legally obligated to represent you. That means you no longer have to pay the commission, right? Not exactly.
Whether or not a real estate agent can collect commission really depends on the commission protection period as defined in your listing agreement.
“Generally, even if the contract has expired, there will be a clause defining a time period during which the real estate agent will still receive a commission in the event of a sale,” explains Christy Murdock Edgar, a Realtor® in Northern Virginia and Washington, DC. “The thinking is that the marketing, the listing itself, and the other work paid for and facilitated by the real estate agent led to the sale.”
In other words, you may still owe a commission for the work your agent already did to sell your property.
Think that sounds unnecessary? Look at it from a broker’s point of view. Such a clause prevents the agent from losing out on a commission if, say, the client stumbles across some buyers and sneakily terminates the contract in hopes of saving some green. Ain’t (legally) gonna happen.
To make sure you know where you stand, check your listing agreement, advises Jane Peters, broker and owner of Home Jane Realty in Los Angeles. In it, you’ll find a section that states the agent may be due commission for a certain number of months after the end of the contract for any persons to whom they gave entry to the property during the listing period. For this to be valid, the section must be fully filled out.
“This would also apply to any offers that were submitted to the seller during that time,” Peters adds.
And like other situations in the real estate world, the listing period is negotiable. Say, for example, you want a quick sale and your agent knows she has only 30 days to get that done.
“You may want to define that commission protection period and say, ‘After the terms of this contract, that’s it,’” says Edgar.
One caveat: “A lot of times,” notes Edgar, “the language [in the listing agreement] says that a commission is still due unless [the seller’s] entered into another agreement.” After all, if you end a contract with one agent and then immediately sign with another, your first agent is completely justified in saying her prowess contributed to your closing on the house.
The listing agreement contains many details, and Edgar says you shouldn’t be shy about coming right out and asking: “When does the contract end? If it ends, how long am I still obligated to pay? If I enter into a new agreement, am I still obligated to pay?”
Understand the terms, and you’re less likely to run afoul of them—or your agent.
Stephanie Booth's stories have appeared in magazines such as Real Simple, Cosmopolitan, Glamour, and Psychology Today.
