How Long After You Cancel Your Listing Are You Obligated To Pay A Commission?

This title is a search string used to find The Set Fee Real Estate Blog yesterday.  It’s an interesting question and, though I’ve talked about cancellations before, I’ve never answered it.  So here goes:

It depends on two things

  • What the original Listing Agreement says and
  • What the Cancellation Agreement says

I know:  Duh, right?  But this is America in 2014!  Nobody reads anything anymore!  We unknowingly give Facebook permission to listen in on our lives via the microphones in our smartphones because we accept privacy agreements without reading!

I’m not an attorney, so my advice is worthless and anyone taking it would probably be foolish . . . however:

Generally speaking, without a formal Cancellation Agreement signed by the Broker, your listing would still be active even if you pull the house ‘off the market.’  The sign might come down and it might be out of the MLS, but in the absence of a written agreement cancelling the Listing – it will still be active for the original term of the listing . . . and you’d be obligated to the commission provisions should the house sell during that period.

In addition, most Listing Agreements have some kind of hold-over clause that requires you to pay a commission should anyone who was shown the home during the listing period return after cancellation/expiration and buy the house.  Often there is a requirement for the Broker to submit a list of these hold-overs to the Seller and usually there is a reasonable time period for the provision – like 90 days or something.

If you really DO cancel your listing – which means you get a written and signed Cancellation Agreement from the Broker – the terms of that agreement will override the terms of the original Listing Agreement.  So read it carefully.  It will spell out the circumstances under which you may be obligated to pay a commission.

People cancel for lots of reasons, some of them good:  job loss, family crisis, death, the house you were wanting to buy was sold before yours was and so on.  Most Brokers are pretty good about accommodating this kind of cancellation. Still: READ THE AGREEMENT!

People also cancel for really bad reasons:  a potential buyer shows up on the doorstep and says he or she will buy (at a reduced price) if the seller ditches the Realtor, another Realtor tells the seller he or she has a ready buyer but there will be no deal unless the listing Realtor is gone, the seller and the Broker (or Broker’s Agent) aren’t getting along (more on that here); you get the picture.

Most Brokers are pretty good about sniffing out this kind of nonsense.  They may succumb to pressure to release the seller BUT usually protect themselves with a good Cancellation Agreement that involves paying a commission if the house sells for any reason for a period of time.

Because my advice is ABSOLUTELY WORTHLESS and because real estate contracts and practice vary by State and location, if you are in a pickle with your Listing, I’d suggest you first try to work it out honestly with the Broker.  But if your needs are not being met and you really want OUT, contact a local attorney specializing in real estate and get their advice and assistance.

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