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.

Can You Cancel Your Listing?

I don’t know.  That’s a legal question and the answer will vary by State and by specific Listing Agreement.  The more important question is: Why do you want to cancel your listing?  Usually the reason is one of the following:

  • No activity
  • No marketing
  • Greener Grass
  • No communication

Let’s take them in order.

If your house is not being shown, if your open house is the loneliest place in town, you have to ask why.  First, look at the market.  How long does it take a properly priced listing in your area to sell?  Is it 30 days or 300?  If the market is racing along like molasses on a cold November morning, even the best listing, offered by the best agent is not going to be shown much.  Have a conversation with your agent, get the facts, and adjust your expectations.

If it is a normal 30 – 90 day market look at the product.  By that, I mean your house.  It is a product now, one that has to compete with similar products on the market at the same time.  How does it stack up in terms of curb appeal?  Does it show well?  And most important, is it properly priced?  It can be very difficult for home owners to see their houses through a cold buyer’s eyes. History and emotion cloud the vision and the run-down-fixer-upper that’s priced 10% over market looks like a bargain-priced-palace to the seller.  Shake yourself out of that stupor!  Call your agent and ask them to show you six homes any potential buyer who might look at yours would also see.  Then come back to your house, take a careful look and talk with your agent about how to be more competitive.

By far, the biggest reason homes aren’t shown and don’t sell is price.  Did you take your agent’s advice on pricing at the time of listing?  Or did you insist that you wanted to start higher?  (after all, you could always come down)  Take a moment and watch this short video about pricing and see if it resonates with your situation:

Now let’s talk about ‘No Marketing.’  Sometimes sellers complain about marketing because they don’t see ads in the newspaper or in the homes magazine and so on.  The reason is simple: print media DOESN’T WORK ANYMORE.  Yes, that’s how you sold a house back in the ’80’s, but it’s a new world now.  Marketing takes place mostly online.  So, go to Zillow.com.  Can you find your house?  Now go to Trulia.com.  Is it there?  Go to your local MLS’s public website and see if the listing is there.  Now go to one of your agent’s major competitor’s website.  Verify that the site is displaying ALL local MLS listings and then look for yours.  If you’re finding your home online, that part of marketing is being done.

Is there a sign in the yard?  Are flyers available?  Is there a QR code on the sign or some other means for SmartPhone enabled passersby to get information about the house?

Is there a lockbox on the door?  Is the house available to be shown on short notice?  Understand that if you restrict showing activity by limiting accessibility what you’re going to get is restricted activity!  I understand that your reasons for not wanting a lockbox are probably sound and there probably is a good reason why the house can only be shown between the hours of 1pm and 5pm, Monday thru Friday . . . but if you really want to sell, maybe you better find another workaround.

Greener Grass.  There is a natural emotional response to making a major purchase.  It is called buyer’s remorse.  You fall in love with the convertible on the lot and buy it, but shortly after driving away you begin to wonder if you made the right decision.  Other cars start to look very attractive.  You know how it goes.  The same dynamic is present when you make the listing decision.  What makes it worse is that the world is full of real estate agents who will do a little courtship dance to inflame those natural doubts you are probably having.  They will imply (or flat out say) they could get you more money or that your agent isn’t doing it right or any number of things to drive a wedge between you and your chosen agent.  Of course, this kind of nonsense is highly unethical . . . but it happens all the time.

If you get this kind of song and dance from another agent, I’d suggest you ask the agent to hang on for a moment while you call your agent.  Then the three of you can discuss the problem!  Most of us are not that confrontational, so plan B would be to listen to what the other agent has to say and call your agent as soon as they leave.  When your doubts are on the rise, you need reassurance and your agent is the person who can give that to you.

Here’s the truth:  if you have a good product that is properly priced and marketed, there is very little more or different one agent or company can do over another.  If there is a difference it’s usually a matter of personality – which is not a good reason to ditch your agent and go with another – or competence.  If you’re discovering that your agent does not seem to know his or her business . . . well, where were you when you decided to sign the listing agreement?  What?  You didn’t ask how many transactions your agent was doing each year?  You didn’t ask about the experience and productivity of the office?

There are some very good real estate agents who do a handful of transactions each year.  However, they are the exception, not the rule.  There is no way an agent doing 8 deals a year (which is industry average) knows as much about putting a transaction together and solving problems as one who is doing, say, 20.  If you are just now realizing that your agent is a little greener than you’d like, get them some help!  Call their Broker (that’s the person the agent works for) and talk about it.  They will likely find a way to add a more experienced agent into the mix and you’ll be able to relax.

Finally, Communication.  Your agent should be talking to you every week whether there is anything to report or not.  You should be reviewing market activity together once a month.  If this isn’t happening, call your agent and communicate your expectation for staying in touch.  If things don’t change, call the agent’s Broker.

To summarize, if you are unhappy and want to cancel your listing, first talk to your agent.  Tell them exactly why you are unhappy and give them a chance to make it right.  If that fails, talk to the Broker.  That person is building a business based on the testimonials of happy customers.  If you are unhappy, he or she is going to want to know about it.  And you’ll probably find that the Broker will do whatever it takes to make you happy because an unhappy customer or two can greatly impact a business plan!

If talking to the Broker doesn’t help, then you probably need to seek legal advice.  A listing agreement is a legally binding contract that rarely can be cancelled unilaterally.  The last thing you want is to think you fired your agent,  list with another agent who sells the house . . . and find your are obligated to pay both agents a full commission!  It happens!

My final and most important piece of advice is this:  When you get ready to list, talk to a Help-U-Sell Broker.  This group does it differently and better.  All you have to do is look at a typical Help-U-Sell broker’s website to see how important happy customers are to them.  Testimonials are everywhere as are pictures of homes they’ve sold and how much those sellers have saved.  If being well-taken-care-of is your goal, you can’t do better than Help-U-Sell.  You can find a Broker HERE.