Monday, April 25, 2011

When does your contract with the listing agent expire?

A listing contract is between the seller and their agent who lists house for sale.  The expiration of the contract is determined by both parties and is clearly stated in the contract.   Ideal situation is - the house is sold within the time frame mentioned in the contract, the agent gets paid and everyone is happy.

However, if the house does not sell within the time frame mentioned and the contract "Expires" or the listing is "Withdrawn" from the MLS - there are further scenarios to consider.

The Listing "Expires"  - Which means that the contract end date has passed and the agent is no longer marketing the property.  The MLS system shows it as EXP.
-The contract can always be extended if both parties agree.
-The seller may decide to go with another agent, which is usually the case - assumption being that the new agent brings a freshness to the listing and new marketing strategy.
-The seller may decide they do not want to sell anymore or
-Sometimes a buyer may want to buy the property even though it is not actively marketed which would be  a  FSBO (For Sale by Owner) situation.   Under these circumstances, if the buyer had visited the property when it was marketed by the previous agent and is buying it within a certain time frame after the expiration of the contract, the previous agent may still be entitled to a commission.  The premise being that it was the agent's marketing effort that resulted in attracting the buyer and hence the sale.  The time frame within which this is applicable is mentioned in the contract and may be different for every brokerage. 

The Listing is "Withdrawn" - The seller decides they do not want to sell anymore and the agent stops marketing the property.  However, the listing contract term may not have expired, so the MLS system shows it as WTH (withdrawn)  This means that the seller is technically still under contract with the agent - only the agent is not actively marketing the property any more.   Subsequently, if the seller wants to hire another agent or sell the property themselves (For Sale by Owner) it is best to check the expiration date on the contract.  If the contract with the first agent has expired - seller is free to continue.  If the contract has not expired, ask the first agent to "Release the seller from the contract" before moving forward.   Best to get this in writing - a simple email from the agent stating that the seller is  not under contract anymore is sufficient.  Then seller can now move forward knowing there is no conflict regarding real estate commissions.   If seller is not released from the contract by the previous agent - and the property is sold while still within the contractual obligation, the previous agent may be entitled to a commission.

Most agents have no problem and will immediately release the seller from the contract when requested.  However, some agents feel that they have invested their services in marketing the property and are entitled to some compensation. I have known situations where agents have asked for a certain $ amount to release the client from the contract.  Under these circumstances, the seller may choose to wait until the contract has expired or pay the agent as requested. 

I personally feel that if  client has indicated that they do not want to work with an agent anymore - it is unethical for the agent to insist on any payment or hold the client hostage until the expiration date.  It is best to honor the client's wishes and release them from the contract.

What do you think?  Should the previous agent get paid under these circumstances?  With all the effort that is put into listing and marketing the property - would it be justified to ask for some compensation, especially considering the client's objective of a sale are being met?
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Bela Vora, REALTOR®, 
Coldwell Banker Preferred - Exton
Office: 610 363 6006; Cell: (484) 947 3127
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