LISTING AGREEMENTS: PROSPECTIVE BUYERS
LISTING AGREEMENTS: PROSPECTIVE BUYERS
This is an advisory to listing agents to protect their right to commission upon expiration or cancellation of the listing period.
A PROSPECTIVE BUYER is a person who either: (1) viewed the property during the listing period or; (2) wrote an offer for the property during the listing period.
Paragraph 4(A)(2) of the Listing Agreement allows the agent to earn a commission after expiration or cancellation of the listing period if the property is sold to a PROSPECTIVE BUYER.
However, to preserve this right the listing agent must fill-in the number of “calendar days” at paragraph 4(A)(2) of the Listing Agreement at the time that the Listing Agreement is signed , and then must send a PROSPECTIVE BUYER NOTICE to the seller upon expiration or cancellation of the listing period. Paragraph 4(A)(2) states:
“If within ____ calendar days (a) after the end of the listing period or any extension; or (b) after any cancellation of this Agreement, unless otherwise agreed, Seller enters into a contract to sell, convey, lease or otherwise transfer the Property to anyone (“PROSPECTIVE BUYER”) or that person’s related entity: (I) who physically entered and was shown the Property during the Listing Period or any extension by Broker or a cooperating broker; (ii) for whom Broker or any cooperating broker submitted to Seller a signed, written offer to acquire, lease, exchange or obtain an option on the Property.”
The most common number of “calendar days” selected is 90, 120 or 180 days. This means that the listing agent is entitled to commission anytime a seller sells to anyone who (I) saw the property during the listing period or (ii) wrote an offer on the property during the listing period even though the property is not sold until after the listing period expires.
This prevents a seller from rejecting a good offer during the listing period, and then accepting that same offer after the listing period expires to avoid commission.
PROSPECTIVE BUYER NOTICE
Once the Listing Agreement expires, or is cancelled, the listing agent must send a written summary to the seller identifying all persons who expressed an interest in the property during the listing period (“Prospective Buyer Notice”).
The Prospective Buyer Notice must be in writing. It can be sent by the listing agent to the seller by e-mail, facsimile or U.S. Certified Mail. However, it must be sent within 3 calendar days after the listing expires or cancels.
“Seller, however, shall have no obligation to Broker under paragraph 4(A)(2) unless, not later than 3 calendar days after the end of the Listing Period or any extension or cancellation, Broker has given Seller a written notice of the names of such PROSPECTIVE BUYERS.”
This means that the listing agent must send a Prospective Buyer Notice to the Seller within 3 days after expiration of the listing.
If the listing agent terminates the listing agreement by mutual consent, and executes a Cancellation of Listing, then the listing must also send a Prospective Buyer Notice to the Seller within 3 days after expiration of the listing.
If the listing agent fails to send a Prospective Buyer Notice, then the listing agent will have no right to commission even if the seller sells the property to a buyer who saw the property during the listing period.
CANCELLATION OF LISTING
If the seller requests cancellation of the listing, the listing agent will generally complete C.A.R. Cancellation of Listing (form COL). However, many listing agents forget that they still need to send out a Prospective Buyer Notice.
Listing agents must preserve their right to commission upon expiration or cancellation of the Listing Agreement by doing the following:
- Fill-in “calendar days” in paragraph 4(A)(2); and
- Send Prospective Buyer Notice to seller identifying all “PROSPECTIVE BUYERS” within 3 calendar days of EXPIRATION or CANCELLATION of the listing period.