RESIDENTIAL LISTING AGREEMENT
RESIDENTIAL LISTING AGREEMENT
Listing Agents can preserve their right to commission after Expiration or Cancellation of the Residential Listing Agreement (“RLA”) by doing the following:
1. Fill-in “calendar days” in paragraph 3(A)(2) of the RLA; and
2. Send a PROSPECTIVE BUYER NOTICE to seller identifying all “Prospective Buyers” NO LATER THAN THE END of the Listing Period upon Expiration or Cancellation of the RLA.
California Association of REALTORS® revised the Residential Listing Agreement in 2016 to require Agents/Brokers to provide a list of Prospective Buyers no later than the “end of the listing period” instead of “within 3 days” as formerly allowed.
The purpose of paragraph 3A2 of the RLA is to allow Agents/Brokers to receive a commission after expiration of the Listing Agreement if the seller ultimately sells to (i)a Prospective Buyer who physically entered the property or (ii) made a written offer during the listing period.
Many agents neglect to complete paragraph 3A2 and accidently give the right to commission away when seller then sells to a Prospective Buyer after Expiration or Cancellation.
WHO IS A “PROSPECTIVE BUYER” UNDER THE RLA?
A Prospective Buyer is a person who either (i) physically entered the property during the listing period or (ii) wrote an offer for the property during the listing property (see paragraph 3A2 of the RLA).
Paragraph 3A2 of the Listing Agreement allows the Agent to earn a commission if the property is ultimately sold to a Prospective Buyer even after the RLA has Expired or has been Cancelled.
However, to preserve that right, the Listing Agent must fill-in the number of “calendar days” at paragraph 3A2 of the RLA at the time that the Agreement is signed. Paragraph 3A2 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 named by the Listing Agent who (i) physically entered 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 with the same buyer after the listing period expires to avoid commission.
It also prevents another agent from picking-up your expired listing and selling the property to one of your Prospective Buyer without paying you commission.
WHAT IS A “PROSPECTIVE BUYER NOTICE.”
Once the Listing Agreement expires, or is cancelled, the Listing Agent must send a written list to the seller identifying the names all persons who (i) physically saw the property or who (ii) made a written offer 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, the timing is critical, and it must be sent “NO LATER THAN THE END OF THE LISTING PERIOD.
“Seller, however, shall have no obligation to Broker under paragraph 4(A)(2) unless, not later than 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 no later than at the end of the Listing Period. You no longer have 3 days as was given under the previous version of the RLA.
If the Listing Agent fails to send a PROSPECTIVE BUYER NOTICE in a timely manner, then the Listing Agent will have no right to commission even if the seller sells the property to a buyer who saw or made an offer on the property during the Listing Period.
CANCELLATION OF LISTING.
If the seller requests Cancellation of Listing, the Listing Agent will generally complete the CAR Cancellation of Listing form (form COL).
However, Listing Agents often forget that they still need to send out a PROSPECTIVE BUYER NOTICE to preserve their right to commission after Expiration of Cancellation of the RLA.