Dear Real Estate Adviser,
Our home was on the market for five months, but we got frustrated and took it off in January. In April, we were contacted by a man who heard about our home from our neighbor and he appears to be a serious buyer. However, our one-year contract with the listing agent doesn't end until August. Will the agent be entitled to a commission even if she didn't bring together the buyer and seller?
-- Calley N.
The answer should be apparent in your contract, though a few gray areas will not be. My guess is that since your agent persuaded you to sign an unnecessarily long one-year listing contract, she probably built other leverage into the contract for herself as well. She likely claims an "exclusive right to sell" in the contract, which, if I had to guess, also states that you have an obligation to refer all buyer prospects to the agency.
Finger-pointing could help
Certainly, you might be able to claim the agent didn't deliver. After all, a skilled agent should have been able to produce a suitable buyer within five months, particularly in a rising real estate market, you would think. While that may be the case, it's also quite possible that you overpriced the place or made her job of selling it difficult in other ways, at least in her view. Moreover, you did pull the house off the market with seven full months left on the listing agreement, effectively sidelining an agent who's still under contract. Had you registered complaints about her representation during those five months, you'd have a stronger case to break the contract and go on your merry way.
Sometimes in situations like yours, owners will just tell the agent things aren't working out, and the agent will relent and simply release the owners from the agreement to avoid ill will. However, then those owners will turn around and sell the house themselves, whereupon agents will likely find out from someone in their close-knit agent community and lay claim to commissions. Tenuous footing there. The agent in your case could also argue that she helped you establish a baseline price, spent money on marketing materials, and gave you staging or repair advice, which set the table for your sale.
You might have to pay up
So my guess is that you will owe the agent something. If this "serious" buyer doesn't have an agent of his own, meaning there's no party to claim half of the typical 5 percent or 6 percent commission, you could offer half of that percentage to the agent to handle the transaction. Hence, she will be out nothing and you'll have someone to help handle the closing and the maze of paperwork. At the very least, you will probably owe the agent for money spent on marketing materials and listings.
A teachable moment
There are a few lessons here. In the future, please don't sign a listing contract for more than six months. There are typically no advantages to doing so unless you're trying to sell a mansion, ranch or other specialized property that's harder to move because it appeals to a smaller buying universe. In fact, a three-month contract may be enough if you live in a sellers' market. You can always extend a listing agreement if you need to, but you can't always gracefully exit one, as you're discovering. It would be prudent next time to build in your own contractual advantage in addressing those what-if scenarios. The worst an agent can do is turn down such a listing.
Good luck on your sale!