Getting a new listing is such a joyous occasion that you won’t want to damper your excitement with any concerns about protecting yourself if your listing expires. So let’s just get that part out of the way right now before you get the listing! After all, when the time comes, you must know how to properly fill out your new listing agreement to protect your commission if your listing expires.

What is the Safe Harbor Clause? Paragraph 3A(2) of C.A.R.’s Residential Listing Agreement entitles you to get paid your commission if certain prospects purchase the property after your listing period has already expired. 

Why Would a Seller Agree? Among other things, the safe harbor clause helps to ensure that we will work hard to get the property sold. If we procure a buyer during our listing period, we do not want to have to second guess as to whether the seller is deliberately stalling in hopes that our listing expires so they can cut us out of the deal.

What Timeframe Should Be Inserted? The longer the better. Many agents, such as those who work in second-home destinations, will routinely insert 365 or more days as a safe harbor period, because prospective buyers may come back to buy long after the listing expires. If a prospective buyer only flies out to visit Southern California once a year, for example, a 90-day safe harbor period may just not be long enough to protect you.

Who is a Protected Buyer? A protected buyer under the safe harbor clause is generally anyone or that person’s “related entity” who, during the listing period, was either shown the property or wrote an offer.

Who is a “Related Entity?” Unfortunately, the C.A.R. listing agreement does not define a “related entity.” Some legal practitioners believe it is someone’s trust, LLC, corporation, or other “legal” entity. Others tend to believe that it also includes “human” entities who are related to a prospective buyer, such as by blood or marriage. Regardless of the ambiguity, you definitely want to protect yourself as the listing agent by getting the names of all visitors to the property, and encouraging them to come back during your listing period with their spouse or anyone else who will be involved in the home-buying decision-making process.

Is There a Form for the List of Prospective Buyers? Yes. You can use C.A.R.’s Notice of Prospective Buyers (NPB). When you get a new listing, consider printing out the NPB form and hang it up at your desk as a reminder to keep adding any identified buyers to your list.

What’s the Biggest Mistake that Agents Make? Time and time again, agents fail to get the NPB to the seller before the end of their listing period. Don’t let that happen to you! To protect your commission, you must get the list of names to the seller before your listing expires.

-Thank you to Nicki Marcellino (La Jolla Manager) for suggesting this week’s legal tip.

Copyright© 2020 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of October 12, 2020. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals.