March 29th, 2021 at 2:22 pm
Multiple Choice Question: If the seller were to collect $40,000 from the buyer, are we as the listing broker and agent entitled to receive half of the money? Pick the best answer:
A. Yes.
B. Yes, if our listing agreement has expired.
C. Yes, if we do not help the seller sell the property to another buyer.
D. No.
Answer: Answer A is the correct answer! Under paragraph 3B of C.A.R.’s Residential Listing Agreement (RLA), if the seller were to collect the buyer’s deposit as liquidated damages, we would generally be entitled to receive one-half of what the seller collects.
The purpose of paragraph 3B is to protect the listing agent. After all, sometimes in a difficult and drawn-out sales transaction where the buyer ultimately cancels without a valid reason, the seller may be reluctant to continue listing the property with us. In that case, paragraph 3B entitles us to at least receive half of what the seller recovers from the buyer. Of course, in practice, if the seller is happy to continue listing with us, and we anticipate getting our full compensation when the seller sells to another buyer anyway, we will generally decide not to make a claim under paragraph 3B for one-half of the damages that the seller recovers.
As for Answer B, nothing in paragraph 3B predicates our entitlement to one-half of the damages received upon our listing expiring. In fact, unless we do not want to work with a particular seller anymore, it would be best practices for us to extend until at least the close of escrow any listing period that is scheduled to expire during the pendency of a sales transaction.
As for Answer C, again, nothing in paragraph 3B predicates our entitlement to one-half of the damages received upon the seller not selling to another buyer. However, it would be reasonable to interpret the RLA as saying that any funds we collect under paragraph 3B would be deducted from the full compensation owed to us.
-Thank you to Aaron Gaston (Ventura Office) for suggesting this week’s legal tip!
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