When Do I Owe a Realtor a Commission?

Sellers typically owe a Realtor a commission once their home has been sold; however, some more “old school” listing agreements will have language stipulating that a seller owes commission as long as a “ready, willing and able” buyer has been found.

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When Is a Realtor Entitled to Commission?

A Realtor is entitled to commission at the closing of a transaction; however, home sellers should be wary of the exact language in their exclusive right to sell listing agreement on when a commission is owed.

While it’s most common for listing agreements to stipulate that the commission will be paid by the seller at closing, you will see some more traditional listing agreements that will state that a commission is owed as long as a “ready, willing and able” buyer has been found.

This type of language can be extremely problematic, as a seller could potentially end up owing commission even if the property doesn’t end up selling.

What constitutes a ready, willing and able buyer?

A ready, willing and able buyer is a prospective purchaser who has submitted an offer that is acceptable to the seller, who is highly interested in moving forward with the purchase, who is financially and legally capable of completing the transaction, and who isn’t actively pursuing other purchase options.

As you can imagine, this sort of language in a listing agreement can cause all sorts of problems for the seller, such as owing a commission for a non-binding accepted offer if the seller later decides to back out. If you see this type of language in a listing agreement that a real estate agent is trying to get you to sign, you should run.

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Do Realtors Get Paid If a House Doesn't Sell?

Usually no. Most listing agreements these days will stipulate that a Realtor is only paid their commission at closing, meaning that no commissions will be paid unless a property closes.

This type of language is best for a seller, as it precludes the chance of the seller owing commission just because a “ready, willing and able” buyer is procured, even if the seller ends up deciding not to sell to the buyer, or at all.

A seller is also protected if a buyer is unable to complete a transaction after contract execution, i.e. the buyer defaults on the contract for some reason, such as a job loss.

We highly recommend avoiding signing any listing agreement that has language which states that you will be liable for broker commission if a “ready, willing and able” buyer is found.

It is simply not standard anymore in many states such as New York, and especially in densely populated metropolitan areas like New York City where competition between agents for listings is fierce.

We’ve included below a sample clause from a New York listing agreement where commission is only owed if a property is actually sold.

Example Listing Agreement Commission Clause

If the Property is sold pursuant to this agreement, you shall pay New York Realty a Fee for Service equal to six percent (6%) of the total sale price of the Property. This Fee for Service shall be due and payable whether the Property is sold (a) to an independent third party, (b) to the Board of Managers of the building in which the Property is located (exercising its right of first refusal), or its designee, or (c) to a current lessee of the Property.

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Do You Have to Pay a Realtor If You Decide Not to Sell?

It depends on what your listing agreement says. Many listing agreements will have language stating that the agreement can only be modified with mutual consent, thus a listing agent could conceivably keep marketing your property online against your wishes.

However, it’s rather unlikely that a listing broker will be able to procure a “ready, willing and able” buyer, much less close a deal, without the owner’s willing participation. For starters, owners could easily make their homes inaccessible for showings, and thus prevent most buyers from seriously placing an offer.

What about if a house simply didn’t sell during the contract term?

Most traditional listing agreements will have some sort of a marketing expense reimbursement clause, whereby a seller owes a fixed dollar amount to the listing broker should a property not sell.

For example, many traditional full-service brokerages will charge the seller several thousand dollars if a property doesn’t sell, to compensate the listing brokerage for marketing expenses.

To be fair, listing agents do a lot of work and are typically only paid if a deal closes. Commuting at odd hours for private showings and taking calls at all hours isn’t easy.

However, while we do believe listing agents invest a significant amount of time, resources and energy into marketing a property, we also believe that even $1,000 or $2,000 is too much to charge as a marketing expense reimbursement.

At Hauseit, our partner brokers will not only market your property for only a 1% listing fee, payable at closing, but they’ve also agreed to waive the traditional marketing expense reimbursement.

Interested in selling? Learn more about how we approach a full service listing by signing up to speak with one of our partner brokers about our 1% for Full Service listing option.

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Can a Real Estate Agent Get a Commission After the Contract Expired?

Yes, a real estate listing agent can still earn commission on your home sale, even after your listing contract with his or her brokerage has expired.

That’s because it’s industry standard for listing agreements to contain a clause stipulating the number of days a listing agent has to deliver to the seller post contract expiration a list of buyer names that have seen the property.

Typically, there will be a maximum number of names that the listing agent is allowed to include. If the seller sells to any one of these protected names even after contract expiration, typically for a specific period of time, then the seller would still owe commission to the former listing agent.

Note that this may cause the seller to owe commission to both their former listing agent as well as their new listing agent, if they have one.

Can I Sell My House Privately After Listing with a Realtor?

An owner can sell privately, or For Sale By Owner, as soon as the listing contract expires. However, the owner may owe commission if he or she decides to sell directly to a buyer that had originally been shown the property by the former listing agent.

If a buyer is one of the protected names on the list submitted by the listing agent, then the owner may wish to wait until the protection period is over before engaging directly.

How long after a real estate contract expires can an owner sell privately?

The protection period will vary and is negotiable, but it’s fairly common to see 90 days as a tenor.

If you have a new listing broker, it would probably make the most sense to not engage the protected names of your former broker during the protection period unless you want to potentially owe double commission.

Changing Realtors after contract expires

Changing Realtors have your listing agreement expires is typically a pretty simple manuever; however, listing agents may be hesitant to work with you if your former listing agent has an unreasonable protection period clause.

For example, if your former listing agreement provides for an unreasonable number of protected buyers (i.e. more than 10) for an inordinate amount of time (i.e. more than 90 days), then new listing brokers may not be as interested in working with you.

Why? They don’t want to waste time on your listing if the vast majority of buyers are essentially excluded from their pool of potential buyers. As a seller, you obviously wouldn’t want to pay double commission, and they know that. So why would they spin their wheels on a much reduced potential buyer base when they can work on something else more reasonable?

Sample protection period clause

Within three (3) business days after the expiration of the listing term, we shall deliver to you in writing a list of no more than six (6) names of persons who inspected the premises during the listing term. If within ninety (90) days after the expiration of the listing term a contract is signed to sell the Property to a person on said list, we shall be entitled to the Fee for Service referenced in this agreement. You represent and warrant that if a new exclusive listing agreement is executed with another exclusive broker (the “New Exclusive Broker”), you will notify the New Exclusive Broker (a) of the existence of this provision and (b) that we may negotiate directly with you with respect to the customers on the list during the ninety (90) day protected period.

Disclosure: Hauseit and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. You should consult your own tax, legal, financial and accounting advisors before engaging in any transaction. The services marketed on Hauseit.com are provided by licensed real estate brokers and other third party professional service providers. Hauseit LLC is not a licensed real estate broker nor a member of any multiple listing service (MLS).

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