Self-protection for Real Estate Agents

By - Diana Brazeale

Real Estate agents work hard to get listings, market properties for sale, and bring sales to fruition. They often do so with no money up front, but with the expectation that their reward will come at closing with the payment of their commissions. If the closing does not happen, an agent who has fronted money for marketing expenses may suffer financially.

An established agent may consider this situation a cost of doing business, take the loss, and move on to other sales. Sometimes, however, an agent will go to great lengths to market a unique property, and end up liable for considerable expense when the owner decides not to sell after all.

The standard form listing contract for Missouri agents provides that if an agent procures a “ready, willing, and able buyer,” for the listed property, the agent is entitled to the agreed upon fee in the contract. That sounds good, but it is rarely so simple. The term “ready, willing, and able buyer” can be construed many different ways by many different courts and attorneys, and it may not be worthwhile for an agent to sue an owner who decides not to sell. Lawsuits are never a sure thing, legal fees are not cheap, and an agent may not want to have a reputation as someone who sues. There is also the practical consideration of collecting the fee when there is no closing. So what is an agent to do? Consider asking for money up front or for reimbursement for expenses exceeding a certain amount. The standard listing contract has no provision for this, but agents can write their own language in the “Special Agreements” section of the contract. For example, “Owner agrees to reimburse Agent for marketing expenses exceeding $___,” or “Owner agrees to deposit $____ with Agent’s Broker for marketing expenses.”

Some owners may balk at the prospect of paying expenses up front or at the suggestion that they might decide to take a property off the market, and look for another agent. At that point, the agent needs to make a decision. Is this owner worth the risk? If the answer is yes, understand that you may take a loss. If the answer is no, let the owner go elsewhere. Keep in mind an old expression: “It is better to not do the work and not get paid than it is to do the work and not get paid.” --Jay

Foonberg, Esq.

If you need help drafting a contract to ensure you get paid, call the number at the bottom of this article.

Diana Brazeale is a real estate attorney and the owner of Brazeale Law Firm, LLC in Branson, Missouri. She has twenty-five years’ experience in the practice of law. She can be reached at (417) 334-7494.