Hey all! :) My question is, in Open Listing Contracts can a broker receive a commission if he finds a ready, willing, and able buyer but then the Owner suddenly decides not to sell through the broker, and instead sells to that ready, willing, and able buyer that the broker originally found, himself. Is the broker still entitled to a commission? Isn't this fraudulent?
2nd question, say the Broker finds a ready, willing, and able buyer but the Owner decides to not use this buyer and sell the property to someone else himself, since the broker went through all this effort is he still entitled to a commission?
My book says the following. that's why I am confused:
An open listing contract is a unilateral contract. The property owner promises to pay a commission if the broker finds a buyer willing to purchase the property at a price and at terms that are acceptable to the property owner. Open listings can be either oral or written. An owner can give an open listing to any number of brokers for the sale of the same property. In effect, the brokers are in competition with each other to find a buyer for the property. In addition, the seller reserves the right to sell it himself or herself without paying a commission to anyone. The broker who successfully performs by locating a "willing, ready and able" buyer is said to be the "procuring cause" of the sale and is the only broker entitled to a commission.
Would prefer a licensed sales associate or broker to answer this! Thanks!
Answers & Comments
Verified answer
With question one, the answer would be yes, the seller would owe that broker the commission, since the broker found the buyer. The seller isn't allowed to "steal" the buyer without just compensation to the broker. With question two, the answer is no. If the seller finds a buyer on his own, no one gets a commission.
I think the answer is "yes" to both. You can read an actual sample contract to be sure. The terms of a so-called "open listing" contract typically state that the broker receives a commission when the broker finds a willing and able buyer who agrees to buy the property for a given purchase price as specified in the contract. Once the broker finds such a buyer, his contractual performance is fulfilled, and he gets a commission. Now, the seller is still free to go out and find a buyer on his own, and if the seller finds a buyer before the broker finds a buyer, then the contract is terminated and broker is not entitled to a commission.
If you had a third question, stating, "Broker searches for a willing and able buyer. Before broker finds such a buyer, the seller's neighbor notices the home is for sale, knocks on the door, and makes an offer, which the seller accepts. The seller then promptly notifies broker that a buyer has already been found." In this case, broker would not be entitled to a commission.
If question #2 were modified like this, then the answer wound be "no." "Seller asks broker to find a cash buyer. Broker finds a ready, willing, and able buyer but buyer's offer is contingent on financing. Owner decides to not use this buyer and sell the property to someone else himself. Since the broker went through all this effort is he still entitled to a commission?"