Brokerage Services Performed in Anticipation of Earning a Fee

The big question this video answers: What are the conditions under which a seller broker earns the right to collect a fee from their seller-client under an exclusive seller representation agreement? Let us count the (many) ways.

Exclusive representation agreements

A broker’s right to enforce collection of a fee in exchange for real estate services originates with a written employment agreement. The employment agreement entered into by brokers and clients is commonly called a representation agreement, formerly known as a listing agreement.

For example, a seller of real estate employs and authorizes a licensed broker as their sole representative to market the property, locate a buyer, negotiate a transaction and close it on behalf of the seller by entering into an exclusive seller representation agreement. [See RPI Form 102]

Likewise, a broker acts as the sole representative of a client under several sets of consumer service situations:

a buyer of real estate employs and authorizes a buyer broker to locate and negotiate the acquisition of suitable property by entering into an exclusive buyer representation agreement [See RPI Form 103.1 and 103.2];
an owner or buyer employs and authorizes a mortgage broker to locate a mortgage loan originator (MLO) and arrange and originate a mortgage by entering into an exclusive borrower representation agreement [See RPI Form 104];
an owner of income property employs and authorizes a leasing agent to locate a tenant and negotiate a lease agreement by entering into an exclusive landlord representation agreement [See RPI Form 106]; and
a commercial tenant employs and authorizes a leasing agent to locate space for occupancy and negotiate a lease agreement with the landlord by entering into an exclusive tenant representation agreement. [See RPI Form 105.1 and 105.2]

Related article:

Form-of-the-Week: Tenant Representation Agreements and Renewals — Forms 105.1, 105.2, 105.1A and 105.2A

The seller under an exclusive seller representation agreement grants their broker sole authority to:

market the property;
locate a buyer; and
negotiate a sale.

The representation agreement also specifies the:

fee amount the seller agrees the broker receives when earned; and
conditions met by the broker or the seller for the broker to earn the agreed fee.

The broker’s right to collect a fee

A seller broker earns the right to collect a fee from their seller-client under an exclusive seller representation agreement in numerous instances, including:

the seller broker submits a full asking price offer to their seller-client from a ready, willing and able buyer;
the seller-client accepts an offer submitted by the broker on terms other than the asking price in the representation agreement;
anyone acquires the property following negotiations commenced with the seller-client during the period of authorized representation;
the seller-client withdraws the property from the market or otherwise interferes with the broker’s performance;
the seller-client unjustifiably terminates the agency of the broker prior to expiration of the representation period;
the client or their agent restarts negotiations during the safety clause period with a prospective buyer or the buyer’s agent who reviewed the property with the seller broker during the representation period and the buyer acquires the property;
the seller acquires replacement real estate in an exchange transaction resulting from negotiations involving the broker during the representation period; and
the seller grants a leasehold to a tenant or a purchase option to a buyer due to negotiations commenced during the period of authorized representation.