Real estate brokers are agents who act as intermediaries or negotiators during the purchase and sale process of a home. They are most often responsible for bringing a ready, willing, and able purchaser to the seller of the home. Thus, when a seller wants or needs to retain such services, they will agree to enter into an employment contract with the real estate broker.
The employment contract, or in real estate terms, the “listing agreement”, is a document that typically gives the real estate broker permission to show the property to potential buyers. There are two general types of agreements: an open listing agreement and an exclusive listing agreement.
In an open listing agreement, the real estate broker may only earn their commission if they sell it to a buyer who can afford to purchase it and goes through with the sale of the property. When the contract is one for an exclusive listing agreement, then the broker will be able to earn their commission regardless of whether they sell the property or if another agent does so.
Regardless of the contract, the agreement will also usually provide:
- The duties that the real estate broker has;
- How the property will be viewed or presented to potential buyers;
- The terms of the property listing, including various dates like when the property has to be sold by;
- What the seller’s duties are;
- Payment methods (e.g., flat fees versus percentage of sales); and
- A clause for how the parties can resolve any disputes that may arise in the future.
Again, commission will generally not be paid out until the real estate broker has found a buyer who wants to and is capable of buying the property.
On the off chance that the seller decides not to sell despite the real estate broker finding a buyer and completing all of the terms of their agreement, the broker will still be able to collect their commission. If the seller continues to refuse to pay, then the real estate broker can bring them to court.
What If a Real Estate Broker Cannot Get Their Commission?
As discussed above, if the seller of the home refuses to pay the real estate broker their earned commission, then the real estate broker can take the seller to court and sue them for what they are owed.
In order for the real estate broker to succeed in court, they must be able to prove the following facts:
- That the real estate broker possessed a valid real estate license;
- A valid employment contract (entered into by both the real estate broker and the seller) was in existence;
- The terms of the employment contract were performed accordingly; and
- Despite the real estate broker fulfilling all of the requirements, the seller is still refusing to pay the agreed upon commission cost.
Basically, what this proves is that the seller has breached the parties’ agreement. The real estate broker performed and the seller provided them nothing in return for their contracted services.
As with all contracts, it is extremely important that the agreement that the parties form includes clear and detailed language. Therefore, it would be in the best interest of both parties to each retain their own lawyer to help draft and review the contract before signing it.
What Remedies Can the Real Estate Broker Receive?
If a real estate broke is successful in proving the elements mentioned in the above section, then a court may be able to award them some kind of remedy, such as:
- The initially agreed-upon commission cost;
- Court costs and attorney fees; or
- In some cases, punitive damages may be available (note that punitive damages are rarely ever awarded unless it can be shown that the defendant’s conduct was outrageous).
Are There Any Defenses Available for the Seller?
When a seller is being sued for not paying a real estate broker their otherwise rightful commission, there are generally three defenses available for the seller to use. These include proving that:
- The real estate broker breached their fiduciary duty to the seller;
- The real estate broker breached the parties’ employment contract; or
- The real estate broker did not have a valid real estate license at the time of the parties’ transaction.
Do I Need an Attorney for Help with Recovering My Commission as a Real Estate Broker?
If you believe a seller has denied the real estate broker’s commission that you are entitled to, or alternatively, you are a seller who is being sued in order to recover a real estate broker’s commission, then it is strongly suggested that you speak with a local real estate lawyer for further assistance.
A qualified real estate lawyer will be able to discuss any of the potential claims or possible defenses available for your real estate commission case. In addition, a lawyer can also help you collect the necessary evidence to best support your case and will be able to advocate for you before the court.