Commission Change in 2022

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OREA changed the terms of the long standing Listing Agreement by adding some words:

OREA’s explanation is as follows:

The COMMISSION Clause wording was revised to streamline the message for clarity and focus on wording,

“as may be acceptable to the Seller”.

That doesn’t really explain the reason “why”.

Let’s have a look at the first part of the Commission Clause where those words were added.


“2. COMMISSION: In consideration of the Listing Brokerage listing the Property, the Seller agrees to pay the Listing Brokerage a commission of ……………% of the sale price of the Property or ………………………………………………………………………………………………………………………. for any valid offer to purchase the Property from any source whatsoever obtained during the Listing Period, as may be acceptable to the Seller. The Seller authorizes the Listing Brokerage to co-operate with any other registered real estate brokerage (co-operating brokerage) and to offer to pay the co-operating brokerage a commission of…………….% of the sale price of the Property or…………………………………………………………………………. out of the commission the Seller pays the Listing Brokerage. The Seller further agrees to pay such commission as calculated above if an agreement to purchase is agreed to or accepted by the Seller or anyone on the Seller’s behalf within ……………………….. days after the expiration of the Listing Period (Holdover Period), so long as such agreement is with anyone who was introduced to the Property from any source whatsoever during the Listing Period or shown the Property during the Listing Period.

OLD Trigger

Previously, the trigger for payment was a valid Offer. That meant an Offer which:

  1. Was for the full purchase price (as per listing),
  2. Had a closing date as requested (ie. 60 days),
  3. Contained “no conditions”.

So, that was all that was required and a Buyer’s agent was entitled to the cooperating commission.

NEW Trigger

We now add one more step. The Seller has to agree. It now says “as acceptable to the Seller”.

The Problem

Although the original wording has been in place for over two decades, 2020 and 2021 spawned some new issues:

  1. List way below an acceptable asking price,
  2. Generate well over twenty (20) competitive bids
  3. Select the best.

The difficulty with this, applying the old trigger was that all 20 agents would be entitled to commission. Well, basically, that’s what it said. So, let’s change that up and make sure it’s just one!

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

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