Homeowner Sues Agent Because Commission is too Small

While this doesn’t actually sound right, it’s true!

Bill was trying to sell his house. He entered into a Listing Agreement with Bob. Bill would pay Bob’s Brokerage 5% on the sale. They didn’t get along. So, Bill fired Bob and went to Mary.

Mary explained that she could do a great job, and get it sold quickly. Bill listed with Mary the next day. She did just exactly what was promised and sold within the first 30 days of her listing.

So, what the problem?

Bob’s contract was for 5% with a 90 day holdover period.

Mary’s contract was for 4% with a 90 day holdover period.

The property sold for $1 million in the first 30 days. The buyer had first seen the property at Bob’s open house and then bought through Mary. Under Bob’s Listing Agreement, he picks up the shortfall percentage.

So, Bill has to pay Mary $40,000.00 and Bob another $10,000.00.

Bob sued Bill and Bill took the position that it was all Mary’s fault, so if there is any liability to pay Bob, it should be Mary and not Bill. After all, Bill explained carefully that:

  • He didn’t like Bob
  • He fired Bob
  • He was upset that Bob might get a commission, so he ended the Listing Agreement
  • Mary, obviously never read the first Listing Agreement
  • Mary failed to notice the 5%
  • Mary failed to notice the holdover period.

CAUTION:

If you are the second agent to list, then please:

  1. Carefully review the Listing Agreement,
  2. Also, note the commission, any conditions,
  3. Determine the holdover period,
  4. Review the Cancellation Agreement, if any.

Note: if Mary had increased her own commission to 5%, then this would not have happened.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

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