An anonymous reader asks:
This is a situation I know well. Back when I was a Chicago real estate broker, I was hired by friends to sell their home, a typical newer construction five-bedroom, 3.5-bathroom house in the Ukrainian Village neighborhood. I listed it for about $949,000. Several open houses and lots of showings later, a buyer made an offer, and we negotiated until we were $15,000 under list price. This was 2011 -- the bottom of the market, when few homes were selling and even fewer were attracting buyers who could, as these could, put 50% down. Yet my friends declined the offer, and canceled the listing.
This kind of thing happens all the time -- and how it plays out depends on the nature of your contract with the broker, and your relationship with your agent. At the heart of the issue is the commission. Does a seller still owe a commission after canceling the listing? Sometimes, the answer is yes. Other times, well, let's look at some clauses from an actual contract to get a sense:
This is the wording from my Chicago listing agreement. If my clients had signed an offer then canceled, they would have owed me a commission. But they never entered into a contract with a buyer.
So, if I'd gotten my clients an offer at or above asking, they would have owed me a commission. Alas, the best offer was $15,000 under. But the second part of that clause is where it gets sticky: While the owners have the right to change their minds and decide not to sell their house, they are still bound by the contract for its duration (12 months), even though I took the house off the market.
To make things even more complicated, every state has different listing agreement guidelines. While in Chicago the protection period can last up to a year, in other areas it might be as short as 60 to 90 days. It's important to read the entire contract to know your rights and the contract terms.
And even though you might hire a friend as a broker, remember: This is a contract with intent to sell. Getting cold feet does not nullify it.
Still, even if your contract doesn't require you to pay a commission on a home you're no longer selling, your broker -- your friend -- is now not going to make thousands of dollars on the sale. That deserves at least a nice thank-you/I'm-sorry dinner out. You're keeping the home -- you should keep the friendship, too.
This was not exactly what my friends with the Ukrainian Village house did. First, they tried to sell again. Then, exactly a year after we signed our listing agreement, they relisted it with another agent (and paid my brokerage a cancellation fee of $350). And just as they canceled with me, they canceled with him.
Me, I missed out on two commissions. And worse, I lost two friends who distanced themselves after the transaction was canceled. So before you hire your friend as your agent, be sure to discuss not just what will happen when the house sells, but also what could happen if it doesn't. And maybe you should make those reservations at Alinea today -- it'll work for commiseration or, we hope, celebration.