Saturday, March 04, 2006

Is Another Commission Lost?

This is a recent article that I received from a lawyer. This has application to all real estate agents.
Read it or weep.

Is Another Commission Lost?

In a recent Ontario case (how come they get all the good, newsworthy cases?), an Appeal Court ordered that a seller could refuse to complete a sale even when the purchaser offered the full asking price.

In this case, the Listing Agreement specified an asking price of $123,900.00 and obligated the seller to sell "upon such terms particularly set out herein". The realtor obtained on offer for the full price of $123,900.00. The seller refused to accept the offer. The realtor sued for lost commissions. After all, the realtor had done what the listing agreement required: bring an offer to the table for the full list price.

While the Court agreed the monetary portion of the listing agreement had been fulfilled, the Court went further. The main issues considered by the Court were two conditions. As the property was an acreage, the buyer's offer required the vendor to warrant the water was potable and the septic system was free from problems. The seller was not prepared to provide these warranties and had not agreed to provide these warranties in the Listing Agreement. The Court found there was evidence the seller was not aware of the status of the water and septic systems and was not prepared to provide a warranty.

After the offer was refused, the seller realized appropriate water tests were required. The tests were obtained and showed a problem. A fix was made quite easily and the house was later sold for the same price with the same conditions as contained in the refused offer. However, these conditions were not disclosed in the initial Listing Agreement and were not part of the "terms particularly set out herein". The realtor who obtained the initial offer for the full asking price was not entitled to receive any commissions.

In this case, the realtor lost:

1. All commissions

2. Court costs

3. Interest

4. Legal fees for a trial

5. The time, aggravation and stress of going to trial.

The lessons we can learn from this experience:

1. If there are standard conditions you would expect a seller to accept put them in the listing agreement.

2. Make sure any offer is in complete accord with the listing agreement before you demand the seller accept it and close.

3. Avoid litigation. It is a process fraught with expense, stress and uncertainty. Mark Twain put it best when he said: "There were only two times I went broke in my life: once when I lost a lawsuit and once when I won a lawsuit."


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