The Right to Cancel a Real Estate Listing Contract with a Broker

When determining whether a seller can cancel a real estate listing contract with their broker/agent before its expiration, it's important to understand the terms and conditions explicitly laid out in the contract. Many listing agreements include provisions that can bind buyers, regardless of when the sale ultimately closes.

Understanding the Terms

Typically, most 'sales listing contracts' include a clause that states any potential buyer who was shown the property during the listing contract's duration is considered obligated to pay the specified sales commission to the listing broker/agent upon a sale, regardless of when the property is sold.

This means that even if the seller later negotiates a deal with a different broker or agent, the original listing broker/agent is legally entitled to their commission if the property was previously shown to a buyer, even if a sale closes long after the original listing contract expires.

When Sellers Seek to Cancel the Listing

I have encountered this request multiple times. When sellers want to cancel the listing, it often leads to a lengthy and sometimes complex process. Here’s how it typically unfolds:

Removing the Listing from MLS

The first step is usually to remove the listing from the Multiple Listing Service (MLS), which means the property is no longer available for public viewing or sale. However, this doesn't automatically cancel the listing contract.

Explaining the Contracts and Fees

At this point, I explain to the seller that the listing contract is still valid. One of the most common reasons for seeking cancellation is because the seller believes they can avoid paying the commission if the listing is left 'dead' (unadvertised and unlisted).

After removing the listing, I advise the seller to consider the potential cancellation fees. These fees can add up to a significant portion of the commission, ranging from 1/3 to half of the commission, plus a standard cancellation fee of $395.00.

Navigating the Seller's Refusal

Often, sellers are upset when I explain the potential implications and fees associated with cancellation. Some sellers might try to convince me to wait it out, hoping the listing will stay 'dead' without any activity. However, this approach is usually not in their best interest.

Avoiding Rule Bending

The real estate industry relies heavily on transparency and adherence to rules. Many sellers attempt to circumvent these rules through unscrupulous methods. I keep meticulous records and log all interactions, ensuring I have solid evidence of any potential rule violations.

For instance, if a seller tries to cancel the listing prematurely to avoid commission, but later finds a buyer through a different agent or direct, they might think they've side-stepped the commission. However, I have the documentation to prove that the property was shown to a potential buyer during the listing period, triggering the commission obligation.

Conclusion

Ultimately, the decision to cancel a real estate listing contract should be made with full awareness of the terms and potential consequences. Working closely with a knowledgeable real estate broker can help sellers navigate the complexities of these agreements and make informed decisions. The key takeaway is that canceling a listing prematurely often comes with significant costs and potential repercussions.

In my experience, the best strategy is to honor the contract, remove the listing from MLS, and wait for the natural expiration of the contract. This approach ensures that you don't face unexpected fees or legal challenges later on.