I’m selling my house, and the listing agreement says I have to pay my real estate agent commissions if my place sells after the agreement ends. Is that legal?
It sounds like you’re referring to the “holdover” clause, which is found in most residential listing agreements (seller representation agreements) in Alberta. And yes, holdover clauses are legal.
A holdover clause permits your real estate brokerage to collect its fee or commission from you if you enter into a purchase contract with a buyer within a specific number of days after your listing agreement ends and that buyer was introduced to your property during the term of the listing agreement. The length of the holdover period is negotiable between you and your real estate professional.
When a real estate professional lists your home, your listing agreement sets out that you will pay your brokerage in the event your home sells.
Imagine you have a 90-day listing agreement. On day 88, your real estate professional arranged for a showing of your home to a buyer. The buyer liked it, but had to think about it for a few days. On day 91, the buyer decides they want to buy your home. That buyer only knew about your home being for sale because of the listing you had on it with your real estate professional.
Assume you didn’t extend your listing agreement, on day 91, your home is no longer officially for sale but you still want to sell. The buyer that viewed your home on day 88 writes on Offer to Purchase for your home, and you accept their offer.
Now the holdover clause kicks in.
Because you’re selling your home to a buyer who was introduced to it during the term of your listing agreement, the holdover clause requires you to pay your real estate brokerage the commission you agreed to in your listing agreement.
Your real estate professional did what they set out to do – they sold your home for a price with which you were happy. They deserve, and have every right, to be paid for their work.
The holdover clause also protects a real estate brokerage’s commission in the unlikely event a buyer and seller want to work together to get a deal done, but they wait until just after the listing agreement ends merely so they don’t have to pay commission. If in such a case the buyer was introduced to the seller’s property during the term of the listing, the real estate professional deserves to be compensated for their work. Side deals between a seller and that buyer shouldn’t affect the ability of the seller’s real estate brokerage to collect its commission.
“Ask Charles” is a question and answer column by Charles Stevenson, Director of Professional Standards with the Real Estate Council of Alberta (RECA), www.reca.ca. RECA is the independent, non-government agency responsible for the regulation of Alberta’s real estate industry. We license, govern, and set the standards of practice for all real estate, mortgage brokerage, and real estate appraisal professionals in Alberta. To submit a question, email firstname.lastname@example.org.