General Real Estate Library Articles on home buying, selling, marketing and 203k Consulting
What If A Seller Calls With A Listed House?by Tony Severino
As full-time Real Estate Investors and Mentors, Tony and I get all kinds of calls from motivated as well as unmotivated sellers, but we also get calls from Real Estate agents as well.
What is creative real estate? To me it is a method to buy and/or sell real estate in the non-traditional method. For example, creative is using private funds or the owner’s existing financing versus the traditional method of going through a realtor/broker to list a house or buying a listed house and going to the bank to get a loan.
Ethics: a. A set of principles of right conduct. b. A theory or a system of moral values.
Ethics (used with a sing. or pl. verb) The rules or standards governing the conduct of a person or the members of a profession.
What does that have to do with anything? Well, Tony and I buy most of our stuff creatively or with cash and always ethically and that is what we encourage, but lately we (Tony and I) have been receiving calls from our students wanting to discuss houses that are listed with a broker/realtor. We have said many times that we don’t buy homes that are listed. Not that we are against realtors. We are not. I am a realtor. You can check out my team’s website at: www.bradmistinateam.com.
We have said many times that we will not go on appointments if the house is listed. Some of our students want us to break our rules or say it is okay for them to go look at houses that are listed and maybe buy it and cut the broker/realtor out of their commission by having the seller cancel their listing after they looked at it. We are not going to okay that method.
The broker/realtor has a contract with that homeowner, probably an exclusive-right-to-sell listing contract. What does that mean? The broker is given the exclusive right to market the seller’s property. If the property is sold while the listing is in effect, the seller must pay the broker a commission REGARDLESS OF WHO SELLS THE PROPERTY. In other words, if the seller finds a buyer without the broker’s assistance, the seller still must pay the broker a commission.
But, that is not all. All exclusive listings have a definite period of time during which the broker/agent is employed. ALSO, the agreements may contain a broker protection clause. This clause provides that the property owner will pay the listing broker a commission if, within a specified number of days after the listing expires or is canceled, the owner transfers the property to someone who viewed the property while it was listed. The time for such a clause usually parallels the terms of the existing listing agreement. A six-month listing may carry a broker protection clause of six months AFTER THE LISTING’S EXPIRATION OR CANCELLATION.
There is also a “MUTUAL RELEASE FROM LISTING CONTACT” in Indiana that has a contingency that is written as follows and can be used when the seller asks the agent to cancel their listing:
‘SELLER AND BROKER AGREE TO WITHDRAW THE PROPERTY FROM THE MARKET, BUT UNDERSTAND THAT THIS DOES NOT TERMINATE THE LISTING CONTRACT. BROKER WILL CEASE TO ADVERTISE AND/OR MARKET THE PROPERTY. IF SELLER DECIDES TO SELL AT ANY TIME BEFORE EXPIRATION OF THE LISTING CONTRACT OR UNDER CONDITIONS AS OUTLINED IN THE EXTENSION CLAUSE OF THE LISTING CONTRACT, THE LISTING CONTRACT IS STILL IN EFFECT AND A FULL COMMISSION SHALL BE DUE AND PAYABLE IN ACCORDANCE WITH THE LISTING CONTRACT. SELLER SHALL NOT LIST THE PROPERTY WITH ANOTHER BROKER DURING THE REMAINDER OF THE TERM OF THE LISTING CONTRACT.
If you are thinking that this doesn’t apply to you because the broker will never know that the house transferred ownership, all I can say is don’t be naive. If the broker finds out that the seller did transfer ownership, a commission is due. Don’t risk a lawsuit and a lien on a property because you didn’t want to pay someone what was rightly theirs.
Now, please consider this. Are you an ethical person? Do you consider yourself running your business ethically? What kind of image is given to a seller when it is suggested that they cancel their listing so you can buy their house and so they won’t have to pay the realtor their commissions? The realtor doesn’t deserve it anyway because they didn’t bring us together. Are you operating as an ethical investor then? Would a potential seller think that is ethical for you, as a business owner, to suggest. My view of that that suggestion is someone who doesn’t honor an agreement so why would I risk entering one with them.
I can go on about this topic and if you want to discuss it further or have questions, shoot me an email or call me.
In the meantime, Go Get A FREE House that is not listed and if it is listed….do the right thing.
Tony is a was trained by the best in the business, Ron Legrand. He and his wife Lisa Severino started a business from nothing and created one of the largest Real Estate Business in the Chicago area.
As a mentor to students Tony Severino helps the students take the seminar training and bring it to life, and thereby a nice size paycheck!
You can learn more about him at www.TonySeverino.com or call the office at 219-932-3000.
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