How to get out of a listing agreement in Ontario

October 28, 2007 6:49 PM

Can someone who knows about Ontario real estate listing agreements help a homebuying n00b?

Here's the sitch:

A friend owns a house that I've been taking care of since he moved away. He was trying to sell privately, but his price was too high, and has finally dropped the price to the point where it's in line with the current sketchy market. In the meantime, however, my wife and I have fallen in love with the house -- and, it's now in a price range that we can afford.

The problem is this: he has now listed it with an agent. I know that as soon as I mention to him that we're interested, he'll be wanting to get out of the listing agreement and sell privately, because we had actually not-too-seriously inquired about the house before. Bluntly, he'd rather sell for a lower price to a friend, and not have to pay the realtor commission. And, he would rather someone he knows -- and who knows how much work went into fixing it up -- get the house.

His current exclusive listing agreement runs out on Feb. 15, and has a 90 day holding period. My question is, does the agreement become null if he takes it off the market before the 15th of Feb? If so, how long until he can sell it privately? (We never spoke with the agent about the house, so there is no problem with commission on that front) We're trying to figure out what dates we're looking at to finish the deal if we decide to go ahead. If he attempts to cancel the agreement for nonperformance (there are a few things that weren't done that would likely justify this), what timeframes are we looking at?

Any help at all would be most graciously appreciated. We're not trying to hoodwink the realtor necessarily, but don't want to see him get a commission for selling to someone who knew about -- and was interested in -- the house long before he ever listed it.

posted by liquado to home & garden (4 comments total)

But you are trying to hoodwink the realtor, don't kid yourself. I don't see how you can make a case for non-performance, either, since the contract is far from over. If the realtor catches wind of the fact the seller is making a deal on the side, the realtor will sue for the commission if necessary. This also applies after the contract is over and the realtor finds out that dealings were going on behind her back. What happens if the realtor brings an offer to the seller? Are you prepared to leap out of the closet with your offer at that point? You as the buyer aren't going to be paying any more for the house, it is the seller who will be paying the fees. Basically you and the seller are cooking up some plan to split the difference, right? There are contracts that stipulate payment only if the realtor brings the buyer and they allow the seller to find their own buyer without paying the commission, but it doesn't sound like your friend signed that kind of agreement.

If you are not currently working with an agent perhaps you and the seller can negotiate with the realtor about a reduced commission since half of a commission isn't going to your agent, but they are not obligated to abide by that.
posted by 45moore45 at 7:07 PM on October 28, 2007

There is only one issue here:

What type of listing agreement does he have with the agent?

Exclusive right to sell? [Rare]
Procuring cause listing? [More common]

If it is the latter, and the agent is not the procuring cause of the sale, the agent is entitled to nothing. If there is an exclusive right to sell, then the agent is entitled to compensation should the home sell during the period in which the exclusive right to sell agreement is in force and effect.
posted by Mr_Crazyhorse at 7:21 PM on October 28, 2007

IAAR (I am a Realtor - but in Alberta) and I think the best thing to do would be to have your friend talk to his Realtor and explain the situation. Obviously, there are some out of pocket expenses the Realtor has already had to spend but I've had this happen to me a number of times and have always been willing to work something out.

Also, not that this will necessarily be the case but often times people will want to have a third party help when trying to deal with a friend. He put it up for sale with a Realtor to expose it to the most potential buyers and to get, hopefully, the most money in his pocket. Doesn't always work out that way, and not everyone will agree, but I see this happen a lot.

There is a lot of protection and services offered by a Realtor that your friend is obviously interested in (because he did list his house) so he might not be as into cancelling as you think - you'll have to find out exactly what he want to do.

As mentioned already, the exclusive listing can mean a few different things but usually it refers to a house for sale that isn't put on the MLS system and is offered for sale/showings exclusively through the listing brokerage. These aren't done with the typical board contracts (which insist on MLS) so there may a provision for seller's rights reserved or other types of renegotiations.
posted by jeffmik at 8:14 PM on October 28, 2007

Thanks for the comments so far.

45moore45: I'm really not trying to hoodwink the realtor. He should absolutely be paid a commission for bringing someone in to the house, showing it, and making a deal happen. But, the only reason for him making any commission on a sale to me is, bluntly, because he happened to be there. As I said, I'm not trying to cook the deal to save money on both sides (I haven't spoken to the owner yet) -- I just don't think the realtor should get paid for a prospect he didn't bring to the table.

Mr_Crazyhorse: Apparently, it is an "exclusive" right to sell. That's why my question about when the agreement can be terminated, and how long after the sale could take place and not result in legal action. If there is no provision for a cancelling of the agreement, if he takes it off the market, does that cancel the listing agreement, or does the agent retain that exclusivity until the date noted, regardless of whether it's listed or not?

jeffmik: Thanks for the best answer yet. I tend to think the honest factor is the best way to do things anyways, and, while according to the agreement (which I've read) he is legally required to let the realtor know about any inquiries, there is no commission guarantee outside of the listing agreement/holding period for sales to parties that the realtor did not show the property to.

I do know that he'd *totally* jump on us buying the house (he's that good a friend, and that honest), and while he wants to maximize his profit on the house, he's already losing money on the deal (they fixed the house up *way* too much), so he'd rather lose money to a friend than lose it to a pair of real estate agents brokering a deal.

I think the bottom line will be, if the agent gets in the way, we'll just rent the property until it reaches the end of the holding period, and work on a deal then.....

Thanks again. Y'all rule. :)
posted by liquado at 9:50 PM on October 28, 2007