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Real estate brokers have certain obligations to perform in selling real estate. If you hire a broker by signing a real estate brokerage contract or listing agreement, the agreement should set out the actions that the broker agrees to take in selling your property. Your broker also has fiduciary duties as your agent. If the broker fails to perform promised actions or fails to carry out his or her duties, you have some remedies available to you.
Getting Out of a Listing Agreement
If you want to get out of a listing agreement, for whatever reason, you should:
- Look at the agreement itself to see if there is language which covers your situation
- Look at the language of the agreement to see if there are duties the broker hasn’t performed
- Consider the time remaining on the agreement before it expires. It may be best to simply let it run out on its own, holding the listing broker to the specific conditions of sale listed in the listing agreement.
Most states require brokerage and listing agreements to be in writing in order to be enforceable. The agreement determines when a commission is earned. A broker employed ”to sell” or ”effect a sale” of the property is not entitled to compensation until the broker effects a sale or procures from the buyer a binding contract of purchase. So, if your broker fails to bring about a sale or obtain a binding contract of purchase, as required by your contract, you don’t have to pay your broker.
The brokerage or listing agreement typically sets out the actions that your broker agrees to take in selling your property. Such actions include:
- Showing your property
- Marketing your property
- Negotiating with the buyers
- Preparing the contract of sale
- Representing you at closing
The listing agreement also typically contains a provision on how disputes should be resolved. This may include:
- Filing a lawsuit in small claims court or civil court
If your broker fails to do anything that he or she agreed to do in the listing agreement, you must use the dispute resolution process that you agreed to use. If a direct solution with your broker won’t work, you should file a complaint with the appropriate board or court. In order for you to obtain relief, you must be able to show that you suffered some losses due to your broker’s failure to perform contractual obligations.
You may want to file a complaint with your local or state real estate board, indicating that your broker did not perform as agreed.
Because you have a legal agency relationship with your broker, he or she has fiduciary duties to you. These duties flow from the law of agency. They include such things as:
- Acting in your best interest in selling your property
- Being loyal to you in carrying out the sale process
- Disclosing pertinent information to you
- Disclosing all offers to you
If your broker violates his or her fiduciary duties and you suffer damage as a result, you may file a complaint before the hearing body as agreed upon in the brokerage or listing agreement.
You should also file a complaint with your local or state real estate board, indicating that your broker violated his duties toward you.
Real estate brokerage contracts and listing agreements are contracts. Therefore, if you suffer losses because of your broker’s failure to perform under the contract, you can sue your broker for breach of contract and obtain contractual remedies. These include:
- Compensatory damages, which is a monetary award to reimburse you for your losses
- Punitive damages, which is an award of money to punish or deter similar conduct in the future, depending on the law of your state, if your broker’s conduct was wanton or reckless
- Attorney’s fees if there is a provision about attorney’s fees in the listing agreement
If you suffer losses because your broker violated his or her fiduciary duties, you can sue your broker for breach of fiduciary duties, negligence, fraud or conversion. You can obtain:
- Compensatory damages, which reimburse you for your losses
- Punitive damages, which compensate you for wanton or reckless conduct of the broker
- Attorney’s fees, if allowed by law
Recovering Your Losses
If you’re successful in your lawsuit against your broker and your broker has insufficient personal funds to pay for your losses, you might be able to obtain payment from your state’s real estate fund. Some states have set up funds derived from real estate license fees for the payment of claims on unpaid judgments against real estate licensees for fraud and conversion of trust funds. Check with your state’s real estate licensing board to see if your state has such a fund, and if so, how you can make a claim.
If you want some legal advice about your options for remedies or you want to file a complaint, contact a real estate attorney in your area.
Questions for Your Attorney
- I think I have grounds to terminate my listing agreement, but my real estate broker does not agree? How complicated will it be to end the listing of my home? Could this interfere with the sale of my home if I want to list my house with another broker or if I find a buyer?
- Where do I file a complaint if my broker fails to perform actions that she agreed to take in the listing agreement?
- What kind of compensation can I get if my broker fails to act in my best interest?