A seller's listing agreement with the first brokerage (5% commission) has a 90-day holdover clause: if the property sells within 90 days after expiry to anyone shown it during the listing period, commission is payable, but the seller's liability is reduced by any commission paid under a new written agreement with another brokerage. After expiry, the seller signs with a second brokerage at 4% and sells for $800,000 to a buyer who toured an open house during the first listing. How much does the seller owe the first brokerage?
Correct Answer
B) $8,000
The buyer was shown the property during the listing period and the sale happened within 90 days, so the holdover clause applies: 5% of $800,000 is $40,000. The clause reduces that amount by the commission paid under the new written agreement, 4% of $800,000, which is $32,000. The seller owes the first brokerage $40,000 minus $32,000, or $8,000.
Why This Is the Correct Answer
The first brokerage's holdover entitlement is 5% of $800,000, or $40,000. The seller paid the second brokerage 4% of $800,000, or $32,000, under a new written agreement, and the clause reduces the seller's liability by that amount. $40,000 minus $32,000 leaves $8,000 owing to the first brokerage.
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A listing agreement contains a clause stating 'commission is earned when a ready, willing, and able buyer is procured.' The seller refuses to complete the sale after such a buyer is found, claiming they changed their mind. What are the agent's rights regarding commission?
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