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A listing broker sells an office building to a syndicate of which the broker is a member without informing the seller of this interest. Before closing, the seller discovers the broker’s interest and refuses to sell. What would happen in a civil suit to collect a commission?

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Audio Lesson

Duration: 2:44

Question & Answer

Review the question and all answer choices

A

The case would be transferred to the Real Estate Commissioner.

B

No commission would be due.

C

The broker would be awarded their full commission.

Correct Answer
D

The court would demand a mitigation hearing.

Why is this correct?

A broker can operate independently and supervise salespersons.

Podcast Transcript

Full conversation between instructor and student

Instructor

Hey there, let's dive into a challenging question from the CA real estate license exam, focusing on agency law. A listing broker sells an office building to a syndicate of which the broker is a member without informing the seller. The seller discovers this and refuses to sell. The question is: What would happen in a civil suit to collect a commission?

Student

That's a tough one. I'm thinking there might be some kind of legal penalty because the broker didn't disclose their interest in the syndicate.

Instructor

Great start! The key concept here is the broker's disclosure requirements and commission rights. The correct answer is C, the broker would be awarded their full commission. Let me explain why. Even though the broker violated the disclosure requirements by not informing the seller of their interest in the syndicate, this doesn't negate their right to a commission.

Student

So, it's not about the violation, but about whether the broker actually did their job of finding a buyer?

Instructor

Exactly. The broker fulfilled their primary obligation under the listing agreement: procuring a ready, willing, and able buyer. The syndicate was prepared to purchase at the agreed terms. The seller's refusal to complete the transaction after discovering the broker's interest doesn't absolve the broker of their performance of the essential service.

Student

I see. So, the commission is more about the contract than the ethical breach?

Instructor

That's right. The seller's refusal to sell after learning the broker's interest doesn't negate the broker's performance. It's a challenging question because it blends ethical disclosure obligations with contractual commission rights.

Student

I still feel like I might have picked the wrong answer. Can you tell me why options A, B, and D are incorrect?

Instructor

Sure. Option A suggests the case would be transferred to the Real Estate Commissioner, but this is a civil suit over a commission dispute, not a licensing law violation. Option B is wrong because no commission would not be due simply because the broker procured a buyer, even if the disclosure was missing. And option D is incorrect because a mitigation hearing is not required in this scenario; it's not part of the commission dispute process.

Student

That clears up a lot. I guess the memory technique you mentioned earlier might help. What was it?

Instructor

It's an analogy: think of the broker as a matchmaker who finds a perfect date for a client but fails to mention they're related to the date. The matchmaker still did their job of finding a suitable partner, even though they broke trust by not disclosing the connection.

Student

That's a clever way to remember it. Thanks for breaking it down, I feel more confident now.

Instructor

You're welcome! Remember, for commission questions, focus on whether the broker procured a ready, willing, and able buyer. If they did, the commission is typically due, regardless of disclosure issues. Keep up the good work!

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