With just about 30,000 licensed New York City real estate agents amounting to only around 12,000 yearly transactions, it comes as no surprise that certain agents resort to a few desperate measures to make sure they make money. Recently, I came across one of the most unethical termination clauses, something I had never seen before in my 25-year career in real estate. Firstly, here is an explanation of the particular clause of termination which I am referring to.
New York City constitutes a multitude of real estate brokerages, most of whom have more or less the same exclusive agreements. In these agreements the sellers are asked to sign off on granting them the complete right to sell a property. Member firms of The Real Estate Board of New York (REBNY) have stricter guidelines along with advised language in order to ensure fair play and that eventually, a member firm does not end up duplicating the consumer. The suggested language for the exclusive listing termination is as follows:
A list of no more than six (6) names of those who visited the Exclusive Property during the Exclusive Listing shall be provided by the Exclusive Broker to the Owner within three (3) business days following the expiration of the Exclusive Listing. If a sales contract or lease is conceived within ninety (90) days following the expiration of the Exclusive Listing with one out of the six people on the list, the Exclusive Broker will receive the commission amount set in the Exclusive Listing. The Owner authorizes that in the event of a new exclusive listing agreement executed with another Exclusive Broker (the “New Exclusive Broker”), the New Exclusive Broker will be informed by the Owner of this provision and in turn the Exclusive Broker could negotiate one on one with the Owner with reference to the Customers present on that list within that ninety (90) day protected period.
Simply stated, this sanctions the exclusive agent to a commission, if from the 6 people they introduce, any comes forward with an interest of purchasing the property within 90 days. It seems rational to me as well as our customers and my colleagues. It maintains peace and fairness throughout the industry when made a part of an exclusive agreement. Unfortunately, at times sellers sign agreements with no such terminology and even worse, certain times the agreements signed are much vaguer and ambiguous which results in keeping them on the hook contractually for long and extended periods, stretching beyond the end of the original agreement.
One such agreement was sent to me by one of my agents this week. She was preparing to bring a multi-family property to the market and was appalled to see the listing agreement from the previous agent and the sellers “protected list”. It is also important to mention that the sellers are in the late 80’s age bracket and have a son who is retired NYPD. The sellers are regular everyday people. The termination language in the previous agent’s agreement reads as follows:
In the outcome of: (i) at any point during the term of this agreement a property is sold, as per the terms acceptable to us, to any potential buyer to whom the property is submitted by (a) previous broker name, (b) us, or (c) any alternate party; or (ii) up to six (6) months following the termination or expiration of this agreement, at any time, a contract of sale is entered into, or the property sale occurs, with any probable buyer to whom the property is submitted within the duration of this agreement, then we are liable to pay previous broker name its entire commission at the final sale of the sold property (the “Closing”). Fourteen (14) days after, and no later than, the termination or expiration of this agreement, the previous broker name needs to submit a list of these likely buyers (the “Protected List”).Nonetheless, the inability of previous broker name to put forth the Protected List shall not relive us of our commitment to pay the commission (defined hereinafter).
The differences between the two clauses may seem negligible to some, but they are extremely different. The term “submitted” that has been used means quite literally submitted! The property was shown by the previous broker only twice, yet the “protected list” provided to the previous sellers by the agent names complete firms alongside several specific individuals. As a matter of fact, every firm that the agent “submitted” the listing was mentioned during the exclusive term. This implies that for the next six months, if a purchaser is brought to the property by an agent from any of those firms (almost each New York City firm), the previous broker firm would reach out to these elderly sellers for their commission. This is not only unethical but also distasteful and desperate.
To summarize, I would suggest you to pay attention to the language that has been used in the exclusive agreement which may become a binding force to your agent and their firm beyond the regular agreement term you were initially looking at.
I am reminded of a saying by Henry David Thoreau as far as the agent goes: “The mass of men lead lives of quiet desperation, and go to the grave with the song still in them.”
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