There is a misunderstanding among some sellers, and even agents, and I’m here to clear that up. You can indeed cancel a real estate listing agreement in California. Sellers might be asking themselves, “under what circumstances?” And the answer to that is: almost any.

Maybe you changed your mind and you decided you don’t want to sell your house after all. Maybe you didn’t get the job out of state that you were sure you were going to. Maybe your agent is doing a substandard job and you want a different agent. Maybe you decided you want to rent it, or let your aging parents live there, rather than selling. There could be any number of reasons, or no reason at all. Maybe you just feel like canceling the listing agreement.

There is even a form to do so among the many in the arsenal of forms from the California Association of Realtors. Fittingly, it is called “Cancellation Of Listing” (C.A.R. Form COL, Revised 4/11). Even dated with the latest update.

When you sign the listing agreement, there may be some caveats about compensating the agent and/or brokerage you are entering into the agreement with. Sometimes you have to pay the agent/brokerage whether they sell the property or not. Some times there is a mutually agreed upon period, like 60 or 90 days, after the expiration or cancellation of the listing agreement where a buyer that was introduced to the property during the listing and marketing period but couldn’t get their ducks in a row until the listing had expired or cancelled. But your agent should spell that out for you when you are signing the listing agreement (C.A.R. Form RLA, Revised 12/15, also known as the Residential Listing Agreement, Exclusive Authorization and Right To Sell.)

When reviewing the listing agreement with your agent, review in detail Item 3 on page 1 of 5 of the California Residential Listing Agreement. The latest version reads:

3. COMPENSATION TO BROKER:

Notice: The amount or rate of real estate commissions is not fixed by law. They are set by each Broker individually and may be negotiable between Seller and Broker (real estate commissions include all compensation and fees to Broker).

A. Seller agrees to pay to Broker as compensation for services irrespective of agency relationship(s), either _______ percent of the listing price (or if a purchase agreement is entered into, of the purchase price), or

 $_______. AND ___________________ , as follows:

(1) If during the Listing Period, or any extension, Broker, cooperating broker, Seller or any other person procures a ready, willing, and able buyer(s) whose offer to purchase the Property on any price and terms is accepted by Seller, provided the Buyer completes the transaction or is prevented from doing so by Seller. (Broker is entitled to compensation whether any escrow resulting from such offer closes during or after the expiration of the Listing Period, or any extension.)

OR (2) If within _______ calendar days (a) after the end of the Listing Period or any extension; or (b) after any cancellation of this Agreement, unless otherwise agreed, Seller enters into a contract to sell, convey, lease or otherwise transfer the Property to anyone (“Prospective Buyer”) or that person’s related entity: (i) who physically entered and was shown the Property during the Listing Period or any extension by Broker or a cooperating broker; or (ii) for whom Broker or any cooperating broker submitted to Seller a signed, written offer to acquire, lease, exchange or obtain an option on the Property. Seller, however, shall have no obligation to Broker under paragraph 3A(2) unless, not later than the end of the Listing Period or any extension or cancellation, Broker has given Seller a written notice of the names of such Prospective Buyers.

OR (3) If, without Broker’s prior written consent, the Property is withdrawn from sale, conveyed, leased, rented, otherwise transferred, or made unmarketable by a voluntary act of Seller during the Listing Period, or any extension.

B. If completion of the sale is prevented by a party to the transaction other than Seller, then compensation which otherwise would have been earned under paragraph 3A shall be payable only if and when Seller collects damages by suit, arbitration, settlement or otherwise, and then in an amount equal to the lesser of one‐half of the damages recovered or the above compensation, after first deducting title and escrow expenses and the expenses of collection, if any.

C. In addition, Seller agrees to pay Broker: _______________________.

D. Seller has been advised of Broker’s policy regarding cooperation with, and the amount of compensation offered to, other brokers.

(1) Broker is authorized to cooperate with and compensate brokers participating through the multiple listing service(s) (“MLS”) by offering to MLS brokers out of Broker’s compensation specified in 3A, either _______ percent of the purchase price, or  $ _______.

(2) Broker is authorized to cooperate with and compensate brokers operating outside the MLS as per Broker’s policy.

E. Seller hereby irrevocably assigns to Broker the above compensation from Seller’s funds and proceeds in escrow. Broker may submit this Agreement, as instructions to compensate Broker pursuant to paragraph 3A, to any escrow regarding the Property involving Seller and a buyer, Prospective Buyer or other transferee.

F. (1) Seller represents that Seller has not previously entered into a listing agreement with another broker regarding the Property, unless specified as follows: ________________.

(2) Seller warrants that Seller has no obligation to pay compensation to any other broker regarding the Property unless the Property is transferred to any of the following individuals or entities: ____________ .

(3) If the Property is sold to anyone listed above during the time Seller is obligated to compensate another broker: (i) Broker is not entitled to compensation under this Agreement; and (ii) Broker is not obligated to represent Seller in such transaction.

As you can see the option of cancelling the listing agreement is pointed out in Section 3.A.2. of the listing agreement itself, in addition to there being a form specifically FOR cancelling the listing agreement. In short, you have options. It might just be that not all of your options are being presented, or pointed out, to you. Or maybe they were but you didn’t understand them.

It is worth noting that there can also be caveats within the cancellation itself that you, as a seller, may be required to pay some or all of the initially agreed upon commission. Again, that should be discussed at the time of listing and mutually agreed upon between the seller and the agent/brokerage.

Sometimes the seller is the party that is hindering the sale of the property. They may not be making it available to potential buyers or making it so unattractive to buyers that buyers move on to other properties. Unreasonable seller pricing can also be a factor that hinders the property from selling.

Sellers must remember that price overcomes all objections. No matter the condition, the location, the history, etc. the right price will sell the property every time. (Just ask those home-buying “services” and “wholesalers” who pay about half what your home is worth.)

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Categories: Real EstateTags: agent compensation, broker compensation, California, cancellation, listing agreement, price overcomes all objections, Real Estate