House Sale Commission Is Owed When a Buyer Is ‘Ready’
Question: In a recent column you said that the seller still owed the listing broker a 6% real estate commission when, the day before close of escrow, the buyer of a Peoria home said that he no longer wanted to buy the home, and that he would forfeit to the seller the $5,000 earnest money deposit. You then said that the listing broker was still entitled to the 6% real estate commission under the listing agreement because the buyer was a “ready, willing, and able” buyer. Why should a seller pay a 6% real estate commission to the listing broker when a buyer simply refuses to close escrow, something over which the seller has no control. How can the listing broker claim to have produced a “ready, willing and able” buyer if the buyer is not “willing” to close escrow after all inspections have been completed and the buyer has the financing?
Answer: Under the law, a buyer is a “ready, willing, and able” buyer immediately after removal of all of the buyer’s contingencies, such as inspections and financing. At that time the seller is obligated to pay the listing broker the listing commission. If the buyer later refuses to close escrow, the seller can elect to accept the earnest money, i.e., $5,000, or sue the buyer for actual damages, which could include the payment of the 6% commission to the listing broker, and any lost profits on the subsequent sale of the home.
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