Question: Two months ago, we listed our north Phoenix home for sale with a real-estate broker because we wanted to move back to Seattle. This list price was $212,000. We have had almost no contact with our broker for the past two months, but last night our real-estate broker brought us an offer for $215,000, which is $3,000 more than the list price. We may move back to Seattle some time in the future, but right now we no longer want to move.
Our real-estate broker told us that, although we do not have to accept any offers below the list price, the law requires us to accept any offers equal to or greater than the list price. Furthermore, our real-estate broker says that, even if we persuade the buyer not to buy our house, we will owe the real-estate broker a commission of $14,000.
Although we would be willing to reimburse our real-estate broker for any expenses, and for her time spent on our listing, we believe that $14,000 is nothing more than blackmail. Do we have to accept the offer for higher than the listing price? Do we still owe our listing broker a commission of $14,000?
Answer: A seller never has to sell to a buyer (even if the buyer’s offer is equal to or greater than the list price) because the marketing of the property at list price by a seller is simply “an offer to a buyer to make an offer.” Therefore, you have no obligation to accept the buyer’s offer of $215,000.
In answer to your second question, under most residential listing agreements, a real-estate broker is entitled to a commission if the real-estate broker produces a ready, willing and able buyer at a price equal to or greater than the listing price, or at a price agreed to by the seller. Even if the offer from the buyer is equal to or greater than the listing price, however, a buyer is only a ready, willing and able buyer if there are no material contingencies in the buyer’s offer to purchase.
The most common material contingencies are mortgage financing and home inspection. Therefore, you would only owe a $14,000 commission to your real-estate broker if there were no material contingencies in the $215,000 offer from the buyer. Inasmuch as almost all offers have some type of material contingency, I seriously doubt that you have any obligation for the $14,000 commission if you refuse to accept the $215,000 offer.
Note: Most commercial transactions provide for payment of brokerage commissions in the purchase contract, not in a listing agreement, and further provide that no brokerage commissions are owed unless the transaction closes.