Mariwyn Evans is a former REALTOR® Magazine writer and editor, covering both residential brokerage and commercial real estate topics.
No Pay for Cancelled Sale
Buyer's rep not entitled to payment from fickle seller, listing broker.
January 1, 2009
Even if a buyer's representative has produced a buyer, he or she isn't entitled to a commission if the sale is cancelled, New York courts ruled. In the case (Valdina v. Martin, N.Y. Appellate Division, 2008), a buyer made an offer on the property and signed a purchase agreement. Before the sellers signed, they decided that they no longer wanted to sell and cancelled the transaction.
The buyer's representative sued the sellers and the listing broker, claiming that by producing a "ready, willing, and able" buyer for the property, he was entitled to his share of the commission offered.
The trial court and then the New York Supreme Court, Appellate Division, found in favor of the sellers. First, the court ruled that because the sellers were obligated by contract to pay compensation only to the listing broker, they had no contractual relationship with the buyer's rep and so could owe no compensation. Next, the court considered the suit against the listing broker.
Under state law, a broker has to compensate a cooperating agent only when the transaction has closed. Since the sale was never completed, the listing broker owed no commission to the buyer's representative.