Whether you hire a real estate agent to help you sell or buy a home, the relationship you have with your agent can have its challenges, especially in the fast-paced business of real estate sales, which by its very nature involves significant financial and emotional pressure. Many variables impact the success of a real estate transaction, and most sellers and buyers have their agents to thank for getting their deal to closing. But what happens when a real estate agent is not up to the task? They’re inexperienced, non-responsive, or they’re just poor at sales? How do you fire a real estate agent who fails to perform or meet expectations?
Beyond the personal relationship between agent and client, there is the legal relationship to consider. It’s created and regulated by a written, exclusive real estate agency agreement. For a seller, this is most often called an Exclusive Listing Agreement. For a buyer, the agreement is referred to as an Exclusive Buyer’s Agreement. In both types of exclusive agreements, the agreement is unlike having a written agreement with any other service provider, such as an attorney, a builder, or even a roofer. Except for an agent’s unethical conduct, one cannot just terminate a real estate agent, or change to a new agent, and then move on with the business of selling or buying a home. The sales agreement is an exclusive arrangement, meaning that the real estate agent represents the buyer or seller only, and that the parties are bound or obligated to each other for a specified time in the contract. These agreements do not allow a seller’s or buyer’s unilateral withdrawal from the exclusive agency agreement.
The key enforcement provision in an exclusive agency agreement is called the real estate agent’s protection period. Essentially, the agency protection period acts as a financial deterrent against sellers and buyers from circumventing the real estate agent and undermining the agent’s sales efforts. The protection period has a time frame (usually 180 days) where agents are entitled to their real estate commission for the sale or purchase of a home.
Some protection periods only apply when a seller sells their home to a purchaser who had previously been through the home while it had been listed with the former agent but not sold by that agent. More severe protection provisions apply to any sales or purchases during the protection period, regardless if the agent was involved in the transaction. For instance, a buyer who has signed an exclusive buyer’s agency agreement will be responsible to their agent for a real estate commission if they purchase a home through another agent during the 180-day protection period. This is regardless if the first agent showed them the sold home or not.
So how then can an unhappy seller or buyer terminate their business relationship with their real estate agent?
Obtain a mutual release. Both parties to the exclusive agency agreement must agree to a written mutual release. Only with a written release can a seller or buyer avoid paying a real estate agent their commission under the protection period. A mutual release is easier to secure when the real estate agent’s conduct is unethical or inappropriate. Lying and misrepresentation are good causes for their dismissal.
Work with the real estate agent’s real estate broker. Every real estate agent works under, and is responsible to a real estate broker. If you are unhappy with your real estate agent’s services but still want to move forward with selling or buying a property, then it’s best to speak with the agent’s broker. The broker has the authority to change agents or amend the contract provisions or even issue the written mutual release.
Let the contract expire. Plans change and when it may have been a good idea to list or buy a home, a buyer or seller may decide to stay put. In such cases, the parties can let the contract expire on it’s own terms. However, should something change later in the near future, remember the protection period provision will protect the real estate agent’s right to their commission on average 180 days.
Should a seller or buyer choose to move forward with their sale or purchase without their contracted real estate agent and ignore the contract’s protection period completely, they risk being sued by their agent for their real estate commission and could be liable to pay a real estate commission twice; once to the agent who closed the transaction and once to the aggrieved agent.
So you can legally terminate your real estate agent but be mindful of the agreement’s protection provisions. Before you engage a real estate agent, it is best to review the exclusive listing agreement or buyer’s agreement with a real estate attorney who may suggest, among other things, a limited or shortened protection period. Do not be dissuaded by any real estate professional who tells you that you do not need to review their exclusive listing contract. Contracts have legal consequences and it’s far cheaper to call an attorney before signing. After all, it is a small price to pay when thousands or even hundreds of thousands of dollars are at stake.
About the Author: Since 1990, David Soble
has been a Michigan real estate and finance attorney He provides legal advice to national banks, lenders, loan servicers, individuals and business owners on real estate matters, business law, compliance and contract issues. Now you can reference Soble’s no nonsense legal approach to nagging real estate issues by claiming his new book “What’s Keeping You Up At Nights? An Attorney’s Practical Approach to Resolving Real Estate Nightmares.”