A buyer's agent shows a property to their client. The client expresses strong interest but then decides to purchase a For Sale By Owner (FSBO) property directly from a seller, without the agent's involvement. The buyer's agent still believes they are entitled to a commission. Under what circumstances might this be true?
- AIf the agent had shown the FSBO property to the buyer previously.
- BIf the FSBO seller was aware the buyer was working with an agent.
- CIf the buyer's agency agreement included a protection clause for properties shown.
- DIf the agent had spent a significant amount of time with the buyer.
Show answer & explanationAnswer & explanation
Correct answer: C. If the buyer's agency agreement included a protection clause for properties shown.
A protection clause (also known as a 'broker protection clause' or 'extension clause') in a buyer's agency agreement typically states that if the buyer purchases a property shown by the agent or introduced to them within a certain period after the agreement expires or is terminated, the agent is still entitled to a commission. Without such a clause, it would be difficult for the agent to claim a commission on a property they didn't procure.
Why the other options are wrong
- A. Simply showing the property earlier isn't enough without a contractual clause protecting the agent's commission.
- B. The FSBO seller's awareness doesn't automatically create a commission obligation for the buyer or seller to the buyer's agent.
- D. Time spent by the agent doesn't guarantee commission; it depends on the terms of the agency agreement and procuring cause.
Protection Clause (Buyer's Agent)
A clause in a buyer's agency agreement that protects the agent's commission if the buyer purchases a property introduced by the agent within a specified period after the agreement expires or terminates.
- Prevents clients from bypassing the agent.
- Must be explicitly stated in the agency agreement.
- Has a defined timeframe post-agreement.
Memory trick: CLAW BACK: Commission protection is a claw back on deals.