Question

A broker who has a listing agreement to sell a house produces a buyer whose offer is acceptable to the seller. However, the seller delays title closing until after the listing agreement has expired, at which time he sells his house to the buyer. The seller then refuses to compensate the broker because the broker did not sell the house within the time frame of the listing agreement. Which of the following statements is true?

Option 1: The seller is not obligated to compensate the broker.
Option 2: The seller must compensate the broker for bringing in a buyer.
Option 3: The seller is only obligated to compensate the broker if the listing agreement is extended.
Option 4: The seller is legally required to sell the house to the buyer.

Answer 1

The seller is likely required to compensate the broker under the 'procuring cause' principle if the broker was responsible for bringing in the buyer, despite the sale occurring after the listing agreement's expiration. The exact terms of the listing agreement and state laws will ultimately determine the seller’s obligation. The correct option is option 2.

Step-by-step explanation:

The question pertains to the obligations of a seller to compensate a broker under a listing agreement when the sale of a house to a buyer produced by the broker occurs after the expiration of that agreement.

The most applicable statement out of the options given is likely Option 2: The seller must compensate the broker for bringing in a buyer, depending on the provisions of the listing agreement and state laws governing real estate transactions.

The broker's entitlement to compensation is commonly protected under the principle of 'procuring cause', which states that if the broker was the principal reason the sale eventually happened, they are typically owed their commission, even if the sale closes after the expiration of the listing agreement.

A key element here is the role of the broker in procuring the buyer who ultimately purchases the property. If the broker's efforts were the direct cause of the sale, then the listing agreement's expiration may not absolve the seller from their obligation to pay the brokerage fee. The correct option is option 2.