Commercial real estate brokers have a listing agreement in place that technically allows them to market a seller’s property. However, the listing agreement is not really an offer from the seller to sell their commercial property to a specific buyer. A seller is not bound within a listing agreement to sell their commercial space. A seller is not bound within a listing agreement to accept any offer from any potential buyer, either. This means that the first offer in and first offer out on a commercial property listing do not always apply.
An offer from a buyer that is ready and able to perform and make a purchase may entitle the commercial real estate broker to a commission on the sale. However, would a seller be liable for more than one commission if multiple offers are received by more than one able and willing buyer? In other words, if a seller receives ten different offers on a commercial property and the seller accepts one of them, are they liable for the other nine offers? Within the context of an open listing the seller is not liable for more than one commission on any given sale. An owner in an open listing (non exclusive) has a right to authorize more than one broker in which each broker is independent of the other, in which the seller is not liable to more than one commission when the consummation of the sale is made with one of the brokers.
A commercial real estate broker must prove in this type of agreement that they were the “procuring cause” of the transaction occurring and the commercial real estate property being sold. An open listing agreement is not usually in the best interest of a commercial real estate broker, although it may be of interest to the seller. Most commercial real estate brokers will not take an open listing. Open listings can often lead to issues popping up with marketing the property. Commercial brokers may run into problems with open listings where they end up having to double up their efforts, as well as having to prove they were the procuring cause of the sale of the property. Also, an open listing does release the seller for paying more than one commission if they pay the broker that is not the procuring cause of the sale.
The favored listing agreement is a win-win agreement that is in place that protects both the real estate broker and the seller. This listing would be an “exclusive agency“ listing agreement.
Mike Henry has been involved in the real estate industry in some fashion for over thirty years. He ocassionally blogs online about the current state of the industry, primarily in the southwest. For more information about commercial real estate, please visit http://austin-office.com.
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