What is holdover clause?

Tuesday Mar 17th, 2020


Let me explain how the holdover clause may affect you after the current listing agreement expires.

Let’s say, for example, your listing agreement includes a 30-day holdover clause. This means that, even after your listing agreement has expired, under certain conditions you may be obligated to pay the listing brokerage commission if you sell your home during the 30-day holdover period.

So, let’s just say your house sells within the 30-day holdover period.

If the buyer viewed, enquired, or was otherwise introduced to your property by or through your brokerage — whether through your listing representative, or any other salesperson at their brokerage — at any point during your listing agreement, you may have to pay the listing brokerage a commission.

This may also be true if the buyer attended an open house or followed up as a result of promotional materials produced by the listing brokerage.

The reason for this possible commission entitlement is that the sale resulted, in some part, from the marketing efforts of the listing brokerage. Since both you and the buyer benefited from the services provided by the listing brokerage, the brokerage is likely to seek compensation for aiding in the sale.

Now, to offer another scenario, let’s say that after your listing agreement expired, you decide to try and sell the property yourself — or list your property with another brokerage. If a buyer were to purchase your property, having never expressed interest in buying the property or having visited any open houses hosted by your former listing brokerage, the commission holdover would not likely apply.

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