What is a Safety Protection Clause?
The Protection Clause in Real Estate Deals
An exclusive right-to-sell listing agreement includes a clause that entitles the real estate broker to a commission after the listing expires or is canceled. The clause applies only in the event that a buyer who was introduced to the property by the listing broker later purchases the property after the listing has been withdrawn or expired.
The broker must typically send notice to the seller with each buyer's name within a certain number of days after the property is off the market.
A listing agreement is a form of employment contract. The agreement cements the relationship between the agent and the consumer under specified terms.
The Safety Clause Explained
The safety clause is sometimes referred to as an extender clause because it protects the broker from collusion between sellers and buyers to save the seller the cost of real estate commission.
It states that the seller still owes the broker a commission if a buyer tries to go around the broker and go directly to the seller, providing that the broker has followed procedure.
A time limitation is generally entered in the contract, which can vary from three days to one year after the listing has expired or is withdrawn.
When the Clause Doesn't Apply
The safety clause generally doesn't apply if it's not checked on the listing agreement. The broker hasn't followed procedure when they don't give written notice to the seller, and likely won't be able to collect a commission if a buyer who viewed the property when it was listed goes directly to the seller to strike a deal.
Some questions exist as to whether the agent loses the protection if notice isn't provided in a timely manner. The contract might state that the agent has three days to notify the seller by identifying the individuals who had previously viewed the home.
Some courts have allowed agents to not send this list for up to a week. They look for "intent."
Some states provide that a seller can't be held responsible for a commission to the first agent if the seller relists with another agent. The intent is basically to prevent collusion between buyer and seller.
A Safety Protection Clause Example
Broker Jones lists Seller Mary's home. Buyer Sam, who toured the home during the listing, calls Mary a few days later and says, "I'll buy your house if you cancel your listing with Broker Jones, and you won't have to pay a commission."
Sam figures this will save both him and Jane money, but Mary would most likely be required to pay the broker a commission anyway because Mary's broker checked the safety clause box in the listing agreement.
This would be cemented by the fact that Broker Jones followed procedure and notified the seller of her obligation to pay a commission if Sam purchases the property based on the previous introduction to the home by Broker Jones.
Handling an Open Listing
Open listings can be tricky for real estate agents to navigate. In this case, the seller agrees to pay the commission to the agent who brings an offer from a qualified, ready, and willing buyer.
Some experts argue that an open listing is similar to a for sale by owner (FSBO) property when it comes to getting the seller to promise to pay commission.
A real estate agent should consider presenting the seller with a one-party showing listing agreement to protect the commission if they find an open listing or a FSBO property they want to show. The agent and the seller can negotiate the number of days, weeks, or months that the clause is applicable.
At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.