The Real Estate Council of Ontario handles a great many calls on the topic of the holdover clause. Primarily, the purpose of this clause is to offer some protection to a sales representative who has shown a property that subsequently becomes unavailable or “off the market” whether through expiry or termination. There is no standard time limit but typically holdover periods are 90 to 120 days.
With any contract to sell a property, the listing broker’s authority ends when either the property sells or when the contract expires. So lets say that Mr. Joe Public walks into a house listed by Broker A. He likes the house and strikes up a good conversation with the listing agent. Joe is rather sneaky so he leaves the open house and returns later in the evening to speak to the owners directly and convinces the seller to terminate the listing and sell it to him privately. The contract has a 90 day holdover clause. In this case, if a deal was consummated, the sellers would owe the full commission to Broker A. The only way to avoid paying commission would be for the sellers to terminate the contract and wait the full 90 days before selling it to him privately.
Now, lets complicate the issue a little. Joe Public is under a BRA with Broker B who shows him the property while it is listed with Broker A. Joe is interested in the property but hasn’t received his inheritance yet so is unable to make an offer. The listing eventually expires just a few days before Joe receives his inheritance. He calls his agent and tells him to contact the seller and bring him an offer. Broker B calls the seller, signs a one week exclusive listing and then brings them an offer which is accepted. The net result is that there is no recourse by Broker A to seek any commission even though the sale takes place within the holdover period however Broker B maybe liable under RECO for breaking a rule, namely contacting the seller directly. As you know, the Privacy Commissioner made changes to the APS several years ago that provided a box to be checked off by the seller that disallowed agents to contact them should a listing expire.
Here is a little understood fact about Broker B’s new listing and the seller’s obligations to pay commissions. Lets say that when Broker B met with the sellers in the example above, and told them that he would take the listing at 1% less than Broker A. Did you know that if the sellers accept Joe Public’s offer, through Broker B, the seller would be required to pay that 1% to Broker A? The reality is that it is unlikely that Broker A would ever actually find out what the commission paid to Broker B was. I would just remind you that the realtor community is very small and this type of news can get around quickly.
As agents it is imperative that, whether we are signing a client to a Buyer Representation Agreement or a Listing Agreement, we explain the holdover clause clearly. It may be worth having your client initial beside the clause. In a court of law it would clearly indicate to a judge that you explained the concept and legal obligations of the holdover clause.
So you are probably wondering what goodwill has to do with having a successful brokerage. The truth is, there have been hundreds of articles written about the technical aspects of running a good business but without personal interaction, your business is likely to fail. Real Estate is a prime example. The buying and selling public require ‘face time’, that simplest idea of building relationships face to face.
The word goodwill is probably best defined as that special feeling a client gets when they know you are working in their best interests. At our office, our listings come with a guarantee; if you aren’t happy with your agent’s service, we will be release you from your contract. In addition, our President sends a personal note to every seller and buyer and asks how the experience was. Whether it is good or bad, we want to know. Fundamentally, goodwill is not a tangible commodity. It is nearly impossible to monetize, nevertheless, when executed properly, goodwill can provide the agent with continued opportunities and referral business.
While that is easily translated between and agent and a client, it is also important to communicate the essence of goodwill between brokerage and client and brokerage and agent. Creating goodwill is done by giving (of yourself, time) and appreciating and acknowledging the contributions of those around you. Goodwill transcends financial or material reward. It is not only about making more money, it is about gaining the agent’s trust, affinity and friendship and those are, collectively, the most important aspects of continuing success.
I believe one of the pillars of any successful business is to have fun and if there was ever any doubt, just remember the words of Mr. Bosley himself. “Make money and have fun and if you’re not having fun, change the way you are doing business”. Words to live by. The reality is that the real estate game can be both wonderful and frustrating. Very good agents burn out from time to time so it is important to take some scheduled time off once in awhile. Our company believes in fun too and while it is important to make money, it is also important to keep the troops happy, so we have pool parties, golf parties, ski trips and holiday celebrations. Yes they are expensive, but their benefits far outway the cost. A happy company is a successful company. For us, our social endeavours are not part of our recruitment strategy. They are a show of appreciation for all the hard work our agents do and lets face it, everyone likes to be appreciated. I remember a boss I once had told be that his philosophy was to never tell someone they were doing a good job because it always kept them guessing. #FAIL!
Getting out and socializing with your workmates builds relationships and when that happens, synergy develops which in turn leads to opportunities and financial gain. So the end game is to build a social net that supports your core business. Get out there and have fun.