When it comes to real estate, it’s critical that you always read the agreement in its entirety before signing – unfortunately, something that many people struggle to find the time for! After all, a real estate agreement is a legally binding contract, and understanding the full terms involved is integral to making a safe decision. However, reading the entire agreement can also raise numerous questions; one such question you may be asking is about commission terms.

Understanding Holdover Clauses

It’s not uncommon for real estate agreements to include a term that states that you will still owe a commission once the real estate agreement expires, which we typically refer to as a “holdover clause.” This clause can understandably seem highly daunting at the outset; however, it’s a relatively straightforward process, and understanding how it works can take a lot of pressure off.

How Holdover Clauses Work

The easiest way to define how holdover clauses work is to give an example. Imagine that you listed a property with a brokerage and signed a listing agreement, but the deadline for the agreement was approaching. Unfortunately, the property didn’t sell by the time the agreement expired – but, shortly after the listing expired, a buyer appeared who had viewed the property while it was still showing as listed with the brokerage.

 In this case, if the buyer expressed an interest in the property during the contract’s term (even if this was only a response to an advertisement for more information about your property), you may hence be liable to pay commission on the property to the brokerage. However, suppose you sold the property shortly after it was unlisted, and the buyer hadn’t seen it while the brokerage listed it. In that case, you won’t usually be liable to pay commission.

Get Professional Real Estate Advice if You’re Unsure

Legal documents can be confusing; there’s no doubting that. Therefore, if you have any further concerns about the holdover clause for your own real estate agreement, you should always contact your real estate agent to ask for further guidance and support regarding the specific terms.