Legal Question in Real Estate Law in California

The buyers of our home backed out two days before the close of escrow. They did not give a good reason and agreed to give up the $18,000 that was deposited into the escrow account. Now, our broker is saying that they are entitled to half of that money and that we (the buyers) only get half ($9,000). I cannot find anything about this in the California Law and other real estate agents that I have talked have said that usually the real estate agent gets some money for expenses and perhaps the broker gets a small amount to cover there expenses and the buyers receive the rest (usually much more than half). Is there California law around this?
Thanks

Asked on 7/19/10, 1:48 pm

3 Answers from Attorneys

Bryan Whipple Bryan R. R. Whipple, Attorney at Law

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I assume your listing agreement is plain vanilla. Other analyses and outcomes are possible with nonstandard agreements.

Normally, a seller's agent/broker earns his/her commission when a ready, willing and able buyer is procured by the agent/broker and the seller enters into a binding, enforceable and unconditional contract to sell the property to the purchaser procured by the broker/agent. If the contract is conditioned upon the buyer doing something, or something outside the control of the seller occurring, the commission is not earned until the condition is met (or, in many cases, waived).

I would say, therefore, that in most situations where the buyer and seller are in contract, and the conditions (if any) of the buyer's obligation to purchase are met or waived, but then the parties mutually agree not to go through with the deal, the broker/agent has earned his/her commission and, given standard escrow instructions, may recover them out of the deposit.

A really complete answer could ramble on for several more pages, discussing waivers, whether a buyer who backs out meets the "willing" part of the "ready, willing and able" test, and so on, but this is the basics: if the buyer seems qualified, signs a contract, and there are no un-met conditions to the buyer's performance, the broker or agent has earned the commission.

Answered on 7/19/10, 5:27 pm

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Mr. Whipple is, apparently, not familiar with the CAR standard listing agreement. It expressly provides that if the property goes into contract and then escrow fails to close through no fault of the seller, the broker is entitled to the lesser of the agreed commission, or half the recovery against any parties responsible for the breach of the contract, after any title and escrow fees and expenses of collection are deducted. So your broker is not entitled to a full half of the liquidated damages, but is entitled to 1/2 of what is left after your fees and expenses, and costs of collection if any, are deducted.

Answered on 7/19/10, 7:49 pm

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