How Real Estate Contracts Get Breached and What to Do About That

Disclaimer: Information in this blog post is meant to be used for educational purposes only and is not to be taken as legal advice. For any matters related to your real estate agent agreement or contract, HomeLight always encourages you to contact your own legal advisor.

72 percent of recent home sellers and buyers said that they would use their agent again—that’s the good news. But, what about the other 28 percent of clients who come away unsatisfied or worse? When your real estate agent breaches contract, it’s a nightmare. A real estate agent’s failure to do their job can cost you time, money, and personal damages.

A breach in contract could be the difference between selling your house in a month and selling it in four. You could lose $40,000 on the sale of your home or pay a five percent sales commission for early termination. Your agent’s “oopsy” could even mean the divulgence of your ugly divorce.

When your real estate agent breaches contract, it causes real problems with serious consequences, but luckily there’s a solution. Open communication and legal preparation are key when dealing with your agent’s breach in contract. We’ll show you why.

What’s in the Real Estate Agent Contract, Anyway?

When you enter into a contract with your listing agent, you are signing (yes, physically or electronically signing) a document that allows your real estate agent of choice to act as your agent in the sale of your property.

This contract gives your agent the exclusive right to market and sell your home.

In addition to the specific duties the real estate agent has agreed to perform (like online marketing, showing the house, negotiating the best offer, etc.), they enter into a set of legal obligations known as “fiduciary duties.”

These fiduciary duties are set in place to ensure that your real estate agent protects your best interest. For example, if you were fortunate enough to have multiple offers well above the marketed price for your home, it is the agent’s responsibility to make sure that you get the highest possible offer for your house. Your agent is working for you to make the process of listing, negotiating for, and selling your home will go as smoothly as possible.

The fiduciary duties in a real estate contract agreement include:

Obedience:
Your agent has entered into a binding contract that requires them do what you ask of them, as long as what you want does not violate any law.

Loyalty:
The agent you employ must act solely to further your best interest as the seller. There cannot be any conflict of interest involving family or personal gain when they are selling a house for you.

Disclosure:
Your real estate agent must be open and honest about all of the information and policies regarding their real estate firm, the offers they receive from potential buyers, as well as any other pertinent information regarding the sale of your house. For example, an agent must disclose if they have a relationship to, or any personal stake in the potential buyer.

Confidentiality:
During and after the sale of your home, your agent must not share any of your personal information or knowledge about you.

Accounting:
Who wants their money? After all of that hard work to make your home sell-worthy, you do. Your real estate agent must account for all of the property and money that is being used in the transaction that belongs to you.

Reasonable Care and Diligence:
When you hire an agent to sell your house, they are obligated to do their job and do their job correctly. If your agent is not competent enough to do any part of their job during the transaction, they are required to let you know so that you do not suffer any monetary or legal damages.

In addition to the fiduciary duties, there are also contractual specifics such as listing duties, the duration of your relationship with your real estate agent, and parameters of their commission and administration fees that you both must adhere to.

How Your Real Estate Agent Can Breach Contract

So, you’ve signed the listing agreement and are ready to sell your house with an agent that you trust. Two weeks go by, maybe three, and for some reason, you don’t see your house listed on any of the top websites. You have tried to contact your agent multiple times only to get his answering machine, or a curt email response once a week. You have an inkling that your agent is shirking their responsibilities, and you’re probably right.

Most likely, your agent  is in breach of your contract. We want you to be able to identify the ways a breach can occur. This way, you will be able to nip the problem in the bud and come up with a reasonable, fiscally safe solution before the situation escalates. The more you know, the less scary the problem will be.

Here are 3 of the most common reasons real estate agents breach contracts:

The Real Estate Agent Fails to Market Your House Correctly

Marketing a house is one of the most important ways to get people to see the home, and know that it’s for sale. It’s common sense, isn’t it? However, you would be surprised how many agents breach contract by inadequately marketing their clients’ home. The National Association of real estate agents states that inadequate marketing is the most common way an agent can break a listing agreement.

An agent  may wait too long after they have signed a listing agreement to put a house on the Multiple Listing Service (MLS), fail to show a house to a potential buyer, or refuse to cooperate with his or her colleagues at the real estate agency to spread the word about your house. Regardless, the agent is committing an infraction. Marketing your home is three-quarters of the battle, and the problem needs to be remedied immediately.

The Real Estate Agent Has Disclosed Personal Information About You

People sell their house for many reasons—they want to downsize, they’re going through a divorce, or maybe a loved one has recently passed. Whatever the reason may be, it is the duty of your real estate agent to keep that information between you.

Yet, you find out that at a meeting that your real estate agent gave their broker the “dirt” on your current living situation. This is a breach in contract.

Any break in trust, or breach in privacy warrants a termination of the relationship and possibly a monetary payment for damages.

The Real Estate Agent Fails to Get the Best Price for Your Home

In some cases, the agent’s breach in contract may occur after you have secured and agreed upon an offer on your home. For example, if your real estate agent fails to disclose a better offer on your home, leading you to believe that the one you just agreed upon is the best one.

Similarly, if your agent is unable to negotiate prices between multiple potential buyers. This could turn off potential buyers, and lose you the opportunity to maximize your profit on your home.

Should this breach ever occur, your agent would be required to compensate you for the money you lost accepting the lower offer.

What You Can Do If Your Real Estate Agent Breaches Contract

Finding out that your real estate agent is not doing their job is stressful. However, if you’re fully prepared for the situation and know how to proceed things get a little easier.

So, what can you do?

Communicate With Your Real Estate Agent, their Boss, and their Brokerage

If it is still early in the game and you feel like your agent has made a small (but forgivable) mistake, the best thing to do is have an honest conversation with the agent and their supervisor (this is typically the real estate broker).

70 percent of client dissatisfaction is due to a lack of communication on both the agent and the seller’s part. If your agent  hasn’t marketed your home properly, or has honestly forgotten to keep you in the loop about offers coming in, have a calm, respectful, in-person conversation with them about your grievance. More often than not, that conversation will remedy the issue and get your real estate agent back on track.

Move On To The Next Real Estate Agent In The Agency

Despite all of your efforts to mend your relationship with your listing agent, you realize that it is just not working. Sometimes, a bad egg is just a bad egg. It is time to move on and find another real estate agent. However, the situation becomes a bit more complicated because if you terminate the contract completely, you will have to pay that real estate agent the commission agreed upon in the contract.

If this is the situation, fear not! Explain your grievances with your current agent to their real estate broker, and the brokerage will assign you to another agent. You won’t even have to pay extra commission.

Speak With Your Attorney and Terminate Your Relationship With Your Real Estate Agent

If you are unable to obtain another real estate agent from the same agency, or would prefer to leave that real estate agency altogether, it is best to consult a lawyer before terminating your relationship completely. Your lawyer will be able to advise you on the legitimacy of your case and make you aware of any mitigation clauses that you agreed to in the original contract. From there, you will be able to determine whether or not to sue for monetary damages, or any other interests that were harmed in the process.

Hire A Top Real Estate Agent to Prevent A Breach In Contract

Sometimes taking preventative measures is the best defense against breach of contract issues. That’s why we recommend that you hire a top real estate agent in your area.

Top real estate agents strive to deliver unbeatable customer services, so they’re less likely to wind up in breach of contract. They’ve also seen more listing agreements cross their desk than the average agent and they have a verifiable and reputable track record that shows they uphold their fiduciary duties and put client’s needs first. he best real estate agents pay attention to detail when dealing with the red tape and minutia of seller-real estate agent contracts as well as buyer-seller contracts.

To be safe, have a lawyer look over your listing agreement and get all of the details of your real estate contract down in writing. As the owner of the property, it’s your job to safeguard yourself before you sign with anyone.

Once you’ve put in the work, wouldn’t it be nice to trust your real estate agent to do the rest?