Let’s face it. Even the most ethical real estate professionals get nowhere fast without being compensated for their efforts. Take this test to see how much you know. All items are straightforward with no tricks, but I guarantee a surprise or two. They are based on Alabama case law. Case citations are with the answers. We at the Real Estate Commission have no jurisdiction over fees or commissions earned. What matters to us is only licensed persons are paid commissions. Still, the license law works in the real world. My column is designed to give you information about that world, and hopefully help you and consumers understand some of the rules.

Question:  A person who acts as a real estate broker in an Alabama transaction selling real estate located in Alabama must be licensed as a real estate broker in order to legally collect a sales commission. True/False? True. In this case an agreement to pay for brokerage services is void and cannot be enforced because the person is not licensed under the Alabama Real Estate License Law.  Culverhouse v. Culverhouse, 420 So.2d 33.  In other words the listing agreement is not valid if the person performing the services is not licensed.

Question:  A Missouri broker who had no Alabama license negotiated the sale in Missouri of real estate located in Alabama. This broker did not enter into a cobroking agreement or a referral agreement with an Alabama broker.  May this broker still legally collect a sales commission? Yes. The failure of a Missouri broker to obtain an Alabama real estate license did not bar recovery of a commission earned where both the formation of the contract and the major portions of its performance occurred outside Alabama, and where the contract was valid and binding in the place where the agreement was made. The Alabama Real Estate License Law was not framed, although it might have been, to apply to all transactions affecting Alabama Real Estate; the law’s coverage is limited to Alabama transactions. This remains true even if the broker violated the license law and was, therefore, subject to fine and imprisonment. Richland Dev. Co. v. Staples, 295 F2d 122. This case in effect says an Alabama transaction is one where the contract is formed, and the major portions of its performance occur in Alabama. This case would apply to a broker licensed in any other state, not just Missouri.

Question:   A listing agreement is subject to the statute of frauds, and must be in writing in order to be valid and enforceable. True/False? False. A contract employing a broker to procure a purchaser of real estate need not be in writing to be valid. Hover v. Whittaker-Warren Agcy., 321 So.2d 213.  It must be noted that this case was decided before RECAD became law. It should still be the law for listing agreements in which no agency relationship is established between the company and the seller. Because RECAD requires agency relationships to be in writing, a listing, which establishes an agency relationship, must be written. This case is likely not applicable in that situation.

Question:  The law in many states says that a broker is not entitled to a commission unless the sale actually closes. Is this also the law in Alabama? No. Generally, unless the seller and the broker have agreed to the contrary, a broker is entitled to receive a commission when he procures a purchaser ready, willing, and able to buy on the seller’s terms, even though the sale was never consummated. Alabama Fuel Sales Co., Inc. v. Vulcan Energy Resources Corp., 339 So.2d 1007.

Question:  Is there a genuine, legal difference between an exclusive agency listing agreement and an exclusive right to sell listing agreement? Yes. An exclusive agency at most precludes the sale of real estate through another broker whereas exclusive right to sell precludes the owner from selling the property himself during the life of the listing contract. Moreno v. May Supply Co., 190 So.2d 710.

Question:   Under a listing agreement a broker must be the procuring cause in order to be entitled to a commission. True/False? False. Under an exclusive right to sell agreement it is not necessary that the actions of a broker be the procuring cause of the sale in order for the broker to be entitled to a commission, albeit the broker must show some minimal causal connection between his efforts and the eventual sale. Mellos v Silverman, 367 So.2d 1369. In this case the sale came under an extension clause providing that the broker was entitled to a commission after the expiration of the agreement if the property sold to a buyer with whom the broker, prior to expiration, negotiated or had some other form of dealing. Under an open listing agreement procurement, within the meaning of the rule requiring a real estate broker to procure a purchaser ready, willing, and able to buy from the seller, is defined as: broker’s efforts which are the efficient cause, but not necessarily the sole cause, of a series of unbroken, continuous events, which culminate in accomplishment of the objective of his employment. The broker’s efforts were the efficient cause of the sale where the broker’s agent prepared to show land by taking pictures and making notes, physically took two men who ultimately purchased land to see it, and spent approximately two hours walking over the land with them. United Farm Agency of Alabama, Inc., v. Green, 466 So.2d 118  In a footnote to this case the court added this case would have been easier to decide if it were an exclusive right to sell listing agreement. The court said this is because the owner contracts away his right to sell the property under an exclusive right to sell listing.

Question:  A salesperson who is the listing agent has done everything necessary to earn a commission.  For whatever reason the qualifying broker decides not to insist on payment of the commission by the seller. The salesperson really needs the money, but is told by her broker that she cannot collect the commission from the seller. Is the salesperson’s broker correct? Yes. A real estate salesperson must be licensed under a qualifying broker who is held responsible to the Real Estate Commission and to the public for each salesperson licensed under him pursuant to the Alabama Real Estate License Law.  A salesperson may not sue or collect a fee directly from a client, but must recover the commission through the qualifying broker. Church v. Colon-Tanner Corp., 483 So.2d 383.

Question:  Is a husband who is a joint owner with his wife of their home liable for payment of a commission when earned even if the wife never signed the listing agreement? Yes. As a general rule the fact that property offered for sale is a homestead and is owned jointly by wife and husband, and that the seller is unable to convey title because wife refuses to join in the conveyance does not affect the husband’s obligation under the listing agreement to pay the broker’s commission.  Further, the listing agreement need not be signed by the wife and the husband is liable for the broker’s commission where the broker found a purchaser and the broker was never advised that the wife opposed the sale or would be unwilling to sign the conveyance until after the purchaser was found. Guillote v. Pope & Quint, Inc., 349 So.2d 62. Note: In a similar case a real estate broker who was informed at the outset that one of the joint owners of the property was signing for herself and for two other joint owners, but not for the fourth owner, and who never attempted to secure signature of fourth owner, had knowledge of possible unwillingness of the fourth joint owner to join in the conveyance, was barred from recovery of the commission. Reborn v. Norton, 381 So.2d 645.

The role of the Real Estate Commission is to protect the public by enforcement of the license law. We wish you success in the real world. In my opinion the most ethical, law-abiding licensees should be the most successful. This is the best way to protect the public. The object of this quiz is to give you some black letter law. Now that you know where some of the edges are, you should avoid them. Do not spend your efforts only to end up unpaid, or worse, with a consumer who has a problem about your compensation. For example, working without getting the signatures of all owners on a listing agreement on jointly owned property is like playing hockey without a helmet. It will blow your hair back for a while, but eventually you will get brained. Make a million.

Again, it should be noted that the information presented in the preceding article relates ONLY to people buying & selling houses in the state of ALABAMA and their agents.