“Do not think of money. Just try to serve your clients. The money will come.”
– Jose E. Sabater, Real Estate Broker, Attorney and Author
In a previous article, I said that a Listing Agreement is the most important document that needs to be signed before selling any piece of real estate property. This is the concluding part of that article.
It should be emphasized that a real estate broker earns compensation only when he/she successfully procures a buyer who is able to complete the transaction at a price and on the terms and conditions which are stipulated in the Listing Agreement, signed and executed by the owner-seller.
There are 3 cases decided by the Supreme Court that we will highlight here. One is De Castro vs. Court of Appeals, G.R. No. 115838, July 18, 2002. Two is Manuel vs. Sarmiento, G.R. No. 173857, March 21, 2012. And three, Oriental Petroleum and Minerals Corporation vs. Tucsan Realty, Inc., G.R. No. 195481, July 10, 2013.
It is encouraging to note that in all these 3 cases the Highest Court in the country all awarded the brokers the commissions that were withheld from them by the owner-sellers. But, as licensed real estate brokers, what are the lessons we can learn from these cases?
First, the Oriental Petroleum case reminds us of the principle of “procuring cause” in ordering the payment of the broker’s commission. The term “procuring cause” refers to a cause which starts a series of events and results, without break in their continuity, in the accomplishment of a broker’s prime objective of producing a purchaser who is ready, willing, and able to buy on the owner’s terms.
Second, the Listing Agreement, whether exclusive or non-exclusive, is a contract of agency. Hence, if the Agreement is not contrary to law, public order, public policy, morals or good custom then it is a valid contract, and constitutes the law between the parties.
The basic job of the broker is to locate a person (natural or juridical) who is ready, willing and able to buy the real property registered in the name of the owner-seller, with the end goal of consummating the sale.
As such, the contract of agency entered into by the owner-seller and the broker are bound to comply with its terms and conditions in good faith. However, it must be recognized that the owner-seller has the right to revoke the Agreement at any time. Now, this leads us to our third important point.
The Court (in the Oriental Petroleum case) has always recognized the broker’s right to his commission, although the owner revoked his authority and directly negotiated with the buyer whom he met through the broker’s efforts. It would be unfair not to give the broker the reward he had earned for helping the owner find a buyer who would pay the price.
Fourth, care must be taken to assure that the Authority to Sell was validly executed. It must be emphasized that the authority to sell in the case of Manuel vs. Sarmiento was notarized. Take note that a notarized document has in its favor the presumption of regularity, and can be contradicted only by clear and convincing evidence.
Fifth and final point, when one has secured an exclusive authority to sell it is incumbent upon the broker to serve his/her principal well. The effort expended should be commensurate to the professional fee agreed upon by the owner-seller and the broker.
In the case of Manuel vs. Sarmiento, the broker went out of her way to spend for the survey of the land, the reconstitution of the title of the property that was sold, and paid for the real property taxes and tax clearances.
As mentioned before, the Supreme Court has always defended the right of the broker to his/her commission as against an owner-seller, who thinks of fraud and deceit towards the broker. The Listing Agreement (if drafted correctly) is designed to protect the broker from scheming sellers who think it is convenient to disregard the broker just to save and pocket more money for themselves when the sale is consummated.
Think less of the compensation and let us focus on serving our clients to the best of our abilities. Yet, it doesn’t hurt if we have a good Listing Agreement in place to protect us from any eventuality.
Happy prospecting and selling. Remember to subscribe to our newsletter for more updates on the practice of the real estate profession.