During the course of listing your home for sale with a real estate professional, you will sign a Listing Agreement, Seller Representation Agreement, and Authority to Offer for Sale (all one form!) Among the many clauses on this form, which is your CONTRACT with the listing brokerage, there is a clause referred to as a “holdover clause.”
As you can see from the example above, a holdover clause deals with a period of time AFTER the expiry of the listing agreement. Typically, this period of time is 30 days to 150 days, after the expiration date of the listing period.
Why should you care about a Holdover Clause?
Let’s say a house sells within its 30 day holdover period, and the homeowner has not relisted the property with a different real estate brokerage. Under the terms of the holdover clause as illustrated above, if the buyer was introduced to, enquired about, or came to an open house for the listed property, by or through the listing brokerage – or even if they followed up on some marketing material – the seller will most likely be obligated to pay the commission to the listing brokerage because the buyer came, in whole or in part, as a result of the listing brokerage’s efforts to market the house.
Joe Richer, the Registrar for the Real Estate Council of Ontario adds this to the conversation, in an example where the homeowner decides to try to sell the house on their own after expiry or chooses another brokerage:
“…let’s say that after your listing agreement expired, you decide to try and sell the property yourself or list your property with another brokerage. If a buyer were to purchase your property – having never expressed interest in buying the property or having visited any open houses hosted by your former listing brokerage, the commission holdover would not likely apply. There are exceptions, so it’s important to carefully review the terms of a holdover clause (and all other clauses in the agreement) before you sign.
It is always a good idea to read all clauses in any contract, especially one that involves a significant asset such as one’s home or investment property.