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Court Denies a Real Estate Broker a Commission Even Though the Broker Submits a Full-Price Offer

In RealPro, Inc. v. Smith Residual Company, LLC, a California appellate court recently declined to award a real estate broker a commission even though the agent brought in a full-price offer.  In RealPro, defendants executed a Listing Agreement with plaintiff for the sale of their real property.  The listing agreement set forth a sales price and terms as follows:  "$17 million cash or such other price and terms acceptable to [the property owners], and other standard additional terms..."  Plaintiff, a real estate broker, delivered to the sellers' broker a written offer to purchase the property at the full listing price of $17 million.  The property owners made a counter-offer of $19.5 million.  Except for the increased price, the property owners indicated the terms of the buyers' offer to purchase was acceptable.  Both the property owners and their broker confirmed in writing that a 4% brokerage commission would be split equally between RealPro and the sellers' broker.  Three months later, when an agreement was not reached on the counter-offer, plaintiff demanded its 2% commission.  The sellers refused.  Plaintiff sued the property owners for breach of contract and related causes of action.

The trial court sustained the property owners' demurrer without leave to amend finding that RealPro had "failed to allege facts giving rise to the existence of an enforceable written contract for the payment of a real estate commission...".  Plaintiff appealed that decision.  The appellate court affirmed holding that plaintiff failed to allege an enforceable contract.

The appellate court found that because the listing agreement provided that the property would be sold for $17 million or "such other price and terms acceptable to [the seller]," the seller was not obligated to pay a commission since that condition had not been met.

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