You successfully navigated the exclusive listing agreement process. You have a signed listing, you prepared marketing materials that were tailored for this property; and your owner client was impressed with what you produced. You begin to market the property, all the right early steps toward a successful transaction, a commission, maybe even some repeat business. What could go wrong?

Likewise if you’ve secured an exclusive right to represent a buyer or tenant client, you’ve worked hard to find a property that was available for sale or lease; but the client decides that none of the properties work, despite your efforts to convince the client that the properties you submitted were within the client’s acquisition parameters and offered good solutions for the client.

When a client has a change of heart, a decision not to buy, sell, or lease now — whether a mere pause in the timing, or something else — all that good work is now wasted. What is a broker to do? Consider seeking a cancellation fee or perhaps even liquidated damages, meaning a stipulated sum paid by one party to the other in the event of termination of the listing. One very well advised residential real estate broker went down this very road, working very hard to please a difficult client. The undertaking in this case was the conversion of a well-located apartment building to condominiums; loft spaces in the West Loop area of Chicago. The broker’s exclusive listing agreement came into play in the following scenario.

At first, the developer wasn’t happy with the volume of prospective buyers. Then the developer criticized the marketing materials. Then he wanted new members on the sales team. The broker continued to work hard to please the developer, a seemingly impossible task. Next, the developer decided to terminate the broker; and after all that work — with only 4 units sold, 13 unsold — there was no recognition, monetary or otherwise, for all the effort.

BUT, the listing agreement contained the following language:

“If Broker’s authority to sell is revoked or said property is withdrawn from the market during the period of Broker’s authority to sell hereunder, Seller shall pay to Broker upon such revocation or withdrawal, not as a penalty, but as liquidated damages, an amount equal to the commission payable on the full price listed above.”

Assuming something like this scenario has happened to you, how can you protect against an unfair or premature termination of the listing? Given the cost of your time for getting to this point without a sale or lease, consider whether you should include language in the listing agreement to test the owner’s commitment to you and your firm, and a reasonable term for the listing for you to find that buyer or tenant. While many might recoil from the idea of asking for liquidated damages or a termination fee, others seek a termination fee computed as a portion of the lost commission. Put another way: what is your time actually worth and why shouldn’t clients pay some amount for your time, even when you haven’t accomplished the ultimate goal of the agreement? Here is what we recommend: (a) some amount of compensation for a termination or withdrawal; (b) post term protection for your registered prospects, as you never know whether one or more of those prospects ripen into a buyer or a tenant, so keep your post term protection in place; and (c) when and if that registered prospect turns into a buyer or tenant, you are due the full commission, offset by the termination fee or liquidated damages. You are not double dipping; you are just standing up for yourself, seeking compensation for your efforts, and protecting yourself against a client who might use your marketing advice and efforts but who wants to avoid paying for those efforts.

That said, many brokers will worry that if the listing or exclusive rep agreement is too tough, too hard to defend and get signed, then you won’t even get the assignment. Is that a loss? Or have you identified a potential client who could be that difficult client, the one who costs you time and effort with no reward? In that case, ask yourself if you are better off identifying the problem early and saving time to seek other clients or work on existing assignments, instead of being the victim of that client whose change of heart became your own problem and loss. Lawyers have similar challenges: we usually ask for retainers up front, whether to protect against non-payment, or simply to test the commitment of the future client. We would rather have a client decline to pay the requested retainer and lose that client than to take him or her on, only to have collection problems down the road, AFTER the time is spent and the work is done. It’s a little bit confidence and self-esteem, plus a little bit self-defense.

If you don’t think liquidated damages are for you, take a look in the mirror. Aren’t you WORTH the protection? We SIOR brokers own self-confidence and excellent track records, which should enable you to find that next client — one worth keeping, one worthy of your time and effort AND who values what you can do for the client and its property or its real estate requirement.