Definition
An extender clause refers to a specific provision found within a real estate listing contract whereby the terms of the contract are automatically extended once the initial expiration date has passed. This clause is sometimes included to ensure that agents continue to have the exclusive right to sell a property even past the original contract term.
Examples
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Example 1: Broker Bob included an extender clause in his listing agreement with the property owner, which meant that the listing contract would automatically renew for another period if the property didn’t sell by the original expiration date. When the homeowner decided to terminate the listing agreement upon the original expiration, Bob tried to invoke the extender clause, thereby attempting to guarantee his rights to the listing still.
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Example 2: Agent Alice utilized an extender clause in a listing contract, which was set to renew terms automatically every six months. The property owner, not thoroughly reviewing the terms, was surprised to learn the contract had extended beyond their expectations and now faced challenges moving forward without the agent’s involvement.
Frequently Asked Questions
What is the main purpose of an extender clause?
The primary purpose of an extender clause is to protect the real estate agent’s or broker’s interest by extending the listing contract terms automatically, ensuring they retain the exclusive right to market and sell a property beyond the initial expiration date.
Are extender clauses legal in all states?
Not all states allow the enforcement of extender clauses. Certain jurisdictions require a fixed termination date for listings to prevent perpetual contracts, ensuring both parties know when the contract ends explicitly.
How does an extender clause differ from a broker protection clause?
A broker protection clause or safety clause extends commission rights to the broker beyond the term of the listing agreement if a sale occurs to a buyer introduced by the broker. An extender clause, however, generally pertains to the extension of the listing agreement itself rather than just rights to a commission.
Can a principal terminate a listing agreement with an extender clause?
In many cases, a principal can still terminate a listing contract with an extender clause, but local laws and specific terms of the contract will influence this capacity. It’s essential to check applicable state regulations and review the contract terms to understand termination rights.
What should I do if I want to avoid an inadvertent contract extension via an extender clause?
Always thoroughly review listing agreements before signing and consult legal counsel if you need clarification on any clauses. Fully understanding the terms, including potential extender clauses, can help prevent unexpected contract extensions.
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Listing Contract: A legally binding agreement between a property owner and a real estate agent authorizing the agent to act on behalf of the owner in selling a property.
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Broker Protection Clause: Also known as a safety clause, it ensures an agent earns a commission if the property sells to a buyer they introduced during the listing period.
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Fixed Termination Date: A specific end date included within a contract, after which the contract either expires or may be renewed, depending on terms agreed upon by both parties.
Online Resources
References
- Getz, M. & Getz, D. (2017). Real Estate Law. Pearson.
- Jacobus, C. J. (2016). Real Estate Principles. OnCourse Learning.
- Friedman, J. P. & Harris, J. C. (2014). Dictionary of Real Estate Terms. Barron’s Educational Series.
Suggested Books for Further Studies
- “Essentials of Real Estate Law” by Jeffrey A. Helewitz
- “Modern Real Estate Practice” by Fillmore W. Galaty, Wellington J. Allaway, and Robert C. Kyle
- “Real Estate Principles” by Charles J. Jacobus
- “The Language of Real Estate” by John W. Reilly
- “The Millionaire Real Estate Investor” by Gary Keller
Real Estate Basics: Extender Clause Fundamentals Quiz
### What is an extender clause in a listing agreement?
- [ ] A clause that allows the property owner to reduce the listing price automatically.
- [x] A clause that automatically extends the listing contract upon expiration.
- [ ] A clause that cancels the listing contract after a certain period.
- [ ] A clause that reduces the agent's commission over time.
> **Explanation:** An extender clause is a provision in a listing contract that automatically extends the terms of the contract upon expiration.
### Can an extender clause be found in all listing agreements?
- [ ] Yes, it's mandatory in all listing agreements.
- [x] No, including it is at the discretion of the broker and the property owner.
- [ ] Only in commercial real estate listings.
- [x] Only in residential real estate listings.
> **Explanation:** An extender clause is not mandatory and its inclusion depends on the agreement between the broker and the property owner. It can be applied in both residential and commercial real estate listings.
### How does an extender clause protect the broker?
- [x] It ensures the broker retains the exclusivity of the listing contract past the initial expiration date.
- [ ] It allows the broker to increase the commission rate.
- [ ] It guarantees a sale within a specific timeframe.
- [ ] It requires the property owner to accept the first offer.
> **Explanation:** An extender clause protects the broker by extending the terms of the original listing contract, thus continuing their exclusive right to market the property.
### Is it possible for a property owner to terminate a listing agreement with an extender clause?
- [ ] No, once signed, the property owner cannot terminate it at all.
- [x] Yes, but must comply with contract terms and local laws.
- [ ] Only if both parties agree.
- [ ] Yes, automatically upon property sale.
> **Explanation:** Property owners can terminate a listing agreement with an extender clause, typically adhering to the specific terms in the contract and local real estate laws.
### How does an extender clause differ from a broker protection clause?
- [ ] Extender clause ensures commission; broker protection extends contract term.
- [ ] Both are the same.
- [x] Extender clause renews listing term; broker protection saves commission rights.
- [ ] Extender clause is illegal; broker protection is legal.
> **Explanation:** An extender clause automatically renews the listing contract upon expiration, whereas a broker protection clause extends commission rights beyond the term of the listing agreement if a sale is made to a buyer introduced by the broker.
### In which circumstances is invoking an extender clause typically restricted?
- [ ] Throughout the year.
- [ ] Under special agent contracts.
- [x] By state laws requiring fixed termination dates.
- [ ] In long-term commercial listings.
> **Explanation:** Certain state laws restrict invoking an extender clause, as they require listing agreements to have a fixed termination date to prevent perpetual contracts.
### Who must agree to an extender clause in the listing contract?
- [x] Both the real estate broker and property owner.
- [ ] Only the real estate broker.
- [ ] Only the property owner.
- [ ] Either party individually.
> **Explanation:** Both the real estate broker and the property owner must agree to and include the extender clause in their listing contract.
### What factor influences the legitimacy of an extender clause?
- [ ] Property location.
- [ ] Commission percentage.
- [x] Jurisdiction and applicable state laws.
- [ ] Duration of listing contract.
> **Explanation:** Jurisdiction and applicable state laws influence the legitimacy and enforceability of an extender clause within a listing contract.
### Can a broker unilaterally enforce an extender clause without owner's consent?
- [ ] Yes, if included in the original contract.
- [x] No, enforcement must comply with contract law and require mutual agreement.
- [ ] Only if property does not sell.
- [ ] Depending on state real estate statutes.
> **Explanation:** While an extender clause may be included in the original contract, unilateral enforcement without the property owner's awareness or against local law would not be permissible.
### What should property owners do to avoid unexpected contract extensions?
- [x] Thoroughly review and understand contract terms before signing.
- [ ] Avoid hiring brokers.
- [ ] Ensure the property sale happens quickly.
- [ ] Only list properties for a short duration.
> **Explanation:** Property owners should thoroughly review and understand the extenders, terms and legal implications of any listing contract before signing to avoid unexpected contract extensions.
