Table of Contents

Extender Clause: What It Is and How It Works

By

澳洲幸运5官方开奖结果体彩网:Alexandra Twin

Updated October 02, 2024

Reviewed by

Doretha Clemon

Fact checked by

Diane Costagliola

An older couple is viewing a house shown by the listing agent/realtor that will be commissioned under extender clause. — carlosalvarez / Getty Images

What Is an Extender Clause?

An extender clause is a contractual provision in an exclusive real estate listing agreement. This type of clause protects the listing agent by guaranteeing their full 澳洲幸运5官方开奖结果体彩网:commission if ꦇthe property sells after the listing agreement has expired.

In order for the agent to qualify and rece𒉰ive their commission, the buyer must be someone to whom the agent showed the property during their time as the listing agent.

Key Takeaways

An extender clause protects a listing agent if they show a potential buyer a property, but the buyer doesn't actually make the purchase until after that agent no longer has the right to the listing.
An extender clause only applies to a buyer the original agent brought in and typically extends the period in which an agent can earn a commission by a few months.
Without an extender clause, a seller could put off a sale until the listing agreement has ended, allowing them to avoid paying the buyer's agent a commission.

Understanding Extender Clauses

An extender clause protects the listing agent from losing the commission they earned, even if the agreement has expired. For example, a seller may hope to cut 澳洲幸运5官方开奖结果体彩网:closing costs when selling their home.

To do this, they could try to avoid paying the buyers' agent’s commission. If the seller goes behind the agent’s back and makes a deal to sell the home to a buyer after the listing agreement has expired, the seller could save money by not paying the agent’s commission.

An extender clause protects against such an occurrence, making sure the agent 𓆉gets their commission.

When a listing agreement ends, if the seller enters into a new listing agreement with a diff༒erent agent, they must inform the new agent about an extender clause still in effect 🅘for the previous agent.

Fast Fact

An exಌtender clause is also known as a protection clause or a safety clause.

The Process of an Extender Clause

A homeowner may enter an exclusive listing agreement with a real estate agent. The duration of these agreements varies, but three months is a common length. During those three months, the real estate agent generally works hard to bring potential buyers to see the home. Real estate agents work on commission, meaning💛 that they are paid based on the sale and price of properties. This motivates them to bring in as many potential buyers as they can.

If the exclusive listing agreement expires after three months and the home has not sold, the seller or the agent may choose not to renew the agreement. The seller may wish to work with a different agent, or the agent ౠmay determine that the home is not likely to se🔯ll and is not worth their time.

If the listing agreement contained an extender clause, then after the agreement has expired, if one of the potential buyers who had seen the home through the agent purchases the house, the agent still receives the commission they would have received through the expired contꦑract.

Extender clauses specify an end to the provision, usuall💞y a few months after the contract expires. Thus, if a potential buyer returns to purchase the home in a year or two, assuming it’s still for sale, the agent would no longer be entitled to their commission.

What Is an Example of an Extender Clause?

A real estate agent is entitled to a commission on the home's sale price if a buyer they bring in purchases it. This listing agreement is valid for four months. An extender clause in the agreement extends this by three additional months.

In the first month, the real estate agent brings in a buyer to look at the house. The buyer de🌞cides not to buy the house but, after five months, changes their mind and buys the house. Though the listing agreement expired after the fourth month, the extender claus꧑e ensures the real estate agent receives their commission.

How Much Is a Real Estate Commission?

A real estate commission is generally between 5% and 6% of a home's closing price. This is usually split between the buyer's and seller's agents, though the terms can always vary. The seller, not the buyer, usually pays the entire real estate commission.

Keep in mind, though, that the standard 6% commission paid by home sellers in the U.S. disappeared after a settlement by the National Association of Realtors. In July 2024, new rules lowered commissions and fees for home buyers and sellers.

How Do I Show More Income for My Mortgage?

To show more income than your wages or salary when applying for a mortgage, you can show your 澳洲幸运5官方开奖结果体彩网:mortgage lender any dividend interest inc⛦ome, incom🔯e streams from assets, such as bonds or rental properties, and income from any pensions or other retirement programs.

The Bottom Line

Extender clauses help protect listing agents from losing out on commissions. Sel🅰lers could typically wait to sell their home until after the listing agreement has expired, saving on commission costs. Extender clauses ensure that a listing agent will receive their commission if a buyer they broཧught in buys the house regardless of the timing.

Article Sources

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