Three Requirements Before An Estate Is Liable For A Broker’s Commission
After a home is sold as part of an estate administration in California, any brokers enlisted to assist with the sale may be entitled to a commission. In some cases, the right to receive this commission could potentially be in dispute. Personal representatives must exercise caution whenever the broker’s right to receive this commission is called into question. While just debts of the estate can and should be paid, questionable obligations must be investigated in order to avoid expending estate funds in an unwarranted manner.
When Estates Become Liable for a Commission to a Broker
Personal representatives may hire real estate brokers to list and market the estate’s property. The broker’s commission is outlined in the listing agreement. The probate court will then determine, in its discretion, whether the commission is reasonable. There are also maximum permitted percentages for commissions outlined by each court. Regardless of the execution of a listing agreement, estates can be held liable for the broker’s commission only if the following conditions are met:
- An actual sale of the real estate is made.
- The sale is confirmed by the probate court, unless it was conducted under the Independent Administration of Estates Act.
- The sale is consummated.
How does this play out during the course of a transaction? Each of the following acts must occur:
- The estate receives the purchase price agreed upon as part of the sale of the property.
- The deed to the property is transferred to the buyer of the real estate.
- A mortgage or deed of trust is taken for payments that are due in the future.
Disputes over a broker’s commission are not the only potential issue that can arise when real estate is sold as part of an estate administration. Our article, “10 Questions to Ask Before California Estate Litigation Over Real Estate,” discusses important points to address before starting the litigation process.
We hope that this information was helpful. To learn more, we encourage you to view our estate administration and litigation videos on YouTube!
The Grossman Law Firm, APC (951) 523-8307