Question 17

The clause designed to ensure that a broker will receive a commission after the listing has expired is called an extension or "tail" clause.

An extension or "tail" clause allows a broker to earn a commission if they have negotiated with a buyer who is ready, willing, and able, even after the listing agreement has ended.

A) an acceleration clause

An acceleration clause typically pertains to loan agreements, allowing a lender to demand full repayment if certain conditions are met. It does not relate to broker commissions or the continuation of a listing agreement.

B) an alienation clause

An alienation clause is a provision in a mortgage or loan agreement that allows a lender to call the loan due upon the sale of the property. This clause does not address broker commissions or the extension of listing agreements.

C) a coinsurance clause

A coinsurance clause is primarily found in insurance policies, requiring the insured to maintain a certain level of insurance coverage relative to the property value. It has no relevance to real estate brokerage agreements or commission structures.

D) an extension or "tail" clause

An extension or "tail" clause is specifically designed to protect the broker's right to a commission after a listing expires, as long as they have engaged a buyer who is ready, willing, and able to make a purchase. This ensures the broker is compensated for their efforts even after their formal agreement has ended.

Conclusion

The extension or "tail" clause is the only option that correctly addresses the situation where a broker can still receive a commission after the expiration of a listing agreement. Other options, such as the acceleration, alienation, and coinsurance clauses, do not pertain to real estate commissions or the concept of listing agreements, making them incorrect in this context.