Question 83

The clause designed to ensure that a broker will receive a commission if negotiations with a ready, willing, and able buyer are completed after the listing has expired is called an extension or 'tail' clause.

An extension or 'tail' clause allows a broker to earn a commission even after the listing agreement has ended, provided that a buyer was found during the listing period. This protects the broker's interests by ensuring they are compensated for their efforts in securing a potential buyer.

A) an acceleration clause.

An acceleration clause is typically used in loan agreements, allowing a lender to demand full repayment of a loan if certain conditions are met. It does not pertain to real estate commissions or the continuation of broker rights after a listing expires, making it an incorrect choice.

B) an alienation clause.

An alienation clause refers to a provision in a mortgage that requires the borrower to pay the remaining balance in full upon selling the property. This clause does not relate to the broker's commission or negotiations following the expiration of a listing agreement, hence it is not applicable in this context.

C) a coinsurance clause.

A coinsurance clause is commonly found in insurance policies and is meant to encourage policyholders to insure their property to a specified percentage of its value. This concept does not involve real estate transactions or broker commissions, making it irrelevant to the question.

D) an extension or 'tail' clause.

An extension or 'tail' clause is specifically designed to ensure that a broker receives a commission if a sale occurs after the expiration of the listing agreement, provided negotiations with a ready, willing, and able buyer began during the listing period. This is the correct answer, as it directly addresses the situation described in the question.

Conclusion

The extension or 'tail' clause is the only option that accurately reflects the mechanism by which a broker can still receive a commission after the listing period has ended if negotiations initiated during that time lead to a sale. The other options do not pertain to real estate commissions or the specific scenario presented, thereby confirming that D is the correct and relevant choice.