Question 45

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 expiration of a listing agreement if a buyer was identified during the listing period. This mechanism 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 related to loan agreements, allowing a lender to demand full repayment if certain conditions are met. This clause does not pertain to real estate brokerage agreements or commissions for brokers after a listing expires.

B) An alienation clause

An alienation clause pertains to the transfer of property ownership and typically allows a lender to call the loan due if the property is sold. This option does not relate to the broker's commission in the context of expired listings.

C) A coinsurance clause

A coinsurance clause is commonly found in insurance policies, requiring the insured to carry a certain percentage of coverage relative to the value of the property. It does not apply to real estate transactions or the payment of broker commissions.

D) An extension or 'tail' clause

An extension or 'tail' clause is specifically designed to protect the broker's right to a commission after the expiration of a listing agreement. It allows the broker to be compensated for transactions initiated during the listing period, thus making it the correct answer.

Conclusion

The extension or 'tail' clause is essential in real estate transactions as it safeguards the broker's commission rights even after a listing has expired. In contrast, the other options address unrelated legal concepts and therefore do not apply to the question regarding a broker's commission structure. This distinction clearly establishes option D as the correct choice.