Question 4

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 is specifically designed to protect a broker's right to receive a commission from a sale that occurs after the listing agreement has ended, provided that the buyer was identified during the listing period.

A) an acceleration clause.

An acceleration clause is typically found in loan agreements and allows a lender to demand full repayment of a loan if certain conditions are met. This option does not relate to real estate broker commissions or the continuation of obligations after a listing expires.

B) an alienation clause.

An alienation clause, also known as a due-on-sale clause, allows a lender to demand full repayment of a loan upon the sale of the property. This term does not pertain to broker commissions or the specifics of listing agreements.

C) a coinsurance clause.

A coinsurance clause is commonly found in insurance policies, requiring the insured to maintain a certain level of insurance coverage. This concept is unrelated to real estate transactions or broker commissions following the expiration of a listing.

D) an extension or 'tail' clause.

An extension or 'tail' clause is the correct term for a provision that allows a broker to collect a commission if a sale occurs with a buyer introduced during the listing period, even after the listing contract has expired. This clause protects the broker's interests and ensures they are compensated for their efforts.

Conclusion

The extension or 'tail' clause is crucial for protecting a broker's commission rights post-expiration of a listing agreement. In contrast, the other options, such as acceleration, alienation, and coinsurance clauses, do not relate to the context of brokerage commissions and are therefore incorrect. This distinction emphasizes the importance of understanding specific contractual terms in real estate practices.