Agents Can’t Recover for a Verbal Listing Agreement
A verbal listing agreement describes an unenforceable verbal contract between a real estate broker (or agent) and the seller. Under California Civil Code Section 1624 verbal listing agreements (Agent: I’ll sell your house for a 6% commission; Seller: OK) are unenforceable. In essence, all listing agreements must be in writing. Unfortunately for Brokers, there is no end-run around this prohibition against verbal listing agreements.
CC 1624 (a) The following contracts are invalid, unless they… are in writing and [signed] by the party to be charged…(4) [a]n agreement authorizing or employing an agent, broker, or any other person to purchase or sell real estate
No Recovery Under Equitable Estoppel
Sometimes when a contract is held unenforceable the party who rendered services can recover under equitable estoppel or quintum meruit. Under equitable estoppel or quantum meruit theories of recovery the party who rendered services without compensation argues that there was some value delivered to the other party and thus some level of compensation is deserved less the other party be unjustly enriched. In terms of oral listing agreements the Broker will argue that the seller was unjustly enriched as the Broker rendered services to facilitate the sale of the home.
Unfortunately for Brokers and real estate agents the courts have consistently rejected arguments for recovery under equitable estoppel or quantum meruit. Regarding equitable estoppel, the party seeking compensation must have reasonably relied upon the oral agreement. According to California courts the Broker cannot have reasonably relied on the verbal listing agreement as Brokers are presumed to know the law as demonstrated by their passing the licensure examination, and by extension, are presumed to know that verbal listing agreements are unenforceable under CC 1624. Furthermore, quantum meruit recovery (compensation for the reasonable value of the services) has been rejected as such awards would circumvent the statute and open sellers up to the potentially unfounded claims by Brokers; the very consumer protection issue the statute was designed to prevent. Therefore, Brokers and real estate agents have little recourse against sellers when the listing agreement was merely verbal and not written.
You can learn more about verbal listing agreements on http://realestateagentlaw.blogspot.com, a blog dedicated to California real estate law. The blog is authored by real estate agent and attorney Adam Garcia.
By Adam Garcia.