Understanding Open Listings: Who Gets Paid in Real Estate?

An owner gives an "open listing" to many brokers, including "A" and "B." Broker A shows the home to a customer, but does not make a sale. Broker B later sells the home to the same customer. The seller is obligated to pay:

• A. "A" a full commission
• B. "A" and "B", who both receive full commissions
• C. "A" and "B", who split the commission
• D. "B" a full commission

Answer: (A)

In an open listing scenario, a property owner has the flexibility to work with multiple brokers without being tied to any one of them. This means that if one broker brings in a buyer and the sale occurs, that broker is entitled to a commission, while other brokers who showed the property but did not lead to a sale are not entitled to any compensation. In this case, Broker A showed the home to a customer but did not complete the sale, and Broker B ultimately sold the home to the same customer. The key factor here is that Broker A did not have a successful transaction that resulted in a sale. Therefore, Broker A does not earn a commission since the arrangement was based on the understanding that only the broker who successfully sells the property is entitled to a commission. Since Broker B completed the sale, Broker B is the only one entitled to a full commission. In an open listing, the seller only pays the broker who successfully closes the sale, which in this instance is Broker B.

When it comes to open listings in California real estate, there’s a lot more than meets the eye. Have you ever stopped to wonder how commissions are distributed when multiple brokers are involved? Well, let’s break it down in a way that’s crystal clear, especially if you’re eyeing that California Real Estate Practice Exam. Ready? Let's go!

What’s an Open Listing Anyway?

Picture this: you own a beautiful home and decide not to put all your eggs in one basket by giving it an "open listing." This means you’re partnering with multiple brokers at the same time. Kind of like dating, but with a lot of potential suitors showing up at your door! The thrilling part? Only the broker who sells the home gets paid a commission. So, no pressure, right?

The Case Study: Brokers A and B

Imagine this scenario: Broker A gives the home a tour to a potential buyer. They chat about the property, maybe have a cup of coffee, but in the end, no sale. Time passes, and then enter Broker B. They take the same potential buyer and seal the deal. Now, you might be thinking, “Wait a second! What happens to Broker A?” Let's clarify.

In an open listing, as per California law, only the broker who actually finalizes the sale collects the commission. So, in this particular situation, Broker A doesn’t get any commission because they didn't lead to a sale. It’s like having a friend help you move and then brag about it, but when it comes to the pizza, they can’t claim a slice if they weren’t there for the heavy lifting!

Who Gets the Money?

The relevant question arises: Who’s entitled to the commission in this scenario? On the table are four possible answers:

• A. Broker A receives a full commission

• B. Both A and B share full commissions

• C. They split the commission

• D. Broker B gets the full commission

The correct choice here is A—Broker A receives a full commission. However, let’s unpack this a little. If Broker B successfully sold the home, doesn’t that mean they should also get something? Technically, Broker A only gets paid for showing the property because the deal was a no-go. So in this dance, only Broker B waltzes away with the full commission for closing the sale. Sounds straightforward, right?

Why It Matters

Understanding how commissions work in the real estate arena is like having a map when exploring a new city—you want to know where everything’s located and avoid any pitfalls. If you’re preparing for the California Real Estate Practice Exam, grasping this key concept is vital. Not only does it help you pass the exam, but it also prepares you for real-world transactions.

Being aware of these dynamics can keep you, as a future broker, from potential pitfalls. Imagine trying to collect a commission without having sealed the deal; yikes!

Wrap-Up

Remember, in an open listing, clarity is king! The seller of the property only needs to pay the broker who successfully closes the sale—making it ideally a straightforward process. So, the next time you're grappling with similar exam questions, think back to this scenario. Broker A doesn’t get paid because they didn’t follow through. The real takeaway? The art of real estate is not just about selling homes; it's about effectively navigating the commission maze to ensure everyone knows their place.