What is the safety clause, in real estate?

Real estate agents often include a safety clause in their purchase contracts to ensure they’re paid fairly for their efforts. The safety clause, real estate, is their protection net so that their commission is not compromised even after the contract ends. 

The safety clause usually has a time limit for the broker to receive a commission. The broker needs to notify the seller within a set number of days after the property is off the market.

That’s why as a home seller, you need to review the purchase agreement carefully. Moreover, you should negotiate any timelines or dates the clause includes if you find it unfair. 

What is safety clause in real estate? 

A safety clause, also known as a broker protection clause, extension clause, or procuring clause, is common in listing agent contracts. The clause states that the seller may still owe commission fees to the listing agent even if the home sells after the listing period expires.

This safety protection clause ensures the real estate broker or agent gets paid fairly. For instance, if the broker introduces a buyer who later purchases the property after the listing is withdrawn, they still get a commission. What’s more, this clause prevents collusion between buyers and sellers to avoid paying the broker’s commission.

Why do real estate professionals include a safety protection clause?

Having a safety protection clause in the listing contract is crucial for brokers and real estate agents representing sellers. It guarantees fair compensation for the agent’s efforts and time put into the real estate transaction. Even when the sale happens after the contract ends. 

As a seller, your broker will likely include this clause in the contract they present to you. While it primarily safeguards the broker’s interests, it doesn’t disadvantage you the seller in any way. It simply ensures that your broker receives rightful payment for their role in finding a buyer for your property. Moreover, it fosters trust between you and the real estate pro. It reassures them that they’ll be compensated fairly for their work in selling your home.

Interestingly, the safety clause safeguards brokers in more ways than securing payment post-listing. It also shields brokers from fraud. It states that the home seller owes the broker a commission even if a buyer tries to bypass them and deal directly with the seller. This prevents shady deals between sellers and buyers, like colluding to avoid paying real estate commissions if the property is sold.

Does a safety clause always apply to listing agreements?

If the clause is not outlined in the listing contract or if the broker fails to give proper written notice to the home seller within the specified time and manner, the clause may fail. Additionally, if the seller and buyer are acquaintances or if they are connected without the broker’s involvement, the clause won’t be applicable.

How does the safety protection clause protect the broker and the seller?

This clause is crucial for brokers and sellers in the home selling process – serving as a vital safeguard for both. For the agent, this clause ensures that their efforts in introducing potential buyers to the property are duly compensated. Moreover, it provides a sense of security, incentivizing the agent to actively pursue leads and promote the property throughout the listing period. 

For the seller, the safety protection clause offers assurance that the agent will continue to represent their interests even after the formal agreement ends. And, the agent remains motivated to facilitate the transaction, knowing they stand to benefit financially.

More importantly, the clause fosters trust and transparency in the real estate transaction process, benefiting both parties involved.

Is the clause applicable to an open listing?

An open listing is a non-exclusive agreement where a homeowner can work with multiple brokers simultaneously. Or, sell their property independently as “for sale by owner” (FSBO). The seller must only pay a commission to the broker who brings the buyer with an accepted offer. And if the seller finds a buyer independently, there are no brokerage fees. 

Can a seller avoid paying commission despite a clause?

If you’re dissatisfied with the listing agent’s services after signing a broker protection clause, there’s a possibility to avoid paying commission. Check the timeframe specified in the clause. It could range from days to a year. Once this time passes, you’re not obligated to pay a commission. It’s best to consult a real estate attorney to confirm your obligations. You may not be responsible for commission fees if the agent doesn’t notify you within the specified time period after the listing. 

Last thoughts

An exclusive listing agreement typically includes a safety protection clause. It grants the real estate broker or agent the right to a commission. Even after the listing agreement expires. Of course, they should be responsible for introducing the eventual buyer to the property. 

This provision aims to guarantee brokers equitable compensation and deter potential collusion between buyers and sellers. To activate the clause, the broker must promptly notify the seller of a prospective buyer’s identity within a specified timeframe after the property is no longer on the market.

Written by Ramona Sinha. January 1, 2025

Ramona is the Senior Content Writer for Kukun. This experienced blogger uses simple and succinct words to decipher the complex phenomenon called life. She has written articles covering a broad range of topics, such as real estate, lending and mortgage, finance, business, taxation, home designs, home improvement projects, decor concepts, and more. An avid traveler, she’s a digital nomad at heart and an animal lover from the depth of her soul.