Minnesota State Real Estate Practice Test

When does a broker earn their commission in most listing agreements?

1. When the listing is signed

2. When a buyer expresses interest

3. When the seller accepts the offer

4. Upon closing of the sale

The correct answer is: When the seller accepts the offer

In most listing agreements, a broker typically earns their commission when the seller accepts an offer, which signifies that the seller has agreed to the terms proposed by a potential buyer. This point marks the broker's achievement of a crucial milestone in the sales process, given that the broker's role is to facilitate transactions between buyers and sellers. When the seller accepts an offer, it demonstrates that the broker has successfully performed their job of marketing the property and securing a willing buyer. Although the transaction is not yet finalized until it closes, the acceptance of an offer indicates that the broker has fulfilled their primary obligation. While the signing of a listing agreement and a buyer's expression of interest are important steps in the process, they do not equate to earning a commission since they do not entail an actual transaction. The final closing of the sale is crucial for the disbursement of funds, but the commission becomes due upon the acceptance of the offer, making that moment key in establishing the broker's entitlement to the commission.