WHAT IS 'Extender Clause'

An extender clause is a type of provision in an exclusive real estate listing agreement. This type of provision protects the listing agent by guaranteeing them their full commission in the event that the property sells after the listing agreement has expired. In order for the agent to receive their commission, the buyer must be someone to whom the agent showed the property during their time as the listing agent.

An extender clause is also known as a protection clause or a safety clause.

BREAKING DOWN 'Extender Clause'

An extender clause protects the listing agent from losing a commission that they earned, even if the agreement has expired. For example, a seller may hope to cut down on closing costs when they sell their home. To do this, they could try to avoid paying the agent’s commission. If the seller goes behind the agent’s back and makes a deal to sell the home to a buyer after the listing agreement has expired, the seller could save money by not paying the agent’s commission. An extender clause protects against that.

When a listing agreement ends, if the seller enters into a new listing agreement with a  different agent, it’s important that they let the new agent know about an extender clause still in effect for the previous agent.

When an Extender Clause Gets Used

A homeowner may enter into an exclusive listing agreement with a real estate agent. The duration of these agreements vary, but three months is a common length. During those three months, the real estate agent generally works hard to bring potential buyers to see the home. Real estate agents work on commission, meaning that they are paid based on the sale and price of properties. This motivates them to bring in as many potential buyers as they can.

If after three months the exclusive listing agreement expires and the home has not sold, the seller or the agent may choose not to renew the agreement. The seller may wish to work with a  different agent or the agent may determine that the home is not likely to sell and is not worth their time.

If the listing agreement contained an extender clause, then after the agreement has expired, if one of the potential buyers who had seen the home through the agent purchases the house, the agent still receives the commission they would have received through the expired contract.

Extender clauses specify an end to the provision, which is usually a few months after the contract expires. Thus, if a potential buyer returns to purchase the home in a year or two, assuming it’s still for sale, the agent would no longer be entitled to their commission.

  1. For Sale By Owner - FSBO

    For Sale By Owner or FSBO is a method of selling property without ...
  2. Captive Agent

    A captive agent is an insurance agent who only works for one ...
  3. Settlement Agent

    A settlement agent coordinates all paperwork and conditions required ...
  4. Paying Agent

    A paying agent is an agent who accepts payments from the issuer ...
  5. Brokerage General Agent

    A brokerage general agent is an independent firm or contractor ...
  6. Market Value Clause

    A market value clause is an insurance policy clause assigning ...
Related Articles
  1. Investing

    How Real Estate Agent and Broker Fees Work

    Buying or selling a home? What you need to know about real estate agent and broker fees.
  2. Investing

    Understanding Real Estate Commissions: Who Pays?

    When you set out to buy or sell a house, one factor worth considering is the real estate agent's fees.
  3. Financial Advisor

    A Day in the Life of a Real Estate Agent

    There are no set hours and no set days. While every day is unique for a real estate agent, there are some activities that may be typical.
  4. Investing

    5 Ways To Save On Real Estate Fees

    Even a 1% reduction in real estate commissions can save you thousands of dollars.
  5. Financial Advisor

    How to Find the Best Life Insurance Agent

    Choosing a life insurance agent is the first and most important step in obtaining coverage. Buyers should pay attention to five key factors.
  6. Investing

    Why You Don't Need A Real Estate Agent

    While there are times when a real estate agent earns the commission, there are other times when you can do it yourself.
  7. Investing

    Would You Make A Good Real Estate Broker?

    How to tell if you'd be good in this field. It is a common second career for many people, but isn't a good match for everyone.
  8. Investing

    8 reasons to sell your home with an agent

    The standard real estate agent cost you 6% of the total house sales, learn what value do they bring you. See if it is worth to hire a sales agent in a housing sales.
  9. Investing

    Cut Commissions With 'For Sale By Owner' Sales

    It takes a lot more work, but selling your home without a real estate agent can have benefits.
  1. How are real estate agents, brokers, and realtors different?

    Agents, brokers and realtors are often considered the same. In reality, these real estate positions have different responsibilities ... Read Answer >>
  2. What is the role of agency theory in corporate governance?

    Understand how businesses use agency theory in corporate governance. Learn how moral hazard problems may be addressed using ... Read Answer >>
Trading Center