California Real Estate Practice Exam

When does a broker's commission typically become non-contingent?

1. Upon securing a buyer who is ready, willing, and able to buy

2. Upon the close of escrow

3. When the property is listed

4. Upon signing the listing agreement

The correct answer is: Upon securing a buyer who is ready, willing, and able to buy

A broker's commission typically becomes non-contingent upon securing a buyer who is ready, willing, and able to buy. This means that once the broker finds a potential buyer who meets these criteria, the broker's right to the commission is established, regardless of whether the sale ultimately closes. The essential elements here are the readiness, willingness, and ability of the buyer, indicating that they are serious and capable of following through with the purchase. This principle is fundamental in real estate transactions, as it reflects the broker's role in facilitating a sale. Even if the transaction does not reach the closing stage due to various reasons, such as issues with financing or negotiation breakdowns, the broker has fulfilled their primary obligation by bringing a qualified buyer to the table. In contrast, the other options pertain to different stages in the transaction process. For instance, closing the escrow or signing the listing agreement are important milestones but do not necessarily establish the broker's entitlement to a commission. The property being listed is simply a preliminary step in the selling process and does not guarantee a committed buyer, which is the main factor in earning the commission.