California Law on Verbal Listing Agreements Between Sellers and Real Estate Agents
In short, verbal listing agreements are invalid in California. California Civil Code Section 1624 is very clear when it states
If a California real estate agent only has a verbal listing agreement with the seller they will lose their ability to recover a commission. Some agents and brokers have argued that they deserve compensation even though the agreement was only verbal since they delivered value to seller, and without compensation the seller will be unjustly enriched. These quantum meruit theories of recovery have been rejected by the courts as their success would circumvent the statute. One of the primary reasons for Section 1624's prohibition against verbal listing agreements is to protect consumers from unfounded compensation claims by real estate brokers and salespersons. By requiring listing agreements to be in writing the statute imposes a requirement to evidence the agreement and enhance the authenticity of commission claims by real estate professionals. Hence, quantum meruit theories of recovery have been unsuccessful for California real estate agents.
The following contracts are invalid, unless they… are in writing and [signed] by the party to be charged…(4) [a]n agreement authorizing or employing an agent, broker, or any other person to purchase or sell real estate.
Equitable estoppel theories of recovery have likewise been unsuccessful as real estate brokers and salespersons cannot establish reasonable reliance on the verbal listing agreement. As reasoned by California courts, reasonable reliance (a requirement for recovery under the doctrine of equitable estoppel) cannot be established since real estate licensees are charged with knowledge of Section 1624 as it is part of the law on the exam for licensure. Since real estate licensees are charged with knowledge that a verbal listing agreement is unenforceable, it is impossible for them to establish that their reliance on a verbal listing agreement is reasonable. In brief, you cannot claim that you reasonably relied on an agreement you knew was not valid. Therefore, Section 1624 has set a very clear rule for California real estate agents: verbal listing agreements are invalid and unenforceable. If you want to protect your right to a commission memorialize your listing agreement in writing.
