A realtor presented a house to a potential purchaser. After the purchaser realized that the realtor was unable to make the seller flexible at the asking price, she turned to another realtor, who closed the deal.
The Court dismissed the first realtor's claim and held that the realtor is not entitled to the fee. In order for a realtor to be entitled to a fee, it is not enough that he presented the property to the purchaser, but actual activity is required on the part of the realtor who need to be an "effective" factor in the closing of the transaction. Any activity by another party that occurs after the initial brokerage activity has taken place, may resume discontinued negotiations and sever the connection between the first brokerage activity and the closing of the transaction until the result can no longer be attributed to the first realtor. However, in order for the relationship to be severed, good faith is required and if a party thwarts the realtor's efforts and uses the information obtained from the first realtor for direct contact with the other party while the realtor is bypassed, or when he acts in another way to avoid brokerage fees, such as by employing a "straw realtor," this will be deemed breach of the duty of to act in good faith and brokerage fee will be owed to the first realtor. Here, the purchaser acted in good faith and turned to another realtor after realizing that the first realtor was unable to close the deal and therefore the first realtor, who was not the effective factor of closing the deal, is not entitled to a fee.