House for Sale by Owner
When seeing a "House for Sale by Owner" sign, you initiated the conversation with the owner and offered to do business with him to sell his property. He then tells you: "I do not want to know anything about a brokerage contract, but if you find me a buyer, I'll give you a little something.” Despite that, you start looking for the future buyer, obviously unaware that this approach could cost you a lot.
Mandatory brokerage contract
An agreement is not enough! The Real Estate Brokerage Act imposes requirements, especially when a broker is entering a brokerage contract with a natural person for the sale of a chiefly residential immovable containing less than five dwellings, including divided and undivided co-ownerships.
On one hand, a brokerage contract exists only when the parties have signed the mandatory form evidencing the contract. On the other hand, the broker must also give a duplicate of the contract to the person who has signed it. Failure to give a duplicate has major implications since the seller is not held to his obligations until he has his contract in hand. This means he doesn't have to pay compensation. In addition, the broker must use a mandatory Brokerage Contract – Sale form. Should a broker fail to comply with these requirements and make calls, advertise or represent or otherwise solicit clients, he runs the risk of having a request for assistance transformed into a complaint filed against him before the Discipline Committee, in addition to not being paid. Indeed, The Act requires that the broker sign a brokerage contract with a person before carrying out such operations.
To conclude, in this case, the broker also has an obligation to make any transaction proposal received known to the seller, whether or not a Brokerage contract - Sale has been signed. In the absence of a brokerage contract, he would have to do the work without even being able to demand compensation.
In such a situation, a possible solution is to sign a brokerage contract and amend it in order to authorize the owner to sell his property by himself. For more information on this matter, please read this article: Exclusive brokerage contract: can the broker authorize his client to offer the immovable for sale by himself?