If you are going to sell your home and you want to hire a real estate broker/agent to help you, you should know what a listing or brokerage agreement is and what it should contain.
A real estate brokerage contract or listing agreement is a contract between a real estate broker and a home seller that specifies what services the broker will provide in helping find a buyer and for what compensation.
Basic Types of Real Estate Listing Agreements
In theory, there are several different kinds of listing agreements to choose among, setting forth the basic nature of your relationship with the agent. Most people, however, use the first of the following choices:
- Exclusive right to sell listing. With this most commonly used type of listing, your one-and-only broker gets a commission no matter who the buyer is, even if you find the buyer yourself.
- Exclusive agency listing. The broker you've chosen lists and markets your home, and gets a commission if your home sells through any broker or real estate company. You can, however, also look for buyers on your own, and if one of them purchases the property, you won't owe the broker a commission.
- Open listing. With this arrangement, the broker has the right to bring prospective buyers to see your home. If the buyer purchases your home, the broker gets a commission. You can give an open listing to as many brokers as you wish. However, this arrangement isn't popular with brokers, for obvious reasons (who wants to put in a lot of work only to have another broker bring in the buyer and claim the commission?) and your home won't get the same market exposure as other homes.
- One-time show listing. The broker can show the home to one potential buyer, listed by name, and is guaranteed a commission if the house sells to that buyer. This is mostly used in for sale by owner (FSBO) situations.
- Net listing. You list your property for sale at a specified net amount to be paid to you, and you authorize the broker to retain the difference between the price at which your property is sold and the specified net amount to be received by you. Net listings are legal in only some states, such as Texas and California. Elsewhere, such agreements have been prohibited in order to prevent unfair dealing on the part of the broker.
The important thing, even if you go with the usual exclusive right to sell listing, is that you realize the choice you've made and don't, for example, get frustrated with an agent who claims a commission after a friend you called up and told about the home sale decides to buy the place.
Listing Agreement Details
After you've chosen the type of listing agreement, you'll need to turn your attention to its contents. In addition to your name and the property address, the following items are usually found in listing agreements:
- List price and basic terms of sale.
- Type of listing. (See above.)
- Length of listing time. (When the agreement expires.)
- What personal property goes with the house.
- What fixtures and appliances aren't included
- Amount of commission and when it will be paid (you should always make it payable when the transaction closes).
- Whether your home will be listed with the local multiple listing service (MLS). It should be; this is part of what makes the agent's services valuable.
- Specific responsibilities of the broker (conducting showings and open houses, advertising, other marketing).
- Whether the agent will handle placing a lockbox on the house.
- What hours and days the house will be available for showing.
- Under what circumstances you can take the house off the market.
- Under what circumstances you can terminate the listing agreement.
- How you will resolve any disputes (for example, by arbitration, mediation, or small claims court).
Read every word of the listing agreement carefully, and make sure you understand everything before you sign it. Don't be afraid to ask about anything you don't understand.
Make sure your entire agreement is in writing and includes everything the broker has represented to you.
Questions for Your Attorney
- Is this an appropriate listing agreement, or do you see any red flags I should negotiate over before signing?
- Under this listing agreement, does my real estate broker get paid if I find the buyer myself?
- Will the terms for the split of the commission between the listing and selling brokers be included in my listing agreement, or can the brokers agree to other terms?
- I'm not happy with my broker, but the sale is going to close soon. Is it too late to end the relationship? Will I owe the full commission?