Real estate listing agreements

The Real Estate Dictionary topic of the day is, Real Estate listing agreements are a contract between a buyer or a seller and a real estate broker. The Real Estate Dictionary has identified 3 rules of a listing agreement:

1. Brokers or the agent of the broker (salesperson) are only allowed to offer a property for sale for the amount agreed upon in the listing agreement.
2. All of the instructions or requests made by the owner in the agreement must be followed as long as the requests correspond with laws.
3. All information a seller gives to the agent or broker must be verified as true and must be accurate in order to avoid false advertising.
There are four types of listing contracts for real estate. Remember a listing contract is just an agreement by an owner to have a home sold by a broker or agent on their behalf?

Open Listing: The Real Estate Dictionary has identified the open listing. This is a listing agreement where the seller basically says they have the right to have multiple representatives (brokers) trying to sell the property. This means that whoever sells the house gets the commission. This is the lease desirable listing because you will work to sell the house and someone else could sell it quicker and you basically worked for free. Under this contract just remember who ever is the procuring cause of the sale gets the commission.

Exclusive Agency Listing: The Real Estate Dictionary has identified the exclusive agency listing as a lot better then an open listing but still not the most desired contract. This type of agreement says that only one broker is allowed commission on the sale of the house. This provides protection for the broker. The downside of this agreement is that the owner of the house retains the right to sell the house on their own and not pay a broker commission. Also the broker can work with other brokers and sell the house with negotiated commission splits. A possible scenario that can occur making the agreement not so desired is a broker finds a buyer and then the seller contacts the buyer and says wait until my agreement is expired and I will sell you the house for cheaper since we will not have a commission to pay.

Exclusive Right-to-Sell Listing: The Real Estate Dictionary has identified this type of listing as the mother of real estate listings. This one offers the most protection and offers the greatest incentive for the broker to get the job done. Under this agreement only one broker is allowed a commission on the sale of the house. If anyone else sells the house while under this contract the broker who has this contract gets the commission even if they did not sell the house. This means that no matter who locates a buyer the one with this agreement gets the commission and the best part is that they do not even have to prove they are the reason the home sold.

Net Listing: The Real Estate Dictionary has identified this as a agreement where the seller states the amount they want the house to sell for and the broker or agent gets any amount of money that the house sells for beyond that price. An example is a person selling a house for $80,000and the broker sells it for $90,000, he broker gets $10,000 in commission. Net listings are illegal in most states and the rest they are frowned upon. You will most likely never get to do one of these listings.

In order for a listing agreement to be valid it must contain these items:

1. It has to be in writing.
2. It must contain a description of the property aka legal description.
3. The price it’s selling for (listing price).
4. Date the agreement ends (expiration date).
5. Total commissions to be paid.
6. Which type of listing it is.
7. Terms of listing and conditions of listing.
8. Agreement must be signed by both the seller and the broker.

Listing agreements can be terminated in the following ways?

1. Property sells.
2. Agreement expires
3. Seller or the broker dies
4. Property is eliminated example it burns down/
5. The property is subjected to Condemnation
6. The property is foreclosed.
7. All parties of the agreement mutually terminate agreement.
8. One party decides to cancel the agreement

***In the situation where one party decides to back out of the agreement there is a possibility for the other to take recourse of action ex. lawsuit.

A protective period clause or safety clause provides protection from a seller waiting until a contract has expired to sell the property to an interested buyer. During this timeframe stated the broker is due a commission if they are the cause of the sale even after the agreement is expired.

The Real Estate Dictionary has believes this is everything that you need to know about real estate listing agreements. HOME