Before you begin officially working with real estate sellers, they need to sign a listing agreement with you. Also called a listing contract, this document forms the agreement between a property owner and a real estate broker. The seller or sellers agree to give the real estate professional the authority to act as their agent in selling the property. The listing agreement is vital to learning real estate and developing realtor skills.
Types of Agreements
You must have a signed listing agreement before entering a property into the MLS. In addition, this contract makes sure the broker and seller are on the same page. It protects both you and the seller.
Therefore, choosing wisely among the four types of listing agreements is essential. This decision will ensure you have a contract that benefits both you as the agent and your seller. Here’s an explanation of the four types of agreements.
Exclusive Right to Sell
As the name suggests, this contract gives one broker the right to earn a commission on the property sale. Even if other real estate brokers or real estate agents help with the property sale, the designated broker is the one who gets the commission. To earn this commission, the broker must represent the homeowner and find a qualified buyer who purchases the home. Even if another broker or agent sells the house, you will get a share of the commission.
Exclusive Agency Listing
An exclusive agency listing may sound very similar to an exclusive right-to-sell agreement. Yet, it is actually much different. When a broker contracts with a seller for an exclusive agency listing, the seller is allowed to find their own buyer. Then, if they do, they don’t have to pay the broker anything. Fortunately, the broker does have a chance to earn the commission. If the broker or their agents find the buyer, the broker does receive their reward.
An open listing agreement gives the property owner the right to create multiple listings with several realtors. Whichever agent brings the buyer receives the commission. While many agents may be working to find them the highest offer, the seller only has to pay a commission to the broker who sells the home.
The seller and broker agree on a net sale price in a net listing agreement. This allows the broker to take all the money above the agreed-upon net price. This may sound like a good deal for the broker if they bring a very high price for the property. However, there is a problem. This type of listing can lead to lawsuits, license suspensions, and financial losses for real estate agents and sellers. That’s why net listings are not allowed in some states and discouraged in others.
Essential Features of a Listing Agreement
Although listing agreements can vary a bit, they usually contain the following features. You can learn more about the details of these elements in the realtor course Roadmap to Success: Sellers. Here are the main points that need to be covered in this contract.
- Parties to the contract. Includes all sellers and the brokerage company name.
- Authority to sell. Designates the broker as someone who has the authority to sell the property.
- Contract length. That is, how long will the agreement be in force?
- Property Description. Important objective facts about the property, including address, county, tax number, parcel number, and more.
- Terms and listing price. The price you will initially list the price for and any conditions requested.
- Broker’s Obligations. What is the broker responsible for doing?
- MLS. When must the property be listed in MLS?
- Broker’s Authority. Authorizes the broker to market and advertise the home in specified ways online or offline.
- Seller’s Obligations. The seller’s duties include making the property available for viewings and providing property disclosures.
- Primary Broker’s Compensation. The part of the contract tells what the broker will receive as compensation for their services.
- Other Broker’s Compensation. This covers what subagents, buyer’s agents, or others will receive for their part in the transaction.
- Brokerage Relationship. Is the broker acting as a transaction broker?
- Termination. Under what terms can either the broker or seller cancel the listing agreement?
- Resolving Disputes. Describes how disputes between the seller and broker and resolved. Also called a Mediation and Dispute Clause.
- Signatures of Sellers and Agent or Broker. The signatures must be added and the document delivered to the seller promptly.
Now that you know some of the typical elements of listing agreements, can you guess which three of these features are most important to a real estate agent? If you thought the broker’s commission, the listing price, and the duration of the contract, you are spot-on.
Fill out the agreement form meticulously and deliver it promptly. A properly completed listing agreement is the best way to protect yourself as a realtor and serve your seller client well. It will help both you and the seller avoid confusion and disagreements. Best of all, it will allow you to get what you’ve earned by helping the seller.