An employment agreement
In the simplest terms, the listing agreement is an employment contract between the home seller and the broker. The agreement describes the relationship between the two parties. It is driven by state and federal law to ensure compliance with existing law and outlines each party’s responsibilities in the process. When both sides fully understand the complexities and meaning of certain verbiage or clauses in the listing contract, the likelihood of future misunderstandings is diminished.
The law regarding listing agreements varies considerable state to state. Some states issue standard approved forms, and others leave contract forms up to real estate organizations, the legal community or individual brokers. In all states, both selling and buying consumers of residential property can expect standardized forms derived from one or a combination of the aforementioned groups. The seller gives approval to the broker, as their agent, to enter the property into the home selling process under the conditions spelled out in the listing agreement. The word agent implies “Agency,” which is a concept in real estate law. You can learn more here.
Types of listings
The most common listing throughout the United States is the “exclusive right to sell” listing. This contract specifies the broker is paid regardless who discovers the buyer, including the seller or another real estate agent. Some other types of listings are; one party, open, net, and limited service listings. Net listings are illegal in most states because they create a significant conflict of interest between the broker and the client. An arrangement where every dollar over a certain dollar amount belongs to the broker is the definition of a net listing.
Typical listing clauses
Legal enforceability requires a number of inclusions in a listing agreement. For example, The Wisconsin WB-1 form is comprised of five pages with 280 lines. While not every line is required for the legality, every line has implications, which is why it is included. To help you prepare for listing your home, here are the most common provisions in listing agreements around the country and the provision’s purpose:
- The parties to the agreement – to identify the participants.
- Identification of the property – exactly what property is to be sold?
- Offering or listed price – to establish the exact price point.
- Term of contract – start and ending date during which contract is active.
- Protected buyers – the broker earns fee if customer purchases for a limited period after expiration
- Seller warranty – seller warrants there are no defects or disclose any defect they are aware of
- Brokers obligations – the work, tools and effort the agent agrees to put forth to produce a buyer
- Broker cooperation – broker agreement to compensate other agents in cooperative sale
- Fixtures and personal property – what stays and what does not stay with the property
- Agency, lead-based paint, fair housing and other disclosures – to ensure compliance with the law
- Broker remuneration – the amount and conditions under which fees are paid
- The terms of sale – occupancy, minimum earnest money, rent seller pays after closing, etc.
- The broker’s fee and how it is calculated – there are numerous ways to calculate fees
- Legal delivery of documents – the methods utilized to communicate legally
- Forms of agency choices when buyers appear – seller has choices to direct broker
- Earnest money protocols – conditions that affect buyer earnest money
- Seller cooperation – property and condition disclosures, prospects, “ as is ” sales
- Deadlines and rescission rights – Real estate law creates implications for timing issues
- Disclosure of material adverse facts – all parties are treated fairly
- Real estate property condition report – Difference between inspect and test, seller’s right to cure
- Termination of listing and early termination – understanding rights and obligations
Remember, every state has their philosophies and protocols. Regardless the state in which your property is located, thoroughly reading this document will be treasured by you, and may affect the outcome.
The Multiple Listing System
The seller lists with one company through the “listing agent.” The listing contract spells out the broker’s agreement to cooperate with other brokers and their agents to gain more exposure to the home. When the sale results through the efforts of one of the cooperating companies, this is commonly called a co-op sale. In most communities (there are exceptions) the listing company sells the home less than fifty percent of the time, so co-op sales are an important part of the selling process. Always verify the property is being included in the MLS system from the very beginning of the listing. Agents that promote or seek “pocket listings” have a conflict of interest. The listing agent’s income doubles if they personally produce the buyer. Even if the agent produced the buyer, the question to which you will never know the answer; were other buyers in the marketplace willing to pay more?
Examine the contract before signing
To familiarize you with the contract in your area, request a copy of the listing contract and review it prior to meeting with agents. You gain time to focus on the wording of the agreement itself, a scenario that rarely plays out that way in the “listing presentations.” Listing presentations are about why the presenting agent is the right choice. You also want to hear why they believe they can sell your home for “Y.” Take notes on your questions and then ask the questions during the interview. As you question the real estate agents you will sense their view on the importance of reviewing documents. Their willingness to set aside time to review the listing documents and explain them correctly prior to entering the agreement says a lot. This is a key indicator of the service level you can expect after you have agreed to utilize their services.
There are a variety of real estate myths that have circulated for generations. Myths about real estate agents, marketing tactics and strategies, pricing, negotiating, open houses and more. Real estate is an industry that may have more armchair quarterbacks that football. Most everyone has an opinion and a story. The two most important issues in placing your home on the market are agent selection and proper pricing.
Screening and interviewing multiple agents, then gathering information from them and asking very specific questions of each of them will pay off from the very beginning of the engagement. The main qualities you are seeking are honesty, market knowledge and effectiveness.
Querying agents in the interview process allows you to verify your home “sparkles” and is in good condition. The agents will also opine on range of value (the highest price you can expect and the lowest price you should accept) pricing when considering your circumstances and at the same time to compete favorably with other homes for sale in the neighborhood. Check out articles titled “How to choose a real estate agent” and “Clean-up, paint-up, fix-up.”