Term
| what is a listing agreement? |
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Definition
The listing agreement is a legally-binding contract that creates an agency relationship authorizing a broker to serve as the agent for a principal in a real estate transaction.
Most listing agreements are bilateral employment contracts – meaning that the owner hires the broker and promises to pay a commission in exchange for the broker's promise to locate a "ready, willing and able" buyer or tenant for the owner.
Listing agreements must be in writing to be enforceable. Oral listings do not afford a broker any legal protection. If the listing agreement is not in writing, a broker could not collect his or her commission if the seller refused to pay.
The three most common types of listings are:
Open Listing
Exclusive Right to Sell Listing
Exclusive Agency Listing |
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Term
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Definition
An open listing is a non-exclusive contract, authorizing a broker to serve as the agent for either the sale or the purchase of property. With this type of listing, a broker is not under the same obligation to perform as with other listing agreements, so an open listing is often considered to be a unilateral contact.
This type of listing gives the seller or buyer the right to engage any number of brokers as agents. With an open listing, all contracted brokers can market the property or search for property at the same time. But only the one broker who brings the ready, willing and able buyer to the seller or who finds the right property for a buyer will receive the commission.
Open listings are rare, since they offer the least assurance that the broker will receive compensation for his or her efforts. |
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Term
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Definition
The most widely used agreement is the exclusive right to sell listing agreement. Under this arrangement, the broker has the exclusive right to market the property for a specified period of time. If the property sells while the broker has the listing, the seller must pay the agreed-upon commission, regardless of who actually procured the buyer (who was the procuring cause). This means that even if the seller himself finds the buyer with no help from the broker, the seller still owes the broker the commission.
When a broker enters into this type of listing, he or she becomes more willing to expend the time, energy and funds to actively market the property. It limits any conflict with the seller over who was the procuring cause.
An exclusive right to sell listing gives the broker the greatest assurance that he or she will receive compensation for his or her marketing efforts. And as a result, sellers usually see a quicker and more profitable sale of the property. |
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Term
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Definition
An exclusive agency listing agreement gives a broker the right to market and sell a property for a specified time period, while the owner retains the right to find a buyer and sell the property without owing the broker a commission.
This type of agreement is exclusive in the sense that the property is listed with only one broker. And as we mentioned on the previous page, all exclusive listings must stipulate a definite termination date. They cannot be "automatically" extended.
This type of listing is not very common these days in residential transactions because it increases the chances of a dispute over the commission between the broker and the seller over who was actually the procuring cause of the sale. |
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Term
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Definition
is not technically a type of listing agreement. In a net listing, an owner sets a minimum amount that he wants to receive from the sale of the property and lets the broker have as commission any amount above the set minimum.
For example, Seller John tells Broker Bill that he wants $100,000 from the sale of his home. Broker Bill sells the home for $125,000, so Bill gets a $25,000 commission.
While in this type of situation the seller is getting what he or she wants for the sale, it creates a conflict of interest for the broker. It essentially violates the broker's fiduciary responsibility of putting the client's interests above his or her own.
If a licensee finds him/ herself in this situation, the licensee must refuse the seller's offer and encourage the seller to pay a flat fee or a percentage of the sale price. Otherwise the licensee must refuse the listing.
Net listings are generally viewed as unprofessional, and they are illegal in many states. Net listings are illegal because they give unscrupulous brokers an opportunity to take advantage of a seller who may not know what his or her property is truly worth. |
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Term
| Exclusive buyer agency agreement |
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Definition
| This agreement is also known as the exclusive right to represent. With the signing of this agreement, the buyer is legally bound to compensate the agent when the buyer purchases any property of the same type as described in the contract. The managing broker is entitled to payment regardless of who locates the property. This means that even if the buyer finds the property himself or herself, the buyer must still pay the agent the agreed upon commission. |
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Term
| Exclusive-agency buyer agency agreement |
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Definition
| This exclusive contract is between the agent and the buyer. However, with this type of agreement the agent is entitled to payment only if he or she actually finds the property that the buyer purchases. If the buyer finds a property himself or herself, the buyer does not owe the agent a commission. |
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Term
| Open buyer agency agreement |
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Definition
| This is a nonexclusive agency contract between a buyer and a broker. A buyer can enter into similar agreements with an unlimited number of other brokers. Only the broker who actually locates the property that the buyer eventually purchases is entitled to the commission. |
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Term
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Definition
all listing agreements have a compensation clause that addresses the fact that the broker will receive compensation for selling the property. The compensation clause also gives specifics as to how the compensation will be paid – percentage or flat-fee.
true |
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Term
| give an example of a compensation agreement that's not a listing agreement |
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Definition
| An agreement that a broker signs with an unrepresented seller – usually in the case of a For Sale by Owner (FSBO) property. In such an agreement, the seller warrants that he or she is offering the property for sale without the assistance of any real estate broker. The broker names a specific buyer who may be interested in the property. The seller agrees that if he or she enters into a purchase contract with the named buyer within a specified time period, the seller will pay a specified commission – either flat fee or percentage – to the broker's firm at closing. |
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Term
| What is an important thing to remember about listing agreements? |
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Definition
| They must be in writing to be enforceable. |
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Term
| What is the major difference between an exclusive right to sell listing and an exclusive agency listing? |
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Definition
| With exclusive right to sell, the broker has the exclusive right to market the property and receive a commission regardless of who procures the buyer. With exclusive agency, the owner retains the right to find a buyer and sell the property and owe the exclusive broker no commission. |
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Term
True or false? Each licensee's office has a set of forms that are used in that particular office. Most of these forms are provided by the local multiple listing service or the Oklahoma Association of REALTORS®. Licensees cannot come up with their own forms, as that would be considered the unauthorized practice of law.
Even though you will be using forms that are provided to you, it's important for you to understand the basic legal requirements for a listing agreement. In most states, listing agreements must have these four components:
An identification of the property
A promise of compensation to the broker
The specifics of that compensation
Written document with signatures of the seller or sellers |
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Definition
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Term
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Definition
| The listing agreement must contain an assurance that the broker will receive compensation and state how that will happen. The seller could stipulate that the broker will receive compensation when the buyer is found, when a contract is signed or only if the sale actually closes. |
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Term
| Specifics of Compensation |
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Definition
| The listing agreement must show the broker's compensation as a fixed amount. It is usually indicated as a percentage of the sale price, but it could be a specific flat fee. As we mentioned when we talked about net listings, the compensation may NOT be indicated as whatever is left over from some net price the seller has in mind to receive. |
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Definition
Listing agreements must be in writing and signed by the seller to be enforceable. In other words, if the agreement is not in writing, the broker could not sue for the commission if the situation were to arise.
Even though such a situation would be rare, if a seller wrote the following on a piece of paper and signed it, it would likely be an enforceable document.
"I, Sally Mayer, will pay broker Sam Donald 7% of the selling price of my home, located at 727 Charisma Drive, My City, when he finds a ready, willing and able buyer for the property." |
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Definition
| Shows the name of the owners and the name of the real estate office that is obtaining the listing. |
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Definition
| Lists the physical address of the property, including city and county. In some situations, the licensee may need to attach a signed copy of a legal description. |
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Term
| Items Included and Excluded |
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Definition
| Lists any personal property that may be included as part of the sale or any real or personal property that is being excluded from the sale. This will avoid and later misunderstandings. |
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Definition
| Indicates the asking price for the property. May also indicate any financing terms, such as loan assumption, down payment amount, all cash, etc. Note: Unless the terms are specified, a seller is not required to pay a commission when refusing a full price offer unless the offer is all cash. |
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Definition
| Shows the beginning and ending dates of the listing period. |
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Definition
Shows the mutually agreed upon commission the seller will pay the broker. It can be a percentage or a specific amount, although percentage is preferred because it will adjust according to the actual sales price.
May provide for any additional compensation to the broker, such as advertising fees or MLS fees.
May state that the broker has informed the seller of the firm's policy of dealing with cooperating brokers and how the commissions are divided.
May indicate that the seller will have escrow pay the broker's commission directly from the sale proceeds. |
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Term
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Definition
| Here the broker and sellers agree to a specific number of days after the listing expiration during which the broker may still receive a commission. Also called a carryover clause, this clause is enforceable if the owner, or his or her new agent, sells the property to a buyer whose name appears on a list of persons to whom the original broker showed the property during the listing period. The broker must give this list to the owner within a specified number of days after the listing expiration. |
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Term
| Ownership, Title and Authority |
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Definition
| Warrants that the owners are the only titleholders of the property and therefore have authorization to sell it. |
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Term
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Definition
| States that the broker will provide the transaction terms to the Multiple Listing Service, unless the seller signs a form to withhold the listing. |
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Definition
| Indicates that the seller is unaware of any legal, financial or physical reasons that would affect the seller's ability to sell the property. If the seller becomes aware of any such reasons, the seller must notify the broker immediately. |
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Term
| Broker's and Seller's Duties |
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Definition
| Broker agrees to use due diligence to achieve the purpose of the listing agreement. The seller agrees to consider all good faith offers on the property, to make the property available for showings, to take responsibility for all information the seller provides to the broker and to hold the broker harmless for any claims resulting from the information given to or withheld from the broker. |
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Definition
| Authorizes the listing agent to accept and hold any deposits on the seller's behalf which will be applied to the purchase price. |
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Definition
| Explains that the broker represents the seller. The broker will not represent the buyer; however, if the listing agent finds a buyer, it may be necessary for the broker to act in the capacity of a dual agent. This section also informs the seller that the broker represents other sellers. |
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Definition
| States that the broker is not responsible for loss or damage to the property, even with a lockbox present. The seller must take steps to safeguard any valuables and obtain insurance to cover the risks. |
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Definition
| Discusses lockbox use and states that persons using the lockbox are not insured against theft, damage, vandalism, etc. that could be attributed to lockbox use. The seller may indicate that he or she does not want a lockbox used. |
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Definition
| The seller may indicate that he or she does not want a sign on the property. |
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Term
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Definition
| States that the loser of a suit or arbitration of any disagreement must pay the associated costs. |
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Term
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Definition
| Provides space for any agreement or terms not covered by any other section, such as a seller paying for a termite report. |
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Term
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Definition
| States that the agreement is binding on the seller and the seller's successors and assigns. |
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Term
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Definition
| States that this agreement supersedes all previous discussions, negotiations and agreements between the seller and the broker. Therefore, anything that is not written into this agreement is not part of the agreement. |
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Term
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Definition
| All the sellers sign and date the agreement and provide their address and other available information. The licensee fills in the firm's name, signs the document, and then provides other information about the firm. |
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Term
It's very important that all the owners sign the listing agreement to avoid any potential problems.
But what happens if the seller is unclear about the names of all the owners? In what types of situations could this happen? |
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Definition
This depends on how the title is held. In cases where the title is held in severalty (one owner), as joint tenants with right of survivorship or as community property, ownership would seem pretty evident. But ownership might not be quite so clear if title is held:
As Tenants in Common – New owners could inherit a portion of the property from any of the original owners.
By a Partnership – Persons inheriting from current owners might not know the names of the other partners.
If the sellers are unclear about the ownership of the property or if you just want to check for yourself, you can do it in one of these ways.
Ask the seller for a copy of the deed or other title document.
Call and check with a title company in the area where the property is located.
Call or visit the county tax office and check the records. |
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Term
| true or false:In most cases, it is an affiliated licensee who will be taking the listing and filling out the appropriate forms. Even though this is the common practice, we can't stress enough that the agreement is actually a contract between the firm of the broker and the seller. According to the license law of most states, listings, transactions, management agreements, and other contracts relating to providing brokerage services are property of the real estate firm. |
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Definition
true;
As we discussed in the chapter on agency relationships, the broker's affiliated licensees are acting as a subagent to the seller and on behalf of the managing broker when performing their real estate activities.
For example, Licensee Sally works for Broker Dan. Seller Tom decides he wants to list his property with Sally, so they arrange a meeting to fill out the paperwork. Sally and Tom sign the listing agreement. However, the listing agreement is actually a contract between Tom and Dan. Sally is acting on behalf of Broker Dan. |
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Term
| true or false: Before making any decisions, the listing agent/seller's agent should always ask the prospective buyer if he or she is represented by another agent. |
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Definition
true;
In a situation such as this, the seller's agent could:
Disclose the potential for dual agency and get written permission for all parties to act as a dual agent.
Refer the buyer to another agent. |
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Term
| Most states require what four components to be on a listing agreement? |
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Definition
An identification of the property
A promise of compensation to the broker
The specifics of that compensation
Written document with signatures of the seller or sellers |
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Term
| How can an agent determine who has title to a property he or she is listing? |
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Definition
Ask the seller for a copy of the deed or other title document.
Call and check with a title company in the area where the property is located.
Call or visit the county tax office and check the records. |
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Term
| When must the seller receive a copy of the listing agreement? |
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Definition
| The seller must receive a copy of the document at the time the signatures are obtained. |
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Term
| Licensee Tim works for Broker Marty. Tim lists Seller Gary's home, fills out all the paperwork and signs the agreement. The listing agreement is a contract between whom? |
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Definition
| The contract is between Broker Marty and Seller Gary. As an employee of Marty, Tim is acting as a subagent. |
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Term
| multiple listing service (MLS) |
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Definition
is an organization of member brokers who agree to cooperate in the sale of properties listed by other brokers in exchange for a share of the broker's resulting commission.
Once the listing agreement is signed, the licensee will discuss other forms that will need to be filled out in order to place the listing into a multiple listing service.
The listing agreement itself will NOT be submitted to the MLS. However, the MLS does need information about the property that it can distribute to all the MLS members through the MLS publications.
County in which the property is located
Tax ID of the property
Listing office ID, name and phone number
Listing agent's ID, name and phone number
Co-listing office ID and the co-agent ID
Area, community or district
Street number and street name
City and zip code |
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Term
| You will probably collect the following information for MLS : |
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Definition
Listing price
Whether or not the property will be advertised on the Internet
Whether the address should be shown to the public
Selling office commission and comments regarding such
Number of bedrooms
Total number of bathrooms
Lot size, with an indicator of whether the number is square feet or acres
Year built
Listing date
Expiration date
School district code with spaces to write in the names of the schools
Occupant type: owner-occupied, presale, tenant or vacant
Owner's name, phone number, city and state
Occupant's name
Phone number to call for showing
Descriptions of lands and improvements
Driving directions to the property
Also, information regarding:
Possession
Showing parameters, such as when the property can be shown and under what conditions
Whether or not a Seller's Property Disclosure has been provided
Tax year and tax amount
Homeowner dues or rental amounts, if applicable
Potential financing terms
Site information, such as:
Lot dimensions
Waterfront footage
Zoning code and jurisdiction
Topography, such as level or pasture
View, such as golf course or mountain
Lot details, such as cul-de-sac, paved street, corner lot
Waterfront features – ocean, lake, high bank, etc.
Site features – indoor/outdoor arena, fenced, outbuildings, etc.
Pool – if so, what kind
Building information, such as:
Sewer or septic
Type of basement
Type of parking available
Builder name
Style of construction
Specific information about the home if it is a manufactured home
Environmental certifications
Foundation type
Building condition
Roof type
Exterior finish
Architecture
Interior features, such as:
Finished versus unfinished square footage
Energy sources
Heating and cooling type
Floor coverings
Fireplace, ceiling fans, walk-in closets, sauna, etc.
Appliances that stay
Total number full, three-quarter, and half bathrooms
Where each of the rooms is located relative to the main floor
Utility/Community information, such as
Community features
Source of the drinking water supply
Spaces to write in the names of the utility companies and nearby bus line |
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Term
true or false:The two most common changes are price changes and listing period extensions, so there are often check boxes to indicate if the change relates to either of these with a place to write in either the new listing price or the new expiration date for the listing.
Below that the form usually has a section of blank space for the agent to write in a description of the change if it doesn't relate to price or listing expiration date.
It is often noted on the form that all other terms and conditions of the original listing agreement remain unchanged.
Then there are places for the document to be dated, signed by the agent on behalf of the indicated broker or broker's company, and signed by the seller or sellers. |
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Definition
true
It is often noted on the form that all other terms and conditions of the original listing agreement remain unchanged.
Then there are places for the document to be dated, signed by the agent on behalf of the indicated broker or broker's company, and signed by the seller or sellers. |
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Term
| true or false: Most states (although not all) require sellers to provide some sort of Property Disclosure Statement to a buyer within some specified number of days (varies by state) of the acceptance of a purchase and sale agreement, but the seller is usually not required to provide the statement before that time. However, many listing agreements encourage the seller to give the completed form to his or her agent as soon as possible. |
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Definition
true; oklahoma's form looks like a seller's awareness type of inspection report. "do the sprinklers work?"
Most forms allow the seller to give information about the condition of the property, the status of buildings and utilities, whether or not there are easements or encumbrances that affect the property and information about important environmental factors.
The seller may be asked about these aspects of the property:
Seller's authority to sell the property
Issues with the title
Encroachments, boundary agreements or boundary disputes
Private access roads
Rights-of-way, easements or access limitations
Existing written agreements for maintenance of an easement or right-of-way
Studies, surveys or notices that would adversely affect the property
Pending or existing assessments
Zoning violations or unusual restrictions on the property that would affect future construction or remodeling
Boundary survey
Covenants, conditions or restrictions which affect the property Note: Any covenants or restrictions that would forbid or restrict the conveyance of the property to persons belonging to the protected classes defined under Fair Housing Law are void, unenforceable and illegal. |
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Term
| true or false: on a property disclosure, Licensees are not responsible for any inaccuracies made by the seller, unless they knew the information was inaccurate. |
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Definition
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Definition
Since a listing agreement forms an agency relationship between the broker and the seller, it can terminate when one of the following occurs:
Performance – The licensee has helped the seller find a ready, willing, and able buyer to purchase his or her home.
Expiration of the agreement term – The date arrives that was stated in writing on the listing agreement.
Termination – The parties either mutually agree to end the relationship or one party decides to end it. |
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Definition
As we have mentioned before, the listing agreement belongs to the broker, even when it is brought in, prepared and signed by an affiliated licensee. So, what circumstances can affect a listing agreement?
All of these situations have some effect on a listing agreement.
Death of the broker
Brokerage firm goes out of business
Broker loses his or her license
Listing agent transfers to a different real estate firm
If the broker dies, loses his or her license, or the firm goes out of business, the state's real estate licensing agency may choose to appoint a temporary broker to close any transactions that are pending. If not, all the broker's listings will terminate.
If the listing agent transfers to another firm, the listing agreement will stay with the original broker, unless that broker gives permission for the licensee to take the listing with him or her and the seller agrees. |
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Term
| Commission and Incomplete Transaction |
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Definition
f for some reason the transaction does not complete, the seller may still be responsible for paying a commission to the listing broker. This can happen if he or she:
Changes his or her mind and refuses to sell
Has a spouse who won't sign the deed
Has a title with uncorrected defects
Commits fraud with regard to the transaction
Cannot deliver possession
Insists on terms that were not in the listing agreement
Mutually agrees with the buyer to cancel the sale
What this means is that the broker is still entitled to receive the commission if the transaction does not complete due to the seller's default. |
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| true or false:Note: Only a broker can initiate an action or file a suit against a seller or a buyer (with whom he or she had a valid written agency agreement) to receive payment of a commission. An agent cannot initiate such an action against a client. However, if the agent does not receive his or her share of an earned commission, that agent can sue the broker to get it. |
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Definition
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Term
| When is a seller typically required to provide a copy of the Property Disclosure Statement to a buyer? |
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Definition
| Usually within some specified number of days of acceptance of a purchase and sale agreement |
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Term
| List two types of transfers that are exempt from the Seller Disclosure Statement requirement. |
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Definition
A foreclosure or deed-in-lieu of foreclosure.
A transfer made by the personal representative of the estate of the decedent or by a trustee in bankruptcy. |
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Term
| If a transaction doesn't complete, under what circumstances would the broker still be entitled to a commission? |
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Definition
| The broker is still entitled to receive the commission if the transaction does not complete due to the seller's or buyer's default. |
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Term
| If a transaction doesn't complete, under what circumstances would the broker still be entitled to a commission? |
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Definition
| The broker is still entitled to receive the commission if the transaction does not complete due to the seller's or buyer's default. |
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| Broker Sara has lost her license for unprofessional conduct. What will happen to her listings? |
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Definition
| The state licensing authority can choose to appoint a temporary broker to close any of Sara's pending transactions. Otherwise, all Sara's listings will terminate. |
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