Listing agreements are a necessary part of real estate sales if you intend to use the services of a real estate agent. The listing agreement provides a structure for details about the sale of your home and also provides a framework for your and your real estate agent’s duties and expectations. A listing agreement takes place in any market when you use an agent, whether you are in Vancouver, BC, or Denver, Colorado. Below we answer all your questions about a listing agreement.
What is a listing agreement?
A listing agreement is a legally binding contract between a home seller and a real estate agent. The seller hires the real estate agent or real estate agent to handle the sale of the house, and gives them permission to find a buyer for the house, and in return the seller agrees to pay a commission to the real estate agent to pay. The commission is usually a percentage of the sale price of the home. For example, if the house sells for $225,000 and the agreed-upon commission is 6% (although this fee is negotiable), the seller would owe the real estate agent $13,500. This amount is usually split equally between your listing agent and the buyer’s agent.
What are the 3 most common types of listing agreements?
Your listing agreement has a title on top of the contract. These titles vary from country to country, so be sure to read the listing agreement carefully to understand the agreement you have with your particular broker or agent. List relationships usually come in 3 types:
Exclusive Sales Rights Agreement: This type of listing agreement is the most common. It is a contractual agreement between the seller of a property and the listing broker, where the broker has the exclusive right to represent the property. With this agreement, the broker is entitled to their commission regardless of who sells the property, as long as the listing agreement is in effect.
Exclusive agency listing: This listing agreement is a contractual agreement between the property owner and the broker, whereby the broker acts as the exclusive broker for the seller. The seller can sell the property alone and does not owe the broker a commission. However, if the real estate agent is the one selling the property, the commission is owed to the real estate agent.
Open list: This offer agreement is a contractual agreement when a home seller has authorized more than one real estate agent to advertise a property and the broker only gets commission if he sells the property. If the house is sold by the home seller, no commission is paid.
What does a listing agreement entail?
The listing agreement usually includes multiple items. The first is a description of the property, including any personal property left when the property is sold (such as curtains) and any personal property you take with you when you move (such as a pool table).
The listing agreement also specifically states the duties of both the home seller and the broker. It provides the agreed sale price for the home, the terms of the broker’s fee, the date the agreement ends, information on conflict resolution between the seller and the broker (if necessary), and any additional terms and conditions regarding the sale of the home.
When do you sign the listing agreement?
The purchase agreement is signed once you and the real estate agent have gone through all the details of the sale of your home and have come to an agreement on every point. By signing you indicate that you are ready to have the agent take the necessary steps to: sell your house.
Do I have to sign the listing agreement?
You must sign a purchase agreement if you have decided to hire a real estate agent to help you sell your home. It is a legally binding document outlining your preferences regarding the sale of your home. If you choose to sell your home on your own, you don’t need to sign a purchase agreement because there is no real estate agent involved in the transaction.
Can I negotiate a listing agreement?
Yes, you can negotiate certain terms in the offer agreement. For example, the amount of the commission you pay to the broker is negotiable, as is the duration of the agreement. Usually minor changes can be made directly to the contract, and larger changes can be included in an addendum if necessary.
How long does a listing agreement last?
A listing agreement lasts as long as you and your broker agree. Typically, listing agreements last three to six months. A shorter time frame gives you the option to hire a new agent if you are not happy with your current agent’s services. However, if at the end of a listing agreement you are happy with the work the broker has done on your behalf, you can easily extend the contract for another three months.
What should I pay particular attention to in a listing agreement?
The duration of the agreement: Most listing agreements have a standard term, but this is negotiable. Some agents prefer a longer term (six months), while you may decide a shorter term is better (three months).
List price: This is the sale price that you and the real estate agent agree to list your home.
Commission: This is recorded in the listing agreement and is also negotiable. It is usually a percentage of the sale price, of 3-6%, and is paid by you to the real estate agent or agent for their assistance in selling your home. If you agree to pay a “cooperating commission” to the buyer’s broker, that broker will be paid out of that commission.
Types of listing agreements: The title will be something like Exclusive Right of Sale Agreement, Exclusive Agency Listing, or Open Listing, but read the agreement carefully to understand your relationship and when commission is due to the agent.
Responsibilities of each party: For example, whether you give the broker permission to hold an open house.
What are the costs of a listing agreement?
There are usually no specific costs associated with the offering agreement. However, the agreement does specify the broker or commission fee from the agent. This fee is paid to the agent at the time of closing, after the company title has confirmed a clear title and the property has been formally signed to the buyer.
What if my house doesn’t sell?
If your house doesn’t sell within the time frame stated in the listing agreement, you can renew your listing agreement with the broker if you are happy with the work they have done on your behalf. You are also free to hire a new real estate agent to sell your home if that best fits your selling goals. Please be sure to read the termination language to confirm whether you will owe any fees for the time and costs incurred by your agent during the offer period.
What is a protection period?
A protection period, also known as a tail period, in a listing agreement helps protect the agent from losing his commission. It is for a specified period of time after the listing agreement has expired. The protection period states that if someone the real estate agent has shown the house to decides to buy the house after the listing agreement has expired, but during the protection period, the real estate agent is still entitled to their commission.
Can I make changes to the listing agreement after signing?
You can make changes to the listing agreement after signing it, but only if all parties agree. Usually, changes to a listing agreement are made in writing, either directly on the agreement itself or in an addendum to the agreement.
Pyjama People does not provide legal advice. This article is for informational purposes only and is not a substitute for professional advice from a licensed attorney.