Agent A-Team or Solo Superhero? Finding the Right Real Estate Partner for Your Selling Journey in Wildwood Florida
When it comes to selling your home in Wildwood, Florida,…
January 29, 2024
Exclusive Right to Sell Listing
What does a listing agreement entail?
What parties are involved in a listing agreement?
Can a seller cancel a listing agreement?
Can a seller change the listing agreement whenever they want?
Can a realtor cancel a listing agreement?
What does a listing agreement include?
What makes a listing agreement valid?
Do listing agreements have to be written?
What information is not needed in a listing agreement?
Which listing contracts do most prefer?
What terminates a listing agreement?
What is the most common reason a home fails to sell?
You’re excited and ready to sell your home. You’ve prepared your house, found the perfect real estate agent to help you with the sale process, and are now ready to list your home. You’re all ready to go! Or are you? Simply finding a real estate agent doesn’t solidify a contract or start the listing process. The following steps are to agree on the terms of the sale together and document those terms in a listing agreement.
Real estate listing agreements are made between a homeowner and a real estate broker. They give the real estate agent legal authority to represent the owner and help them find a qualified buyer for their property. The terms in listing agreements are meant to protect and benefit both parties, and the deal itself can be exclusive or non-exclusive. There are several common types of listing agreements: Open Listing Agreement, Exclusive Agency Listing, Exclusive Right to Sell Listing.
Types of Listing Agreements
Exclusive Right to Sell Listing
Exclusive right to sell listings are the most common type of listing contract. In the exclusive right to sell listing agreement, the agent is the only one allowed to represent the seller by listing the property and searching for buyers. During this type of agreement, the seller is not entitled to work with other agents. Commissions are paid to the agent, even if the seller finds a buyer on their own.
Exclusive Agency Listing
In an Exclusive Agency listing, the seller lists their property with one agent or brokerage and pays a commission when they find a qualified buyer for the property. It is similar to the Exclusive Right to Sell as it is also exclusive. The main difference between the two agreements is that in the case of an exclusive agency listing, the seller is not obligated to pay commission to the broker if they end up finding a buyer on their own.
Open Listing
An Open Listing is also commonly known as a “For Sale by Owner” listing. This type of open listing agreement is a non-exclusive listing agreement, which means it allows an owner to sell their property on their own. In this scenario, the owner can choose to hire multiple real estate agents and pay commission to the one that brings a ready and willing buyer to purchase the property.
NET Listing
A NET Listing is a less commonly used listing agreement. In this type of listing agreement, the property owner decides on a NET price for their property that they would be ok with accepting. A real estate agent can then sell the property for a higher price and retain any amount over the NET amount. Something to remember before deciding to use a NET listing is that NET Listings are not legal in all states.
Frequently Asked Questions
What Does a Listing Agreement Entail?
A listing agreement is a legally binding contract that exists to form a relationship between a seller and a real estate broker to manage and complete the sale of a listing. Listing agreements are necessary to start the selling process and must include certain features to be valid. Once signed, they permit your real estate agent to represent you and your property to potential buyers. This representation includes managing the Listing and the sale of your property. It’s important to note the relationship between the parties is not always exclusive and can be non-exclusive. There are several different types of listing agreement contracts.
What Parties Are Involved in a Listing Agreement?
The two parties generally involved in a listing agreement are the broker and the seller or landlord in the case of leasing. It’s important to remember the listing contract is with the broker or brokerage and not the agent. Real estate agents operate under the broker’s supervision.
Can the Seller Cancel a Listing Agreement?
In most cases, sellers have more flexibility than listing agents when it comes to breaking a listing agreement. A listing contract often allows for the seller to back out of the agreement without penalty if the broker agrees. It is sometimes in the broker’s best interest to agree to protect their reputation. When signing a contract, ensure to look for the “termination” or “cancelation” clauses. If these clauses don’t exist, it’s always possible to negotiate them into the contract before signing.
Can a Seller Change a Listing Agreement Whenever They Want?
In most cases, changes can be negotiated if both parties agree. It’s always best practice to record any changes in writing and create an addendum to add to the listing contract.
With a non-exclusive or an open listing, there is more flexibility when it comes to listing agreement changes. In an open listing real estate scenario, you as a buyer are not committed to an exclusive agency listing agreement or exclusive right to sell listing agreement. Without being tied to a single agent or agency, you then have the freedom to change or withdraw the agreement at any time.
Can a Realtor Cancel a Listing Agreement?
As a real estate broker, you almost always have less freedom when it comes to terminating a listing agreement. If a broker decides to terminate the agreement, they can be held liable for any damages done to the other party. For a real estate broker, the best course of action would be either to let the contract expire or to come to a mutual agreement to end the contract with the property owner.
Apart from mutual consent, there are some exceptional cases where the real estate listing agreement would automatically terminate. Some examples of these cases include destruction of the property, property use changes, transfer of title by operation, or death, insanity, or bankruptcy of either the agent or the owner.
What Does a Listing Agreement Include?
There are different types of listing agreements such as exclusive right to sell, open or exclusive agency. Each type of listing contract may vary slightly, and terms will also vary depending on the parties’ specific negotiations. However, each contract, at the minimum, will include several essential elements. Here are several you can expect:
- The Property Asking Price
- An Explanation of Seller and Broker Obligations
- Description of Commissions & Fees
- The Property Description
- Any Personal Property Included or Not Included in the sale
- An outline of the Mediation Process & Terms
- The Contract Expiration Date
What makes a Listing Agreement Valid?
There are several features a Listing Agreement must contain to be valid. These features are:
- The property listing start date and end date
- The listing price
- Compensation terms for the selling broker
- Terms of any brokerage fees
- The broker’s rights regarding working with other brokers
- The broker’s rights regarding previous offers on the property
Do Listing Agreements Have to be Written?
In most cases, listing agreements must be in writing, but some states do permit oral contracts. Oral contracts are generally not advised as they are not enforceable in a court of law. Most real estate sales contracts are required to be in writing, according to the statute of frauds.
The Statute of Frauds outlines the different types of agreements that are more prone to fraud if made orally and then mandates these contracts be in writing to be enforceable. The Statute of Frauds is used throughout all of the United States but is often adapted to some extent.
What Information is Not Needed in a Listing Agreement?
Listing contracts should always contain information about the property, selling terms, and financing. Certain information such as personal information about either party, such as age or gender, would not be considered necessary information to include.
Which Listing Contracts do Most Prefer?
Preference depends on the buyer’s needs. However, Exclusive Right to Sell Listings are the most common-used listing agreements. An Exclusive Right to Sell Listing contract creates an exclusive agency between the broker and seller, allowing the broker a period of time to sell the Listing in exchange for an agreed upon commission. This type of Listing is more popular than others because it limits any conflict or confusion over who was responsible for bringing a qualified buyer.
What Terminates a Listing agreement?
There are instances where a listing agreement may need to be terminated. The scenarios in which a listing agreement is terminated are often mutual but can sometimes be one-sided. If a broker terminates a listing agreement without consent or legal authority, they can be held responsible for any damages to the seller.
Termination scenarios can be categorized as either 1) Termination by Acts of the Parties or 2) Termination by Operation of Law.
Termination by acts of both parties includes:
- Performance
- Mutual agreement
- Discharged by the principal
- Resignation
- Abandonment
Termination by operation of law includes the following:
- Expiration of term
- Death or incapacity of both parties
- Change of law
- Destruction of property
- Condemnation of property
- Bankruptcy
- Loss of license
What is the Most Common Reason a Home Fails to Sell?
There are a variety of reasons a home fails to sell, but the most common reason is an unreasonably high asking price. The asking price is always outlined in the listing contract and is usually decided with the help of the listing agent.
Summary
A listing agreement is basically an employment contract between a seller and a real estate broker. The agreement gives the real estate agent permission to help find a buyer for the seller’s property. Within a listing agreement, you would find some required features such as the real estate listing terms, type of Listing, and the amount of commission the agent is entitled to upon sale of the property. Once the listing contract is signed, the agent can then start helping the seller procure a buyer according to the terms outlined in the agreement. Everything in a listing agreement is negotiable prior to signing, and the agreement can be terminated whenever there is a breach of contract or under certain special cases.
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