Before you begin the process of selling your house, you need to complete a listing agreement. This document is between you and your real estate agent. It sets out the terms for the upcoming sale of your home.
What is a Real Estate Listing Agreement?
When homeowners decide to sell their homes, they would usually like to showcase their homes to a broad part of the market. They can do this by working with a real estate broker, who will place their home in a market listing. This is a list of homes for sale in the general area, containing important information such as sales prices.
The broker and the seller will usually create a listing agreement, which is a contract stating the terms under which the broker can promote the seller’s home. There are many different types of real estate listings, such as open listings, exclusive listings, and many other types. These may be regulated by state and local real estate standards, as well as professional standards for brokers and real estate agents.
How Do Listing Agreements Work?
Listing agreements allow real estate agents to represent homeowners and property to potential buyers. Such agreements state that an individual real estate agent is the only person who can manage the listing and sale of the property. A listing agreement contract is what officially starts the home-selling process.
How Much Does a Listing Agreement Cost?
A listing agreement will not cost you anything. Instead, it outlines how much you will pay your real estate agent for selling your property.
What is Contained in a Listing Agreement?
A real estate listing agreement needs to include certain information in order to be valid. A valid listing agreement should contain:
- The start date and end date of when the property will be posted in the listing
- The price at which the home is going to be offered up for sale (i.e., the “list price”)
- How the sales broker will be compensated-whether through flat fees or percentages of the sale (i.e., broker’s commission)
- Terms regarding brokerages fees paid by the selling party
- The broker’s scope of authority regarding co-agreements with other brokers
- The broker’s scope of authority regarding the existence of previous offers
Thus, under real estate laws and guidelines, these provisions need to be included and followed in any real estate listing agreement. A failure to include any of these legal issues may result in the document being voided. Violations can also affect subsequent home sales transactions.
Can I Add Clauses to a Listing Agreement?
Listing agreements often include different clauses that state what will happen if you and your real estate agent run into disputes during the home-selling process. Any clauses included in your listing agreement must be agreed upon before signing the contract.
The following are the most important terms and types of clauses that may be included in a listing agreement:
- The amount of commission you’ll pay your real estate agent. Typically, commission amounts to 5% or 6% of the proceeds of the sale.
- Exclusive right to sell clause. This clause gives your agent the exclusive right to sell your property for the duration of the listing agreement. Other types of arrangements are possible, but your real estate agent will likely choose this type of agreement.
- Duration. Your listing agreement may last anywhere from three to six months. For sellers, shorter listing agreements are typically better. If you aren’t satisfied with the agent’s services, you can let your listing agreement expire and choose a different agent. From a real estate agent’s perspective, a longer listing agreement is preferable because the agent won’t want to risk losing their commission when the property starts garnering interest.
- Safety/Protection Clauses. Even though listing agreements have expiration dates, the contract will also likely include a clause that protects the real estate agent after the expiration date. This prevents buyers from trying to avoid paying an agent’s commission by finding a buyer while you’re still represented by an agent but waiting to conduct the sale until your listing agreement expires. Be sure to make an exception within the contract in case you decide to change listing agents. In the case that your first agent sells quickly and your clause entitles the first agent to a cut, you could end up owing two commissions.
- Duties. A listing agreement may outline the activities the listing agent is authorized to perform on the homeowner’s behalf. Be sure to read through this clause carefully. Make sure you understand everything. If any specific duties are listed, make sure that the agent will handle them. Duties may include listing the property, posting yard signs, or creating listing sheets.
- Dispute resolution. Your listing agreement will likely specify how disputes between you and your agent will be handled, especially ones that can be handled informally. Common dispute resolutions include mediation or legally binding arbitration.
- Representations. Your listing agreement will likely require you to verify that you’re in a legal position to sell the property and that no one else has an ownership interest in it.
What Happens if a Listing Agreement is Violated?
Violations of real estate listing agreements can often lead to serious consequences. For instance, the seller may lose some very important opportunities to sell their home if a misunderstanding has occurred. A common mistake is where there is an error or even negligence regarding the price of the home.
In such cases, the broker may become liable to the seller and may be required to pay damages for any losses. In very serious cases, the broker may even be penalized by their licensing authority.
What Happens to the Listing Agreement if My House Doesn’t Sell?
The listing agreement is valid from the day you sign the listing agreement until the day it expires. A listing agreement’s expiration date depends on the real estate market and the homeowner’s preferences.
An expiration date can be negotiated with your realtor. However, most listing agreements expire after six months. Once a listing agreement expires, the contract terminates, and your home will be taken off the market. At that point, you may choose to find a new real estate agent or extend the listing agreement with your current realtor.
How Do I Terminate a Listing Agreement?
If your realtor hasn’t found any buyers for your home, you may eventually want to terminate your listing agreement. Terminating a listing agreement is a simple process. Typically, you can ask for your release or ask for another realtor if you’re working with an agency.
Do I Need a Lawyer for Help With a Real Estate Listing Agreement?
In any home sales transaction, the assistance of a lawyer is highly recommended. You may wish to hire a qualified real estate attorney in your area if you are considering forming a real estate listing agreement. Your lawyer can review the documents with you to determine how they may affect your rights as a seller. Also, in the event of a lawsuit or any legal disputes, your lawyer can help represent you during a trial.
Use the link here to view LegalMatch’s database of experienced real estate attorneys. LegalMatch’s services are 100% confidential and can help you narrow down your search for a lawyer in your area for free.