Listing Agreement Considerations
Ensure your listing agreement protects your interests with expert legal advice tailored to your needs
What to Look For in a Listing Agreement
A listing agreement outlines the terms between a seller and a real estate agent. Important things to review include commission rates, contract length, agent responsibilities, and termination terms. Understanding these details as a seller helps protect your interests and ensure a smooth selling process. Traditional commission structures help motivate both parties to sell quickly and at the best price. However, if a sale doesn’t go as planned, it can create tension between a seller and their agent. To ensure clarity and legal enforceability, commission agreements are almost always in writing as a listing agreement. Largely, what differentiates the types of listing agreements is what marketing events trigger earning of the commission. In this article, we briefly explore different types of listing agreements and some key terms to keep in mind.
Types of Listing Agreements
Exclusive Right to Sell Listing Agreement
This is the most common type of agreement in most markets. Under an exclusive right to sell agreement, the agent is entitled to a commission for the sale of the property during the term of the agreement. Many also extend to include any buyer procured by, or introduced by, the agent who later purchases, even after the agreement term expires.
Exclusive Agency Listing Agreement
An Exclusive Agency Listing Agreement is a contract between a property owner and a real estate agent, giving the agent the exclusive right to sell the property. However, if the owner sells the property without the agent’s help, no commission is owed. This differs from an Exclusive Right to Sell Agreement, where the agent earns a commission regardless of who sells the property. Under these agreements, the timing and nature of offers can be significant, especially if the property owner ends up selling to a buyer they find, but at a lower price gets from another buyer.
Open Listing Agreement
Under this type of agreement the seller can enter into listing agreements with multiple real estate agents and retains the right to sell the property themselves without paying any commission. The thinking behind these agreements is to allow multiple agents to compete and broaden the pool of potential leads.
Net Listing Agreement
This type of listing agreement is controversial and banned in many states, though not in Washington. It sets a fixed price the seller must receive, with the agent keeping any excess. The issue is the potential conflict of interest, as agents may be motivated to push prices beyond the property's actual value.
Service Agreement
It is possible for listing agreements to do away with the concept of commission all together with, for example, fixed or hourly fees for services rendered. These agreements are rare. Redfin does not use a service agreement but still receives a seller’s commission, even though its agents do not. Real estate attorneys often charge fixed and hourly fees, but they do not offer any marketing or pricing services.
What if a Seller Introduces a Buyer?
If an owner has not retained the right to find buyers, agents may be willing to negotiate exceptions for personal contacts, like family and friends. Sellers who think this may be applicable should disclose potential buyers upfront so that the exclusion can be included in the listing agreement. Otherwise, any agreements should be memorialized with a signed amendment to the listing agreement.
What if a Seller Selects a Buyer But an
Agent's Buyer Offered More
Sellers have the right to choose which offer to accept, which may not always be driven by price. Other common considerations include other favorable terms (cash, date, contingencies, etc.), personal reasons, and scheduling needs. However, most listing agreements, and the law in many states, will nevertheless credit the agent with the sale thus entitling them to commission upon the procurement of a buyer ready, willing, and able to purchase. If the agreement does not specifically state otherwise, it is likely the agent will still be entitled to receive their full commission when the sale closes with the seller’s buyer. Depending on the circumstances, the commission may even be calculated on the higher amount of the offer the agent produced.
Other Practical Considerations in Listing Agreements
Many scenarios can arise from a listing agreement, so it’s important to be prepared. The best approach is to address potential issues upfront when signing the agreement. Here are some key terms to look out for:
- 1. Clear start date, end date, and term.
- 2. Marketing efforts to be performed.
- 3. Price expectations and any market analysis requirements.
- 4. Terms regarding notice and responsiveness.
- 5. Termination language.
Disclaimer
This article is provided for informational, educational, and marketing purposes only and does not constitute legal advice. The content is current as of its publication or last review and may not reflect the latest legal developments. Do not rely solely on this information—consult a qualified attorney regarding your specific situation.
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