A real estate listing agreement, also known as a “listing contract”, is a written document that binds a real estate agent to a set of terms for how they can go about selling the owner’s property.
The agreement covers:
- The asking price ($) for the property;
- The agent’s commission;
- The duties the agent is obligated to uphold;
- The term of the agreement (the “listing period”);
- The agent’s selling rights (exclusive, open listing, etc); and
- The ways the agent can go about marketing the property.
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
Exclusive Right-to-Sell Listing Agreement (Most popular) – Guarantees the agent a commission so long the home is sold during the listing period (even if the seller finds a buyer themselves).
Exclusive Agency Listing Agreement – Limits the seller to working with one agent, but does not provide the agent with a commission if the seller finds a buyer on their own.
Open Listing Agreement – The least binding option of the three, this allows any agent to find a buyer and receive a commission. Provides a great deal of flexibility for sellers, but is a less attractive option for agents.
Buyer’s Agency Agreement – A contract formed between a broker and a potential buyer. The broker will show the buyer potential properties, negotiate on their behalf, and handle other responsibilities in exchange for a commission.
Business Listing Agreement – Guarantees a broker a monetary or percentage-based commission in exchange for successfully selling a company.
Lead-based Paint Disclosure – Must be attached to a purchase agreement prior to signing if the property was built prior to 1978.
Property Disclosure Statement – A form that lists any and all issues or defects with the property. Must be provided to a potential buyer before signing a purchase agreement.
A listing agreement gives an agent the permission to represent a seller (and their property) to potential buyers and other 3rd parties in exchange for a percentage of the property’s selling price (or a fixed amount).
The agreement comes in three (3) general types, each of which alters the level of exclusivity the broker has in the deal.
- Agent preference: Most preferred
- The seller is limited to working with only one (1) agent
- The agent is guaranteed a commission if the property sells
Arguably the most popular type of listing contract, this agreement guarantees the broker will receive their commission so long the property is sold while the contract is still effective.
This option is most often preferred by brokers, as it removes the risk of the seller (or another agent) from finding their own buyer in order to avoid paying the commission. Because this agreement is exclusive, the buyer is prohibited from hiring any others brokers as well.
- Agent preference: Adequate
- The seller is limited to working with one (1) agent
- The agent is not guaranteed a commission if the seller finds the buyer
With this type of contract, the seller gives the rights to selling the property to only one (1) broker (like the exclusive right to sell), but if the seller finds a buyer on their own (without the broker’s help), they are not required to pay the broker’s commission.
To summarize, the seller is not allowed to work with any other brokers, but can take an active process in selling the property alongside the broker. This option is not preferred by brokers, but is still the more favorable option when compared to an open listing.
- Agent preference: Least preferred
- The seller can work with any number of agents
- The commission is only paid if a agent finds a buyer
This “no holds barred” type of agreement places few restrictions on the seller, allowing them to work with any broker in order to sell the property. This is the common option for FSBO “For Sale by Owner” properties.
While rarely used in comparison to the other types above, it is more common when the market is saturated with buyers, with properties that are located in more rural areas, as well as properties that are on the more difficult side of selling.
As a whole, listing agreements may appear complicated and never ending. But when examined on a provision-by-provision basis, they start to get a lot more manageable. The following is a guide to the most important provisions found in a listing agreement:
This section is used for establishing the identities of those that are being bound by the agreement. It contains the name and address of the seller (or sellers, if there are two owners), the name of the broker that will be representing the seller, and the name and address of the agency that the broker works for (or owns).
Used for identifying the property being sold. This section will require the:
- Full address of the property (including the unit number, if any);
- The tax map and lot (this shows the geographic location of the property);
- The deed book and page (e.g. “Warranty / 13-2”);
- Any fixtures that aren’t included in the sale. Fixtures are permanent attachments to the property, such as a building or shed.
- Any personal property that is included in the sale. Also known as “chattel”, this is property that is movable (e.g. “Living room couch”).
Rights to Sell
One of the most important sections in the entire agreement, this establishes whether the broker has exclusive rights to list the property. See “What is a listing agreement” above for more information on this section.
This is the price the broker will list the property for. This price will be determined by speaking with the broker, examining market trends, and having them complete a Comparative Market Analysis (CMA) on the property.
Period of Agreement (Listing period)
This is the length of time the agent will have to sell the property. The timeframe is set by the seller after deliberating with the agent about the market conditions and other factors.
The most common timeframes are 30 days, 60 days, 90 days, 6 months, and 1 year.
30-day listings is common for properties in a hot housing market. Also known as a seller’s market, this is marked by properties receiving offers (and in many cases being sold) within a few days of being listed, sale prices exceeding listing prices, and a general lack of available properties on the market.
Note on extensions: An “extension” period is a length of time after the listing period ends in which the agent is guaranteed a commission if the property is sold to a buyer that the agent had previously negotiated with. “Negotiated” refers to providing info or showing the property, as well as representing an offer on the property.
The “Commission” is the payment the agent receives for successfully selling the property. There are no laws that require a minimum commission amount. The exact amount is negotiated between the seller and the agent, with the average rate sitting between 5 and 6 percent of the property’s selling price. The commission is expected to be “split” between the buyer and selling agent, who would take between 2 and 3 percent each. If the buyer has no agent, the commission would be kept by the listing agent entirely. Once the property is sold, the listing agent pays the buyer agent from their own commission.
While not as common as percentage-based commissions, some agents take a flat fee for listing and selling the property. In this case, the agent’s commission would remain the same regardless of the final selling price of the property.
Buyer Agent Commission
Under the clause “Cooperation with other Agents and Agencies”, the agent can type the commission percentage a buyer agent would receive. The amount that is entered is deducted from the commission the listing agent receives at closing. As stated under the “Commission” section above, this commission is not paid out if the buyer does not have an agent.
Disclosed Dual Agency
A listing agent can act as a “dual agent” if they represent both the seller and buyer in a transaction. This type of deal is controversial, as many believe it is difficult to take both party’s best interests into account.
It is also considered a “dual agency” if two agents from the same brokerage are involved in the deal (even if the agents do not know one another).
Eight (8) states have enacted statutes that prohibit listing agents from acting as a dual agent. These states include Alaska, Colorado, Florida, Kansas, Maryland, Oklahoma, Texas, and Vermont.
This section allows the seller to choose which ways the agent can market their property. To maximize the likelihood of finding a qualified buyer, it is recommended that the seller initial all marketing options.
Agency Disclosure Forms: By State
|Alabama||§ 34-27-82||Brokerage Services Disclosure (PDF, Word)|
|Alaska||§ 08.88.610 & § 08.88.615||Real Estate Commission Consumer Disclosure (PDF)
Waiver of Right to be Represented (PDF)
|Arkansas||§ 17-42-108||Agency Representation Disclosure Form (PDF)|
|California||§ 2079.14 & § 2079.16||CAR Form AD (PDF)|
|Colorado||§ 12-61-808||Brokerage Disclosure to Seller (PDF)|
|Connecticut||§ 20-325d||Real Estate Agency Disclosure Notice (PDF)|
|Delaware||§ 2938||Consumer Information Statement (PDF)|
|Florida||§ 475.278||Brokerage Relationship Disclosure (PDF)|
|Idaho||§ 54-2085||Agency Brokerage Disclosure (PDF)|
|Illinois||§ 225 ILCS 454/15-35||Disclosure of Seller’s Designated Agent (PDF)|
|Iowa||§ 193E-12.2||Agency Disclosure and Acknowledgement (PDF)|
|Kansas||§ 58-30,110||Real Estate Brokerage Relationships (PDF)|
|Kentucky||§ 201 KAR 11:121||Guide to Agency Relationships (PDF)|
|Louisiana||§ LXVII-3703||Customer Information Form (PDF)|
|Maine||§ 13279||Brokerage Relationships Form (PDF)|
|Maryland||§ 17-530||Agent Representation Form (PDF)|
|Massachusetts||§ 87AAA3/4(d)||Consumer Relationship Disclosure (PDF)|
|Michigan||§ 339.2517||Disclosure – RE Agency Relationships (PDF)|
|Minnesota||§ 82.67||Agency Relationships in RE Transactions (PDF)|
|Mississippi||§ 1601-4.3||Working with a Real Estate Broker (PDF)|
|Missouri||§ 339.770||Broker Disclosure Form (PDF.1, PDF.2)|
|Montana||§ 37-51-314||Relationships in RE Transactions (PDF)|
|Nebraska||§ 76-2422||Agency Disclosure Information (PDF)|
|Nevada||§ 645.252||Duties Owed Disclosure – Form 525 (PDF)|
|New Hampshire||Rea 701.01||Brokerage Relationship Disclosure (PDF)|
|New Jersey||§ 11:5-6.9||Consumer Information Statement (PDF)|
|New Mexico||§ 126.96.36.199||Broker Duties Disclosure (PDF)|
|New York||§ 443||Disclosure Form for Buyer and Seller (PDF)|
|North Carolina||§ 58A .0104||Working w/Real Estate Agents (PDF)|
|North Dakota||§ 70-02-03-15||Agency Relationships in RE Transactions (PDF)|
|Ohio||§ 4735.57||Agency Disclosure Statement (PDF)|
|Oklahoma||§ 858-355.1||Disclosure to Seller or Buyer (PDF)|
|Oregon||§ 696.805 & § 696.820||Initial Agency Disclosure Packet (PDF, Word)|
|Pennsylvania||§ 35.284 & § 35.336||Consumer Notice (PDF)|
|Rhode Island||§ 5-20.6-8||Real Estate Relationship Disclosure (PDF)|
|South Carolina||§ 40-57-370||Disclosure of Brokerage Relationships (PDF)|
|South Dakota||§ 36-21A-147||Real Estate Relationships Disclosure (PDF)|
|Texas||§ 1101.558||Information about Brokerage Services (PDF)|
|Utah||No statute||Agency Disclosure (PDF)|
|Vermont||§ 4.6 (Page 15)||Mandatory Consumer Disclosure (PDF)|
|Virginia||§ 135-20-220||Disclosure of Brokerage Relationship (PDF)|
|Washington||§ 18.86.030||Agency Disclosure – Form 42 (PDF)|
|West Virginia||§ 30-40-26||Notice of Agency Relationship (PDF)|
|Wisconsin||§ 452.133 & § 452.135(2)||Broker Disclosure to Clients (PDF)|
|Wyoming||§ 33-28-302 & § 33-28-306||Real Estate Brokerage Disclosure (PDF)|
Depending on who a real estate agent is representing, they can be called a “buyer’s agent” or a “seller’s agent”.
An agent is a “buyer agent” when they are representing a party interested in purchasing a property. They show the buyer potential listings, negotiate on their behalf, handle any paperwork, communicate with 3rd parties, and more.
A “seller’s agent” is a professional that represents the seller of a property. They manage all marketing of the property, research the market, host open houses, get the property prepared, add the property to MLS (and other listing websites), add the lockbox (if approved), present offers to the seller, and negotiate on the seller’s behalf at closing.
- Realtors are those that belong to the National Association of Realtors (NAR). Someone that is a Realtor is not necessarily a real estate agent, as they accept other real estate-related professions (such as property managers) into the association.
- Real estate agents are professionals that are licensed to assist people with the buying and selling of real estate.
- Real estate brokers are those with further education and certification that can open their own brokerage and hire other agents.
Listing agreements expire to protect the seller from being tied to a single agent. If the seller and agent sign a listing contract for three (3) months, for example, and the property doesn’t sell in that timeframe, the seller can hire a different agent to try and sell their property, take the property off the market, or create a new plan with their existing agent. Additionally, the fact the contract will expire puts beneficial pressure on the agent to get the property sold prior to expiration.
The purpose of an exclusive listing agreement is to guarantee the agent a specific amount of time to get the property sold. It prevents the agent from putting in their time and energy only to have the buyer back out.
While the seller can technically terminate the agreement at any time, they may need to pay the agent a commission or “damages” if they do not have a legally valid reason for doing so. Such reasons could be malpractice or a breach of the contract. Regardless of the reason, the seller should read through the listing contract to see if there is a process for ending the agreement and should communicate with the agent about their wishes immediately.
- Appraisal – Estimates the value of a property. Required by banks to ensure the property’s value matches the value of the loan they provide.
- Covenants, Conditions, and Restriction (CC&Rs) – Also known as “bylaws”, these are any limitations on what a homeowner can do with their property. The rules are typically set by a home owner’s association (HOA), developers, and/or builders.
- Closing – Finalizes the sale of the property. This is the time when all documents are signed, money is paid to each respective party, and the buyer takes ownership of the property.
- Contingency – A clause that allows the parties to “back out” of the deal in certain circumstances.
- Earnest Money Deposit (EMD) – A payment made from a potential buyer to a seller to convey the buyer’s interest in purchasing the property. Typically paid after the purchase agreement is signed and kept in an escrow account.
- Escrow – An arrangement in which money (such as an earnest deposit) is held by a 3rd party until a specific action has occurred.
- FSBO – Stands for “For Sale by Owner”; refers to the process of selling a property without the assistance of a real estate agent.
- Lockbox – A secured device that contains the keys to the property. It hangs around the doorknob, and can only be accessed by other agents for the purpose of showing the property to potential buyers.
- MLS – An up-to-date database run by agents and brokers that contains active listings in a specific area or state.