Unit 3 - Contracts - Listing Agreements

Property Disclosure Exemptions

A foreclosure or deed-in-lieu of foreclosure A gift or other transfer to a parent, spouse, domestic partner, or child of a transferor or child of any parent, spouse, or domestic partner of a transferor A transfer between spouses or between domestic partners in connection with a marital dissolution or dissolution of a state-registered domestic partnership A transfer where a buyer had an ownership interest in the property within two years of the date of the transfer including, but not limited to, an ownership interest as a partner in a partnership, a limited partner in a limited partnership, a shareholder in a corporation, a leasehold interest, or transfers to and from a facilitator pursuant to a tax deferred exchange A transfer of an interest that is less than fee simple, except for the transfer of a vendee's interest under a real estate contract A transfer made by the personal representative of the estate of the decedent or by a trustee in bankruptcy A transfer in which the buyer has expressly waived the receipt of the property disclosure statement

List two types of transfers that are exempt from the Property Disclosure Statement requirement.

A foreclosure or deed-in-lieu of foreclosure. A transfer made by the personal representative of the estate of the decedent or by a trustee in bankruptcy.

Which of these statements is true? Once a listing agreement is signed by all parties, it cannot be changed. The seller can change the listing agreement whenever he or she wants. A listing agreement can be modified, but only if all parties agree in writing. A listing agreement can change by the mutual verbal agreement of all parties.

A listing agreement can be modified, but only if all parties agree in writing

Which is TRUE about listings? A net listing is illegal in all states. An open listing is an exclusive contract. A seller can sell his or her own home and owe no commission if he or she signs an exclusive agency listing. An exclusive listing must always be at least 30 days long.

A seller can sell his or her own home and owe no commission if he or she signs an exclusive agency listing

Which of the following types of sale does NOT typically require a property disclosure statement?

A transfer made by a trustee in bankruptcy

When an amendment is made to a listing agreement, what happens to the terms of the original listing agreement?

All other terms and conditions of the original listing agreement remain unchanged.

Signature section

All the sellers sign and date the agreement and provide their address and other available information. The licensee fills in the firm's name, signs the document, and then provides other information about the firm

What does a carryover clause do?

Allows the broker to collect a commission for some period of time after the listing expires.

Seller Janet delivers a disclosure statement to Buyer Amanda. Amanda reads it over and decides everything looks good enough to continue with the purchase. A few weeks later, a major hail storm damages the roof and now it leaks. So the original disclosure is no longer accurate. Which statement is false? Janet should amend the disclosure statement and deliver it to Amanda. Janet can correct the damage to the roof and tell Amanda nothing. Amanda can rescind the purchase agreement within three business days after she receives an amended disclosure. Amanda can require Janet to replace the roof.

Amanda can require Janet to replace the roof

Give an example of a compensation agreement that is not a listing agreement.

An agreement that a broker signs with an unrepresented seller (a FSBO) in which that seller agrees that if he or she enters into a purchase contract with the buyer named in the agreement within a specified time period, the seller will pay a specified commission to the broker's firm at closing.

However, compensation agreements exist that are different from listing agreements. Two examples of compensation agreements that are not listing agreements are:

An agreement that the designated broker has with his or her employees or independent contractors that addresses how they will be paid. (We'll talk more about this in an upcoming unit.) An agreement that a broker signs with an unrepresented seller - usually in the case of a For Sale by Owner (FSBO) property. In such an agreement, the seller warrants that he or she is offering the property for sale without the assistance of any real estate broker. The broker names a specific buyer who may be interested in the property. The seller agrees that if he or she enters into a purchase contract with the named buyer within a specified time period, the seller will pay a specified commission - either flat fee or percentage - to the broker's firm at closing.

Most states require what four components to be on a listing agreement?

An identification of the property A promise of compensation to the broker The specifics of that compensation Written document with signatures of the seller or sellers

listing agreements must have these four components:

An identification of the property A promise of compensation to the broker The specifics of that compensation Written document with signatures of the seller or sellers

Describe an open listing

An open listing is a non-exclusive listing that allows a seller or buyer to engage a number of different brokers to sell or help purchase property. The broker who brings the buyer or finds the suitable property gets the commission. If the owner sells the property or the buyer finds his or her own property, no commission is owed to any broker.

What is an MLS?

An organization of member brokers who agree to cooperate in the sale of properties listed by other brokers in exchange for a share of the broker's resulting commission

How can an agent determine who has title to a property he or she is listing?

Ask the seller for a copy of the deed or other title document. Call and check with a title company in the area where the property is located. Call or visit the county tax office and check the records.

Deposit

Authorizes the listing agent to accept and hold any deposits on the seller's behalf which will be applied to the purchase price.

Broker and Seller's Duties

Broker agrees to use due diligence to achieve the purpose of the listing agreement. The seller agrees to consider all good faith offers on the property, to make the property available for showings, to take responsibility for all information the seller provides to the broker and to hold the broker harmless for any claims resulting from the information given to or withheld from the broker.

In what section on an MLS listing form would an agent look at to determine the type of foundation used in the construction of the home?

Building Information

the seller may still be responsible for paying a commission to the listing broker. This can happen if he or she:

Changes his or her mind and refuses to sell Has a spouse who won't sign the deed Has a title with uncorrected defects Commits fraud with regard to the transaction Cannot deliver possession Insists on terms that were not in the listing agreement Mutually agrees with the buyer to cancel the sale

Utility/Common information

Community features Source of the drinking water supply Spaces to write in the names of the utility companies and nearby bus line

Depending on the form used in your area, you may collect any or all of the following information for submission to your local MLS.

County in which the property is located Tax ID of the property Listing office ID, name and phone number Listing agent's ID, name and phone number Co-listing office ID and the co-agent ID Area, community or district Street number and street name City and zip code

Which of the following situations might impact a listing agreement?

Death of a broker

All of these situations have some effect on a listing agreement.

Death of the broker Brokerage firm goes out of business Broker loses his or her license Listing agent transfers to a different real estate firm

In the same vein, if a buyer hires a broker to find a property and agrees to pay a commission to the broker, the broker will be entitled to receive that commission if he or she performs according to the terms of the contract, even if the buyer:

Decides against making the purchase Makes a direct purchase of a "for sale by owner" property Chooses to purchase a property through another broker

Lockbox

Discusses lockbox use and states that persons using the lockbox are not insured against theft, damage, vandalism, etc. that could be attributed to lockbox use. The seller may indicate that he or she does not want a lockbox used.

Environmental

Drainage problems Fill material Damage to the property caused by disasters, such as fire, wind, floods, earthquakes, etc. Existing shorelines, wetlands and floodplains Existing environmental hazards, such as asbestos, radon gas, fuel or chemical storage tanks, etc. Commercial or industrial use Soil or groundwater contamination Transmission poles, transformers, or other utility equipment on the property Dumping site Illegal drug manufacturing Radio tower interference

Systems and Fixtures

Electrical system Plumbing system Hot water tank Garbage disposal Appliances Sump pump Heating and cooling systems Security system

Which component is not required in most listing agreements? Identification of the property Specifics of compensation defined Signatures collected Escrow company named

Escrow company named

Commission after Listing Expiration

Even after a listing expires, a broker may still be entitled to receive a commission. If you recall, most listing agreements have a clause in place (often called a carryover or safety clause) which says that the broker is still entitled to a commission for a set period of time after the listing expires, if the property is sold to a prospect that the broker introduced to the property during the time of the listing.

The listing type that assures a broker that he or she will receive compensation no matter who procures the buyer is what kind of agreement?

Exclusive right to sell

Agency Relationships

Explains that the broker represents the seller. The broker will not represent the buyer; however, if the listing agent finds a buyer, it may be necessary for the broker to act in the capacity of a dual agent. This section also informs the seller that the broker represents other sellers.

Interior Features such as

Finished versus unfinished square footage Energy sources Heating and cooling type Floor coverings Fireplace, ceiling fans, walk-in closets, sauna, etc. Appliances that stay Total number full, three-quarter, and half bathrooms Where each of the rooms is located relative to the main floor

Safety Clause

Here the broker and sellers agree to a specific number of days after the listing expiration during which the broker may still receive a commission. Also called a carryover clause, this clause is enforceable if the owner, or his or her new agent, sells the property to a buyer whose name appears on a list of persons to whom the original broker showed the property during the listing period. The broker must give this list to the owner within a specified number of days after the listing expiration.

Homeowner's Association/ Common Interests

Homeowner's Association, if applicable Periodic assessments Pending special assessments Shared common areas or existing maintenance agreements for pools, tennis courts, walkways, etc.

Waiver of Right to Receive Completed Property Disclosure Statement

If the buyers sign here, they are giving up their right to receive the seller disclosures

Waiver of Right to Revoke Offer

If the buyers sign this waiver, they are saying they have read the disclosure statement, approve it, and are giving up their right to revoke the purchase offer.

Seller representations

Indicates that the seller is unaware of any legal, financial or physical reasons that would affect the seller's ability to sell the property. If the seller becomes aware of any such reasons, the seller must notify the broker immediately.

Listing Price and Terms

Indicates the asking price for the property. May also indicate any financing terms, such as loan assumption, down payment amount, all cash, etc. Note: Unless the terms are specified, a seller is not required to pay a commission when refusing a full price offer unless the offer is all cash.

Sewer/On Site Sewage System

Kind of sewage system on the property Connection to public sewer main, if applicable Sewage fees or charges Construction and upkeep of on-site sewage system, if applicable Connection of plumbing fixtures to sewage system Changes or repairs Location of on-site system Frequency of maintenance of on-site system

Signed Written Document

Listing agreements must be in writing and signed by the seller to be enforceable. In other words, if the agreement is not in writing, the broker could not sue for the commission if the situation were to arise. Even though such a situation would be rare, if a seller wrote the following on a piece of paper and signed it, it would likely be an enforceable document.

MLS Listing Information

Listing price Whether or not the property will be advertised on the Internet Whether the address should be shown to the public Selling office commission and comments regarding such Number of bedrooms Total number of bathrooms Lot size, with an indicator of whether the number is square feet or acres Year built Listing date Expiration date School district code with spaces to write in the names of the schools Occupant type: owner-occupied, presale, tenant or vacant Owner's name, phone number, city and state Occupant's name Phone number to call for showing Descriptions of lands and improvements Driving directions to the property Possession Showing parameters, such as when the property can be shown and under what conditions Whether or not a Seller's Property Disclosure has been provided Tax year and tax amount Homeowner dues or rental amounts, if applicable Potential financing terms

Items included and excluded

Lists any personal property that may be included as part of the sale or any real or personal property that is being excluded from the sale. This will avoid any later misunderstandings.

Property

Lists the physical address of the property, including city and county. In some situations, the licensee may need to attach a signed copy of a legal description.

Give some examples of the kind of site information you might collect to submit to the MLS. (Other correct answers can be found on Page 25.)

Lot dimensions Waterfront footage Zoning code and jurisdiction Topography, such as level or pasture View, such as golf course or mountain

Site information such as

Lot dimensions Waterfront footage Zoning code and jurisdiction Topography, such as level or pasture View, such as golf course or mountain Lot details, such as cul-de-sac, paved street, corner lot Waterfront features - ocean, lake, high bank, etc. Site features - indoor/outdoor arena, fenced, outbuildings, etc. Pool - if so, what kind

Property Disclosure Statement

Most states (although not all) require sellers to provide some sort of Property Disclosure Statement to a buyer within some specified number of days (varies by state) of the acceptance of a purchase and sale agreement, but the seller is usually not required to provide the statement before that time

When this law is in effect, it typically applies to:

Multi-family dwelling of up to four units New construction Certain condominiums and timeshares Manufactured and mobile homes For-sale-by-owner (FSBO) properties (sometimes)

Which of these listing agreements is considered a unilateral contract? Open Exclusive Agency Net Exclusive Sale and Listing

Open

Three most common types of listings

Open Listing Exclusive Right to Sell Listing Exclusive Agency Listing

What are the three most common types of listings?

Open Listing, Exclusive Right to Sell Listing, and Exclusive Agency Listing

What are the two most common changes to an original listing agreement?

Price changes and extensions to the listing period

most listing amendment forms have spaces at the top to fill in:

Property address Seller's name MLS listing number Listing office Listed price

Additional Terms

Provides space for any agreement or terms not covered by any other section, such as a seller paying for a termite report.

Structural

Roof issues Basement problems Conversions, additions or remodeling Age of the home Settling, slippage or sliding, if applicable Defects with foundations, sidewalks, slab floors, driveways, etc. Pest inspections Pest infestations Attic and basement insulation

The seller may be asked about these aspects of the property:

Seller's authority to sell the property Issues with the title Encroachments, boundary agreements or boundary disputes Private access roads Rights-of-way, easements or access limitations Existing written agreements for maintenance of an easement or right-of-way Studies, surveys or notices that would adversely affect the property Pending or existing assessments Zoning violations or unusual restrictions on the property that would affect future construction or remodeling Boundary survey Covenants, conditions or restrictions which affect the property

Building information such as

Sewer or septic Type of basement Type of parking available Builder name Style of construction Specific information about the home if it is a manufactured home Environmental certifications Foundation type Building condition Roof type Exterior finish Architecture

Listing term

Shows the beginning and ending dates of the listing period.

Compensation to Broker

Shows the mutually agreed upon commission the seller will pay the broker. It can be a percentage or a specific amount, although percentage is preferred because it will adjust according to the actual sales price. May provide for any additional compensation to the broker, such as advertising fees or MLS fees. May state that the broker has informed the seller of the firm's policy of dealing with cooperating brokers and how the commissions are divided.

Parties

Shows the name of the owners and the name of the real estate office that is obtaining the listing.

On an MLS listing form, in what section would you find information regarding waterfront footage?

Site information

Changes to Property Condition

Sometimes, after the date that the seller completes the disclosure statement, he or she becomes aware of additional information, or some change takes place that makes something in the disclosure statement inaccurate.

Successor and Assigns

States that the agreement is binding on the seller and the seller's successors and assigns.

Security and Insurance

States that the broker is not responsible for loss or damage to the property, even with a lockbox present. The seller must take steps to safeguard any valuables and obtain insurance to cover the risks.

Multiple listing service

States that the broker will provide the transaction terms to the Multiple Listing Service, unless the seller signs a form to withhold the listing.

Attorney fees

States that the loser of a suit or arbitration of any disagreement must pay the associated costs.

Equal housing oppoturnity

States that the property is offered in compliance with all anti-discrimination laws.

Entire Contract

States that this agreement supersedes all previous discussions, negotiations and agreements between the seller and the broker. Therefore, anything that is not written into this agreement is not part of the agreement.

Identification of the property

The best way to identify a property is through the legal description. A street address can be and is often used, but it should be supported by the legal description, attached to the listing document. If the licensee does not have a copy of the description at the time the listing is prepared, he or she can have the seller sign it with a note on the legal description line that states the description will be provided by the agent at a later time. The agent can obtain the legal description from a title insurance company or from the seller's deed

If a transaction doesn't complete, under what circumstances would the broker still be entitled to a commission?

The broker is still entitled to receive the commission if the transaction does not complete due to the seller's or buyer's default.

If the seller takes no corrective action prior to the closing date, the buyer will have the right to exercise one of the following two options.

The buyer can approve and accept the amendment. The buyer can rescind the purchase agreement within three business days after receiving the amended disclosure statement.

Licensee Tim works for Broker Marty. Tim lists Seller Gary's home, fills out all the paperwork and signs the agreement. The listing agreement is a contract between whom?

The contract is between Broker Marty and Seller Gary. As an employee of Marty, Tim is acting as a subagent

Expiration of the agreement term

The date arrives that was stated in writing on the listing agreement.

Listing terminated by performance

The licensee has helped the seller find a ready, willing, and able buyer to purchase his or her home.

Promise of Compensation

The listing agreement must contain an assurance that the broker will receive compensation and state how that will happen. The seller could stipulate that the broker will receive compensation when the buyer is found, when a contract is signed or only if the sale actually closes.

Specifics of Compensation

The listing agreement must show the broker's compensation as a fixed amount. It is usually indicated as a percentage of the sale price, but it could be a specific flat fee. As we mentioned when we talked about net listings, the compensation may NOT be indicated as whatever is left over from some net price the seller has in mind to receive.

Exclusive right to sell

The most widely used agreement is the exclusive right to sell listing agreement. Under this arrangement, the broker has the exclusive right to market the property for a specified period of time. If the property sells while the broker has the listing, the seller must pay the agreed-upon commission, regardless of who actually procured the buyer (who was the procuring cause). This means that even if the seller himself finds the buyer with no help from the broker, the seller still owes the broker the commission.

Termination

The parties either mutually agree to end the relationship or one party decides to end it.

Licensee Jones is in the process of closing on a sale. However, the property title has been found to have uncorrectable defects. What is the result regarding Jones compensation?

The seller is still liable for licensee Jones' compensation.

When must the seller receive a copy of the listing agreement?

The seller must receive a copy of the document at the time the signatures are obtained.

Water

The source of the household water Any easements regarding the water source Problems or repairs If the source provides adequate potable water Existing water treatments systems Existing water rights related to the household supply Irrigation water rights for the property, if applicable Entity supplying irrigation water to the property Condition of any outdoor sprinkler system

Broker Sara has lost her license for unprofessional conduct. What will happen to her listings?

The state licensing authority can choose to appoint a temporary broker to close any of Sara's pending transactions. Otherwise, all Sara's listings will terminate.

Which of the following types of transactions typically contain a property disclosure? The transfer of a deed based on a open market sale of a residential property A transfer made by the personal representative of the estate of the decedent or by a trustee in bankruptcy A transfer in which the buyer has expressly waived the receipt of the property disclosure statement A gift or other transfer to a parent, spouse, domestic partner, or child of a transferor or child of any parent, spouse, or domestic partner of a transferor

The transfer of a deed based on an open market sale of a residential property

Often their signatures mean that the buyers are recognizing the following:

They have a duty to pay attention to any material defects and discover any problems with the property for themselves. The disclosures in the statement are made solely by the seller and not by any real estate licensees. Licensees are not responsible for any inaccuracies made by the seller, unless they knew the information was inaccurate. Disclosure information is not intended to be part of any written purchase agreement between buyer and seller. They have received copies of the Disclosure Statement signed by the seller. If the home was built prior to 1978, they have received the appropriate lead-based paint information.

What is an important thing to remember about listing agreements?

They must be in writing to be enforceable

Exclusive buyer agency agreement

This agreement is also known as the exclusive right to represent. With the signing of this agreement, the buyer is legally bound to compensate the agent when the buyer purchases any property of the same type as described in the contract. The managing broker is entitled to payment regardless of who locates the property. This means that even if the buyer finds the property himself or herself, the buyer must still pay the agent the agreed upon commission.

Exclusive agency buyer agency agreement

This exclusive contract is between the agent and the buyer. However, with this type of agreement the agent is entitled to payment only if he or she actually finds the property that the buyer purchases. If the buyer finds a property himself or herself, the buyer does not owe the agent a commission.

Open buyer agency agreement

This is a nonexclusive agency contract between a buyer and a broker. A buyer can enter into similar agreements with an unlimited number of other brokers. Only the broker who actually locates the property that the buyer eventually purchases is entitled to the commission.

Lead Based Paint

This section would apply only to homes built prior to 1978. The seller of such a home must disclose information about the possible presence of lead-based paint in the home. The seller also acknowledges whether he or she has provided all documents and reports pertaining to lead-based paint to the buyer or indicates that he or she has no such reports to provide.

If the seller of a residential property fails or refuses to provide a disclosure statement to the prospective buyer, the prospective buyer's right of rescission will apply (unless the buyer has waived the right of rescission) until the earlier of these dates:

Three business days after receipt of the disclosure statement. The date the transaction closed

When is a seller typically required to provide a copy of the Property Disclosure Statement to a buyer?

Usually within some specified number of days of acceptance of a purchase and sale agreement

Ownership, title, and authority

Warrants that the owners are the only title-holders of the property and therefore have authorization to sell it.

What is the major difference between an exclusive right to sell listing and an exclusive agency listing?

With exclusive right to sell, the broker has the exclusive right to market the property and receive a commission regardless of who procures the buyer. With exclusive agency, the owner retains the right to find a buyer and sell the property and owe the exclusive broker no commission.

Sales of manufactured and mobile homes

are typically made with a property disclosure.

Buyer Agency Agreement

describe the terms of the relationship between the buyer agent and his or her buyer client. The agreement addresses such things as the duration of the agreement; the commission that will be paid; and the various rights, duties, and obligations of the parties.

Listing Agreement

legally-binding contract that creates an agency relationship authorizing a broker to serve as the agent for a principal in a real estate transaction.

Exclusive Agent

listing agreement gives a broker the right to market and sell a property for a specified time period, while the owner retains the right to find a buyer and sell the property without owing the broker a commission. The seller must pay a commission only if the home is sold by the broker or an authorized agent or subagent of the broker.

Open listing

non-exclusive contract, authorizing a broker to serve as the agent for either the sale or the purchase of property. With this type of listing, a broker is not under the same obligation to perform as with other listing agreements, so an open listing is often considered to be a unilateral contract.

Net Listing

not technically a type of listing agreement. In a net listing, an owner sets a minimum amount that he wants to receive from the sale of the property and lets the broker have as commission any amount above the set minimum.