Chapter 5 Unit 3: Listing Agreements

exclusive right to sell listing agreement

- most common type -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

Two examples of compensation agreements that are not listing agreements are:

1. An agreement that the designated broker has with his or her employees or independent contractors that addresses how they will be paid. 2. An agreement that a broker signs with an unrepresented seller - usually in the case of a For Sale by Owner (FSBO) property. I

If the sellers are unclear about the ownership of the property or if you just want to check for yourself, you can do it in one of these ways.

1. Ask the seller for a copy of the deed or other title document. 2. Call and check with a title company in the area where the property is located. 3. Call or visit the county tax office and check the records.

Basic components of a Listing Agreement

1. Promise of compensation 2. Specifics of compensation 3. Signed written document

Listing agreement clauses

1. Shows the name of the owners and the name of the real estate office 2. Lists the physical address of the property 3. 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. 4. Indicates the asking price for the property. May also indicate any financing terms, such as loan assumption, down payment amount, all cash, etc. 5. Shows the beginning and ending dates of the listing period. 6. Shows the mutually agreed upon commission the seller will pay the broker 7. Safety Clause 8. Ownership, Title and Authority 9. MLS 10. Seller Representations

Advantages to exclusive right to selling listing agreement

1. The broker becomes more willing to expend the time, energy and funds to actively market the property. It limits any conflict with the seller over who was the procuring cause. 2. An exclusive right to sell listing gives the broker the greatest assurance that he or she will receive compensation for his or her marketing efforts. And as a result, sellers usually see a quicker and more profitable sale of the property.

There are also spaces on the form for the buyers to sign. Often their signatures mean that the buyers are recognizing the following:

1. They have a duty to pay attention to any material defects and discover any problems with the property for themselves. 2. The disclosures in the statement are made solely by the seller and not by any real estate licensees. 3. Licensees are not responsible for any inaccuracies made by the seller, unless they knew the information was inaccurate. 4. Disclosure information is not intended to be part of any written purchase agreement between buyer and seller. 5. They have received copies of the Disclosure Statement signed by the seller. 6. If the home was built prior to 1978, they have received the appropriate lead-based paint information.

Open listing: who can search/who gets commission

1. With an open listing, all contracted brokers can market the property or search for property at the same time. 2. only the one broker who brings the ready, willing and able buyer to the seller or who finds the right property for a buyer will receive the commission.

negatives to open listing

1. brokers may not put much effort into marketing the property. 2. a seller could sell the property himself or herself and a buyer could make a purchase himself or herself without having to pay any commission to any broker. 3. when licensees from two competing brokers negotiate with the eventual purchaser of the property, leading the way for a dispute over which licensee was actually the procuring cause.

Who is a listing agreement between and who does the paperwork?

1. the agreement is actually a contract between the firm of the broker and the seller. 2. it is an affiliated licensee who will be taking the listing and filling out the appropriate forms.

Identification of the Property should include

A street address can be and is often used, but it should be supported by the legal description, attached to the listing document.

In most states, 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

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

ownership might not be quite so clear if title is held:

As Tenants in Common - New owners could inherit a portion of the property from any of the original owners. By a Partnership - Persons inheriting from current owners might not know the names of the other partners.

Clauses: Deposits

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

Clauses: Broker's 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.

if for some reason the transaction does not complete, 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

MLS INFO: examples of utility/community information you may need

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

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

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

Clauses: 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.

PDS: seller might be asked about environmental concerns

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

PDS: seller might be asked about systems and fixtures

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

Clauses: 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.

MLS INFO: examples of interior features you may need information on

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

PDS: seller might be asked about HOA/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.

What should an agent do if they don't have a legal description of the property when the listing is being prepared?

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.

What happens to the agreement if an agent switches firms?

If the listing agent transfers to another firm, the listing agreement will stay with the original broker, unless that broker gives permission for the licensee to take the listing with him or her and the seller agrees.

Clauses: 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.

PDS: seller might be asked about sewer/sewage systems

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

Licensee Mike was owed a commission from seller Jane. Jane has refused to make payment. What recourse does licensee Mike have?

Licensee Mike can seek damages through his broker.

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.

MLS INFO: examples of site information

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

When Property disclosure statements are required by law, 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)

Why is net listing unprofessional/illegal

Net listings are illegal because they give unscrupulous brokers an opportunity to take advantage of a seller who may not know what his or her property is truly worth. It essentially violates the broker's fiduciary responsibility of putting the client's interests above his or her own.

What happens if issues of a property come up after closing?

Once the property has closed, the seller has no obligation to deliver any disclosure statement, and the buyer does not have the right to rescind, even if new information comes to light.

The three most common types of listings are:

Open Listing Exclusive Right to Sell Listing Exclusive Agency Listing

examples of form of listing contract termination?

Performance Expiration Termination

Since a listing agreement forms an agency relationship between the broker and the seller, it can terminate when one of the following occurs:

Performance - The licensee has helped the seller find a ready, willing, and able buyer to purchase his or her home. Expiration of the agreement term - The date arrives that was stated in writing on the listing agreement. Termination - The parties either mutually agree to end the relationship or one party decides to end it.

What are the two changes most often made to a listing agreement?

Price changes and listing period extensions

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

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

PDS: seller might be asked about structural issues

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

MLS INFO: examples of building information

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

Modifying a listing agreement must include

Since the listing agreement is a valid contract once all parties have signed it, it can only be modified with the written consent of all the parties.

Clauses: 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.

Clauses: Equal housing opportunities

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

Where can the agent obtain the legal description of a property?

The agent can obtain the legal description from a title insurance company or from the seller's deed

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.

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.

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.

PDS: seller might be asked about 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

Which types of transactions typically contain a property disclosure?

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

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.

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

In some cases, the disclosure form also contains two waiver provisions:

Waiver of Right to Revoke Offer Waiver of Right to Receive Completed Property Disclosure Statement

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.

Once the listing agreement has been completely filled out and signed, the seller must receive...

a copy of the document at the time the signatures are obtained (or as soon thereafter as reasonably possible). For this reason, many listing agreements are printed on multiple form stock so that the copy can be given to the seller immediately.

compensation clause

all listing agreements have a compensation clause that addresses the fact that the broker will receive compensation for selling the property. It also also gives specifics as to how the compensation will be paid - percentage or flat-fee.

buyer agency agreements

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.

exclusive agency 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.

Listing Agreement

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

Open Listing

is a 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.

multiple listing service (MLS)

is 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.

net listing

is 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. viewed as unprofessional, and they are illegal in many states

Bilateral Employment Contracts

meaning that the owner hires the broker and promises to pay a commission in exchange for the broker's promise to locate a "ready, willing and able" buyer or tenant for the owner.

disadvantages of exclusive agency listing agreement

not very common these days in residential transactions because it increases the chances of a dispute over the commission between the broker and the seller over who was actually the procuring cause of the sale.

Sales of manufactured and mobile homes are typically made without what?

property disclosures

Clauses: Safety Clause (Carry-Over Clause)

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.

What happens when a broker signs an agreement with an unrepresented seller - usually in the case of a For Sale by Owner (FSBO) property

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.

who is responsible for filling out the property disclosure statement?

the seller's responsibility

When do sellers need 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. However, many listing agreements encourage the seller to give the completed form to his or her agent as soon as possible.