Unit 2: Illinois Listing Agreements

Types of Listing Agreements

-Exclusive agency -Exclusive right-to-sell -Open (aka non-exclusive)

What Does the Seller Owe? Without the broker's permission, a seller terminated a listing agreement before the date stated in the contract. What two things might the seller owe?

-Marketing and advertising expenses to date -Full commission if a ready, willing, and able buyer were found **The seller may have to reimburse the listing agent for any marketing and advertising costs or pay the full commission if a ready, willing, and able buyer were located.

Which Type of Listing Agreement? When the listing agreement includes a protection clause, there must also be clear language explaining the broker isn't owed a commission during the protection period if the seller enters into a valid listing agreement with another licensee once the first agreement expires. For which type of listing agreement is this required?

-Non-exclusive -Exclusive agency -Exclusive right-to-sell **This is a requirement of any listing agreement that includes a protection clause, regardless of whether it's an exclusive or non-exclusive agreement.

Minimum Services Which three are the minimum broker services that must be identified within an exclusive listing agreement?

-Present all offers and counter-offers received to the client -Assist the client with all required notices, negotiations, and counter-offers -Answer the client's questions regarding the offers, counter-offers, contingencies, and notices **When you're explaining the listing agreement to a client, you'll want to emphasize that these are the minimum services that the law requires. You'll actually be doing quite a lot more to get the client's property sold.

Completing the Process Before you get to work marketing the property, what two steps will you take to complete the process of obtaining a listing agreement?

-Provide a copy of the agreement to the client -Keep a copy of the agreement for the brokerage records

Font That Shouts Which clause must be displayed in a larger font than the other clauses if it's included in the listing agreement?

A clause that allows the broker's compensation to be paid out of the earnest money deposit in the event of buyer default **Section 1450.770(g) of the Illinois administrative code rules makes this a requirement.

Net Listing Facts Let's take a closer look at net listings. Determine if the statements are true or false. Net listings can be written for exclusive right-to-sell, exclusive agency, or open listings.

True

Net listings are legal but discouraged in Illinois.

True

Net listings can lead to conflicts of interest.

True

Burt terminated his exclusive right-to-sell listing agreement with Scott, his listing broker, without cause. Burt may legally do this as long as he's ______.

Willing to pay Scott's commission anyway

Bernie represented Oscar in the sale of Oscar's home. They signed an exclusive right-to sell-listing agreement. If Oscar were able to find his own buyer, would he owe Bernie a commission?

Yes, because "exclusive right to sell" means Bernie gets paid no matter who finds the buyer.

Listing Agreement

a listing agreement is a written agreement between a sponsoring broker and a seller that gives the designated listing agent the right to offer a property for sale. **The listing agreement guides both your and the seller's actions.

The agent doesn't have to split the amount over the seller's specified price with the buyer's agent.

False

More Required Elements of an Exclusive Listing Agreement What else is required in an exclusive listing agreement?

More Required: -The names of the seller(s) and the sponsoring broker -The compensation the broker will receive and when it will be paid -A statement that discriminatory behavior against protected classes by the seller or the broker is illegal -Signatures from the seller(s) and the sponsoring broker (or the broker's authorized signer) More NOT Required -The minimum offer the seller is willing to consider

Net Listings

Net listings are prohibited in some states, and not because they involve trapping buyers in nets until they agree to buy a property. A net listing can be used in conjunction with any type of listing agreement, but it may not be in a brokerage's best interest to cast this particular kind of "net." Although net listings are legal in Illinois, most brokerages don't allow them due to the potential abuse involved. Check out this resource to learn what net listings are and why they're illegal in some states.

Diane toured Tom's house and would have loved to make an offer, but couldn't until she found out whether her husband was going to be relocated. Two months after the listing expired, Diane discovered they were staying put. She called Amy, who told her that she no longer had Tom's house listed. Diane then contacted Tom to make an offer. Commission or no commission?

No commission

Sandra started working with a buyer's agent about a week after the initial listing had expired. Her agent hadn't seen Tom's house but contacted him directly to find out if they could see it. Sandra ended up purchasing the house. Commission or no commission?

No commission

The property didn't sell during the listing period. The owner decided to not list the property again. Commission paid or no commission paid?

No commission paid

Sylvia and Claude Do Business ... Or Do They? Sylvia has made her listing presentation to Claude, and he's agreed to work with her on an exclusive basis to sell his house. He's a bit quirky, though, and says he prefers their agreement to be oral, not written. Can Sylvia have an exclusive right-to-sell agreement with Claude if it's not written?

No. Any exclusive brokerage agreement that isn't in writing (and that includes the exclusive right-to-sell agreement or an exclusive agency agreement) is no longer considered exclusive. It becomes an open agreement.

What About Property Type? Do the rules regarding protection clauses apply to commercial property?

No. The rule is there to protect consumers selling residential property from paying multiple commissions on a single transaction. The assumption is that buyers and sellers of commercial property are more seasoned, and don't need the same level of protection.

What type of listing agreement provides the sellers with the opportunity to enter into listing contracts with multiple agents and still reserve the right to sell the property themselves, owing no commission?

Open listing

An agreement that allows sellers to contract with multiple agents but only pay a commission to the agent who locates a buyer is called an ______________

Open listing agreement.

What Type of Contract Is in Place? The Damons are selling their home. Thinking that it'll help them cast the widest net of prospective buyers, they have agreements with Bill, Jan, and Paul, all of whom work with different brokers. Only the lucky dog who brings the buyer to the table gets the 5% commission the parties agreed to. What type of agreement is in place?

Open listings **Agreements with multiple licensees create open listings.

Protection Clauses

Protection clauses ensure that you won't do a bunch of legwork for a client and then get left out in the cold when it comes time to get paid. With protection clauses, you'll collect a commission even after your agency relationship has expired, as long as you were involved in identifying the property or the buyer.

Required Elements of an Exclusive Listing Agreement Which four items are required in an exclusive listing agreement?

Required: -The listing price of the property -Duration of the agreement, with a specific termination date -Identification of the property by its address or a legal description -The minimum duties of the listing broker NOT Required: -A clause that automatically extends the agreement if the property hasn't sold by the termination date

Is This a Net Listing? Now that you know what a net listing is, let's see if you can identify one. What is an example of a net listing agreement?

A seller wants to sell the property for at least $400,000. If the property sells for more, that money will go to the listing broker as commission.

First Steps Before soliciting the listing, which of these actions should you take when you first have contact with a consumer?

Actions to take: -Provide a Notice of No Agency form -Ask if the consumer has signed a brokerage agreement with another licensee Actions NOT to take -Describe how the sponsoring broker is compensated **Before you can solicit the listing, including a discussion of compensation, you need to establish if another agent is already working with the consumer. It's also a good idea to make consumers aware that, until you do have an agency agreement, they should be careful what they share with you.

Soliciting the Listing After you're sure the consumer doesn't have a current agreement with another licensee, what actions must you take before you sign the listing agreement?

Actions you MUST take before signing the Listing Agreement: -Describe designated agency -Identify yourself as the designated agent -Explain the broker's compensation -Disclose how dual agency works -Walk the consumer line by line through the agreement -Complete the agreement with the seller **These are all necessary actions you'll take before signing the listing agreement.

One More Time ... What Type? Gerald wants a real estate agent that's going to work hard for him, and he's willing to pay the agent no matter who brings the buyer to the table. What type of agreement is in place?

Exclusive right-to-sell

Listing Agreement Termination

Can be terminated if: -The property sells and closes, or the stated listing term ends, even though the property hasn't sold. -The broker and seller mutually agree to terminate. -The listing agent abandons the listing. **Termination of a listing may still result in money being owed to the broker. Let's look at a scenario.

Does a Protection Clause Apply? Amy is working as a listing broker for Tom. They agreed upon a 45-day protection clause and included it in the listing agreement. For each of the following situations, indicate whether Amy should receive commission under the protection clause. Assume that Tom hasn't signed a new listing agreement. (context for the 4 examples) The Dragles looked at Tom's house once during the listing term and once after it had expired, eventually signing a sales contract 28 days after the listing agreement had expired. Commission or no commission?

Commission

Three individuals toured Tom's house twice while it was listed with Amy, but no one made an offer. A month after the listing expired, Tom decided he could accept a much lower offer, so he contacted the people to see if they'd be interested at a lower price. One was interested and decided to sign a purchase contract. Commission or no commission?

Commission

Did the Agent Earn the Commission? Next, let's identify whether a commission should be paid to the listing agent in each of these scenarios. Assume an exclusive right-to-sell agreement was signed, meaning the agent receives commission no matter who found the buyer. The property sold and closed within the listing agreement period. Commission paid or no commission paid?

Commission paid.

The property sold after the listing agreement ended, but the buyer learned of the property during the listing period. Commission paid or no commission paid?

Commission paid.

An __________________ allows the listing agent to list the property and receive a commission no matter who brings the buyer to the table.

Exclusive right-to-sell agreement

When you're discussing a potential listing agreement with a client in Illinois, you'll need to provide disclosures of designated agency, your broker's compensation, and ______.

Dual agency

What must be included in any Illinois listing agreement, according to the Real Estate License Act of 2000?

Duration of the agreement with a termination date

Janice wanted to sell her townhome, and her neighbor was considering buying it. She wanted to put it on the market while she waited to find out if her neighbor was going to buy. In order to receive the best possible representation but avoid paying a commission if her neighbor buys the property, which type of listing agreement would best suit Janice's needs?

Exclusive agency

What Type of Contract This Time? Larry Gray is selling the home he grew up in. A former childhood friend, Rick, always told Larry to look him up if he ever sells the house. Larry wants to give his old pal an opportunity to purchase the home, but also wants it to be marketed by an agent. It doesn't really seem right to pay the agent a commission if Rick is the buyer, so Larry signed this type of contract with his agent.

Exclusive agency **An exclusive agency agreement allows Larry the opportunity to work with an agent, but if the buyer is one Larry lines up, he won't have to pay the agent a commission.

An agreement that allows sellers to work with an agent while still trying to locate the buyer themselves is called an _____________________. If the sellers find the buyer, the sellers don't owe a commission to the agent.

Exclusive agency agreement

Exclusive vs. Non-Exclusive Listing Contracts: Which is better?

Exclusive listing contracts always!!!! **Take a poll and ask all real estate professionals you meet: "Which would you prefer to have: an exclusive right-to-sell listing or an open listing?" Actually, forget the poll. The results will be 99.99% exclusive, 0.01% open (there's one in every crowd). You want to make money, right? On that note, let's get to know that exclusive right-to-sell listing agreement a little better—it's the one you hope to see most often, after all!

Bob wants an open listing agreement. Why might this not be in Bob's best interest?

He won't get full representation from any one licensee.

Exclusive Right-to-Sell Agreements Let's take a closer look at the exclusive right-to-sell agreement. Many areas use a specific version of the form, but most contain similar information. What information do you think all such contracts should contain?

Info included in contracts: -Start and end date for the listing period -Amount of commission to be paid to the selling agent, sub-agent, or buyer's agent -Listing price Info NOT included in contracts: -Transaction closing date

Does the Protection Clause Apply Now? Let's rewind a little. Amy worked as a listing broker for Tom. They agreed upon a 45-day protection clause and included it in the listing agreement. The house didn't sell, and their agreement expired. A week later, Tom signed a new exclusive right-to-sell agreement with Kevin. The Dragles, who looked at Tom's house once during the listing term with Amy and once the day after it had expired, eventually signed a sales contract 28 days after the listing agreement had expired. Which agent gets a commission from this sale?

Kevin, Tom's current broker **Since the buyer made an offer after Tom signed a new listing agreement with Kevin, the protection clause in Amy's listing agreement was canceled.

Compensation and the Listing Agreement A licensee is completing a listing agreement with a new client. Which of these situations would be legal for the licensee to perform, and which would be illegal?

Legal to Perform: -Enter an agreed-upon commission percentage in the listing agreement. -Alter the compensation agreed to in the listing agreement by putting the change in writing and having the seller and broker sign the document. Not legal to perform: -When writing up a counter-offer, include new terms for the compensation arrangement, modifying what was in the listing agreement. **Compensation is one of the many things you need to discuss with your client to make sure that everyone understands and agrees to the terms set forth in the listing agreement.

What is NOT a valid way to terminate a listing agreement?

The buyer requests it