Friday, August 12, 2022 / by Laura Larson
A listing agreement: What is it?
A listing agreement is a formal agreement between you, the seller, and the real estate agency that will assist you in selling your house. It specifies that the seller is employing the agent to handle the sale of their home and gives them permission to find a buyer. The seller consents to provide the agent with a commission in return.
What to expect in a listing agreement
A real estate listing agreement usually includes several essential details about the upcoming sale. You’ll want to look them over carefully to make sure everything checks out. The listing agreement will include things like:
- Contact information
- Listing Price
- Agent Fees
- Agent Duties
- Property Description
- Items included in the property sale
- Items that will be removed after closing
- Agreement duration
- Conflict resolution details
- Protection periods
- Type of agreement
Here’s what to expect from each one:
This can include names, phone numbers, addresses, and other information for the seller and real estate broker or agent. Which contact details are included depends on how the agreement is written.
This is the sales price your home will be listed at. You and your agent will talk about the listing price ahead of time, so make sure it matches your earlier conversations.
Real estate agent fees usually come as a percentage of the home’s final sale price. Total commissions tend to hover around 6%. For example, if a property sells for $250,000 and the agreed-upon commission is 6%, the seller would owe 15,000 in commissions. Real estate commissions are negotiable.
These are your expectations of the agent and what you give them permission to do. For example, if you want your agent to hold open houses or list your home on an MLS (multiple listing service), you’ll grant them formal permission in this section. Understanding the agent’s responsibilities will give you a clear idea of what they will (and will not) do during the selling process.
The property description includes items included in the sale: Here you’ll find any personal property left behind after the property is sold. It often includes large appliances like washers, dryers, ovens, and refrigerators. As well as items not included in the sale: Anything you’re taking with you or getting rid of before the buyer takes possession of the home.
The amount of time the realtor will represent you before the agreement terminates. Most real estate listing agreements include a default duration, but this is negotiable. Some agents prefer a longer term (six months), but you may decide a shorter period would be better (three months). An agent may be willing to change these details if you’d like them to.
Conflict resolution details
This legal-heavy part of the document lays out how any potential disputes are resolved between the property owner and agent. It will probably specify whether conflicts are settled using mediation (a third party helps the parties reach an agreement) or arbitration (a third party makes the decision). Odds are you probably won’t have to deal with a formal dispute. But it always helps to understand this section, just in case you need it down the road.
A protection period, sometimes called a tail period, helps protect the seller’s agent from losing their commission. It stays in effect for a certain amount of time after the listing agreement expires. A protection period kicks in when the agent shows the house to someone during the listing agreement period, but that person doesn’t buy the home until after the listing agreement has expired. If there’s a protection period clause in the agreement, the seller would still pay the agent their full commission.
Types of Agreement
Most agreements will specify one of four types of listings:
- Exclusive right-to-sell listing
- Exclusive agency listing
- Open listing
- Net listing
Listing agreements usually come in one of these four types. Your agreement type is often listed at the top of the document itself. These agreements may vary in name based on where you live, so read the listing agreement closely to understand the specific contract you have with your broker or agent.
Exclusive right-to-sell listing agreement: The most common type of listing agreement. Exclusive right-to-sell listings give the listing agent and their brokerage exclusive rights to represent the seller’s home. The agent is entitled to their commission regardless of who sells the property, as long as the listing agreement is in effect.
Exclusive agency listing agreement: This is similar to an exclusive right-to-sell listing. The only difference is that an exclusive agency listing gives the seller a way out of paying a commission: by selling the home themselves. If they successfully sell the property on their own, they don’t have to pay their agent.
Open listing agreement: Think of an open listing as a “last agent standing” competition. This non-exclusive agreement allows the seller to use multiple real estate agents to sell their home. The agent who sells the home is the only one who gets a commission. It also gives sellers the power to try to sell the home themselves, even while other agents are trying to sell it too. If the property owner succeeds, the agents walk away empty-handed. For this reason, most real estate agents will be hesitant to sign an open listing agreement.
Net listing agreement: With a net listing agreement, the seller agrees on an acceptable home sale price with their agent. If the agent sells the home for more than that price, they get to keep the proceeds. Net listings are uncommon and actually illegal in some states including Virginia.
5 easy things to double-check (and triple-check) before you sign a listing agreement
The entire listing agreement is important, but you can double-check five crucial details in a handful of seconds:
- The listing price
- The agreement’s expiration date
- The commission rate
- The type of listing agreement
- Your personal property that is or isn’t included with the transaction
When will the listing agreement be signed?
After you and the agent have agreed on all the specifics of your real estate transaction, you will sign the listing agreement. By signing, you authorize the agent to begin taking the necessary actions to sell your house.
Does the listing agreement require my signature?
Yes. The listing agreement, which specifies both your preferences and the agent's obligations, is a binding contract. You won't need to sign a listing agreement if you decide to sell your house on your own because you will be the one representing yourself.
Can I negotiate a listing agreement?
You can negotiate several parts of a listing agreement. These include:
- Agent Commission
- Agent Duties
- List Price
- Agreement Duration
- Listing Type
What is the price of a listing agreement?
Typically, signing the listing agreement itself is free of charge. Although you won't likely make any upfront payments, the contract will outline the broker or agent's commission payment. Once the title company certifies a clear title and the property is formally signed over to the buyer, this fee is paid at closing.
What if my home doesn’t sell?
If your home doesn’t sell within the time frame outlined in the listing agreement, you have two options:
- Renew the agreement and keep your current agent
- Hire a different agent
After I sign the listing agreement, can I make changes?
Yes, but only if everyone is in agreement. The majority of listing agreement amendments are made in writing, either on the actual agreement or through a listing agreement addendum (more information added to the end of the document).
If you are considering making a move and listing your home for sale, contact Laura Larson, she will go through every aspect of the listing agreement in detail. Once you signed, rest assured you will get top dollar and sell your home with no hassle.