Of all the documents used in the real estate business, none is more important than the listing agreement. A listing agreement , when executed (signed) by the parties, becomes a legally binding contract that authorizes a broker to serve as an agent for a principal in a real estate activity.
TYPES OF LISTING AGREEMENTS 1. Open Listing. 2. Net Listing. 3. Exclusive Agency Listing. 4. Exclusive Authorization and Right–To–Sell. 5. Exclusive Authorization To Locate Property.
OPEN LISTING Owner agrees to pay a commission to the broker who procures a buyer. An open listing is considered a unilateral contract. Any number of brokers may have a listing on the property. The owner may sell the property himself or herself.
Seldom is used in the sale of real property. Mostly used in Business Opportunity Sales. OPEN LISTING
NET LISTING Not a true listing. A clause in the agreement that the seller is asking for a certain sum of money. All costs including the broker’s commission are included in the sales price. Net listings are seldom used. Agents are vulnerable to charges of fraud, misrepresentation and other abuses. Agent must disclose the selling price in writing to both the seller and the buyer.
Example: Mr. Parker wants to net $150,000 from the sale of his home. The house has a loan of $50,000. So the home needs to sell for $200,000 with no commission. The broker wants a 6% commission. The home sells for $212,766. The seller wants $200,000 less commission -- this is 94% of the sales price. $200,000 ÷ 0.94 = $212,766. Therefore the broker’s commission is $12,766.
EXCLUSIVE-AGENCY LISTING Maybe No Commission Similar to exclusive-authorization-and-right to sell listing. One difference: if seller sells the property, then there is no commission to the listing broker.
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EXCLUSIVE-AUTHORIZATION-AND-RIGHT-TO-SELLING LISTING Most Used Listing The listing agreement is a written contract between the broker and the seller, an it must be filled out correctly and signed by the broker and seller(s).
Gives the broker the sole right to procure a buyer for the property. The broker has the right to a commission no matter who sells the property during the term of the listing. The listing must have a termination date. The seller must receive a copy of the listing.
Name of client and real estate office or broker. Enter beginning and termination date. Location of the property. City, county, street address or lot, block and tract. This is the listing most often used, because it guarantees the listing broker a commission.
1. Exclusive Agency Right To Sell Name of Seller Real Estate broker. Enter beginning date Ending date. Location of the property. City, county, street address or lot, block and tract.
2. Items Excluded and included Additional items excluded list items Additional items included list items
3. Listing Price and Terms Listing price – Written and numeric ($) Additional terms Example: Two hundred thousand or no/100 and $200,000.00
4. Compensation To Broker Notice: The amount or rate of real estate commission is not fixed by law. It is set by each broker individually and may be negotiable between Seller and broker (real estate commissions include all of the compensation fees to the broker). Enter either the percentage of the listing price or sales price.
5. Ownership, Title, and Authority This paragraph warrants that the seller(s) are the only title holders. The seller has the right to sell this property.
6. Multiple Listing Service This gives the agent the right to publish the listing on the MLS.
7. Seller Representations This states the seller is unaware of: i. any notice of defaults. ii. Any delinquent amounts. iii. Bankruptcy, insolvency affecting the property. iv. Any litigation, arbitration pending. v. special assessments.
8. Broker’s and Seller’s Duties Broker agrees to use diligence in achieving the purpose of the listing agreement. Seller agrees to consider offers received in good faith and to hold the broker harmless for claims resulting from incorrect information supplied or the failure to disclose information the broker.
Seller further agrees to indemnify, defend and hold broker harmless from all claims, disputes, litigation, judgments and attorney fees arising from any incorrect information supplied by Seller, or from any material facts that the Seller knows but fails to disclose.
9. Deposit This section authorizes the listing agent to accept the deposit. Without this authorization an agent taking a deposit could be doing so as the agent of the buyer.
10. Agency Relationships A. Disclosure B. Seller Representation. C. Possible Dual Agency with Buyer D. Other sellers E. Confirmation
11. Security and Insurance i. to take reasonable precautions to safeguard valuables ii. to obtain insurance to protect against these risks.
12. Keysafe/Lockbox A keysafe/lockbox is designed to hold a key to the property permitting access by other brokers.
13. Sign Putting a For Sale sign on the property makes the property more recognizable. However, the agent must obtain authorization from the seller to do so.
<ul><li>Equal Housing Opportunity </li></ul><ul><li>The property is offered in compliance with antidiscrimination laws. The seller cannot reject an offer on the property based on the race, color, creed, etc. of the potential buyer. </li></ul>
15. Attorney’s Fees If there is any disagreement between the seller and buyer and they go either to court or to arbitration, the loser in either incident must pay the costs. This paragraph tends to reduce frivolous lawsuits.
16. Additional Terms There is space for the agent to add terms or conditions to the listing agreement.
17. Management Approval Gives the broker the right to cancel this agreement in writing, within five days of its execution.
18. Successors and Assignors This agreement is binding upon seller and seller’s successors.
19. Dispute Resolution Mediation The broker and seller agree to mediate any disputes arising from the agreement prior to any other action that is available. They are not, however, required to resolve the dispute through mediation.
Arbitration Any dispute or claim in law or equity of this contract or any resulting transactions shall be decided by neutral, binding arbitration. By initialing, the seller and broker agree to binding arbitration and give up their right to adjudication and disputation arising from this agreement through the courts.
<ul><li>Entire Contract </li></ul><ul><li>It is agreed that this agreement is the entire agreement and may not be contradicted by prior written or verbal agreements. </li></ul>
Signatures The document is signed by the the seller(s) and the broker. The broker promises to use diligence in procuring a purchaser. This statement makes the agreement a bilateral contract.
PROBLEM Mr. and Mrs. Sullivan want to list their home for $300,000. The address of the property is 2211 E. Harvest Ave., Cerritos CA 99888. The washer and dryer and refrigerator are to be sold with the home. They are willing to give you a 180-day, starting today, which is April 15, 2003. Your office charges a 6% commission and you and the sellers agree on the 6% commission. Your license is with C–28 realty and the broker’s name is Bob Hardy. C–28 realty is located at 111110 Alondra Blvd., Cerritos CA 98889.
OPTION COMBINED WITH A LISTING Law forbids a listing broker who has this type of option to profit at the expense of the owner . If the broker finds a buyer willing to pay more than the option price, and if the broker then exercises his or her option to buy to make a greater profit from resale of the property, the broker must make a full disclosure to the owner.
If a broker is employed to sell property and is also given an option to purchase the property himself, he occupies the dual status of agent and purchaser. He is not entitled to exercise his option except by divesting himself of his obligation as agent, by making a full disclosure of any information in his possession as to the prospect of making a sale to another.
EXCLUSIVE AUTHORIZATION TO LOCATE PROPERTY This is a buyer’s listing, where the real estate agent will find the buyer a property. The commission can be paid by either buyer or the seller.
It gives the broker the right to act as an agent of the buyer. No shared loyalty. The buyer’s broker is held to the same standard of performance in serving the buyer as the listing broker owes to the seller. The commission is negotiable. Must have a definite termination date.
THE LISTING TRANSACTION The agent should pay careful attention to the listing details to ensure a smooth transaction. The listing process is “80% preparation and 20% selling.”
STEP I Obtain Information about the Property Many companies today have access to microfiche records of tax sites and plot maps. Another method is to use title companies which can quickly provide you with the information.
STEP II Obtain your CMA Using your local board of realtors one can get comps of recent sales and expired listings. Today all this information is on the MLS and the internet.
STEP III Drive by Current & Expired Listings Before going to your listing presentation drive-by the comparables and expired listings to see how they will compare to your new listing. Make notes on each property. Compare them to the new listing. Take photos, if none are available, so the owners can see the types of property that their home will be competing with for buyers.
After you obtain the listing, thank the owners and tell them when you will be in contact them again. Be certain you leave the following: 1. a copy of the signed listing with your buisness card attached, 2. a copy of your competitive market analysis. 3. the Estimated Seller’s Proceeds form. 4. the agency disclosure form.
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