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Washington Real Estate Fundamentals
Lesson 8:
Listing Agreements
© 2011 Rockwell Publishing
Listing Agreements
Listing agreement: Contract in which property owner hires real estate firm to help sell the property.Creates agency relationship.Parties: seller and real estate firm.
Licensee working for firm fills out form, but is not party to contract.
© 2011 Rockwell Publishing
Listing AgreementsEarning a commission
Real estate firm’s compensation: commission, also called brokerage fee.Usually percentage of property’s selling
price.Percentage specified in listing
agreement.
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Earning a CommissionRight to sue seller
If seller doesn’t pay commission, firm can sue if three requirements met:
1. Written agreement with seller.
2. Properly licensed before services offered or promise of compensation procured.
3. Terms of listing agreement fulfilled.
© 2011 Rockwell Publishing
Earning a CommissionReady, willing, and able buyer
Under most listing agreements, seller must pay commission only if a ready, willing, and able buyer is found during listing period.
Buyer considered ready and willing if:offer meets price and terms set by seller
in listing agreement, orseller accepts offer even though listing
price and terms not met.
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Ready, Willing, and Able BuyerFinancially able
In addition to being ready and willing, buyer must also be able:Has capacity to enter into binding
contract.Has financial resources to complete the
purchase.Sufficient cash, or can qualify for loan.
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Ready, Willing, and Able BuyerCommission without closing
Once ready, willing, and able buyer found, commission earned.Firm generally entitled to payment even
though sale never closes, if seller’s fault:doesn’t have marketable titlecan’t deliver possession of propertychanges mind about sellingmutually agrees with buyer to end contract
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Earning a CommissionTypes of listing agreements
When real estate firm entitled to payment also depends on type of listing agreement used.
Three basic types:open listingsexclusive agency listingsexclusive right to sell listings
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Types of Listing AgreementsOpen listings
Open listing: Seller promises to pay firm a commission only if firm’s affiliated licensee was procuring cause of sale.
Procuring cause: Person primarily responsible for bringing about agreement between seller and buyer.
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Open ListingsProcuring cause
Open listing also called nonexclusive listing, because it may be given to several firms.Firms do not promise to make effort to
find buyer. Agents may put less effort into these
listings because of risk they won’t get paid.
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Open ListingsNot favored by brokers
Open listings generally used only at seller's insistence.No advantage for real estate firm.Competing firms may end up in a dispute
over who was the procuring cause.Many MLSs don’t allow agents to submit
open listings.
© 2011 Rockwell Publishing
Types of Listing AgreementsExclusive agency listings
Exclusive agency listing: Entitles firm to commission if anyone other than seller finds buyer during listing period.Seller gives listing to only one firm.If seller finds buyer on his own, no
commission owed.If anyone other than seller finds the
buyer, listing firm entitled to commission.
© 2011 Rockwell Publishing
Types of Listing AgreementsExclusive right to sell listings
Exclusive right to sell listing: Entitles firm to commission if property sells during listing period, no matter who finds buyer.Seller gives listing to only one firm.Commission owed even if seller finds
buyer without help.Most frequently used type of listing.
© 2011 Rockwell Publishing
Types of Listing AgreementsDiligent effort
While open listing is unilateral contract, exclusive listing is bilateral contract.With exclusive listing, firm gives express
or implied promise to market the property and make diligent effort to secure a buyer.
© 2011 Rockwell Publishing
SummaryEarning a Commission
• Listing agreement• Commission• Ready, willing, and able buyer• Open listing• Procuring cause• Exclusive listing• Exclusive agency listing• Exclusive right to sell listing
© 2011 Rockwell Publishing
Elements of a Listing AgreementBasic requirements
Four basic requirements for enforceable listing agreement in Washington:Identifies property.Includes promise to compensate firm. Fixes what the compensation will be.In writing and signed by seller.
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Elements of a Listing AgreementTypical provisions
Although an enforceable contract can be a very simple document, lack of detail can cause misunderstandings .
Generally, real estate firms use preprinted listing forms, which spell out the terms of the agreement in detail.
© 2011 Rockwell Publishing
Typical Listing ProvisionsAgency authority
Listing agreement form usually begins with:identification of brokerage firmdescription of agency authority granted to
firm
Provisions of contract also apply to listing licensee as subagent.
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Agency AuthorityLimitations
Despite the term “exclusive right to sell,” firm is not given authority to actually sell the property, only to solicit offers.Seller who wanted to give brokerage firm
authority to sign purchase and sale agreement would have to execute and record a power of attorney.
© 2011 Rockwell Publishing
Agency AuthorityEarnest money deposits
Agreement usually authorizes firm to receive earnest money deposits from buyers.That means firm acts for seller when
accepting deposit from a buyer.If firm’s agent stole a deposit, it would be
the seller’s loss, not the buyer’s.
© 2011 Rockwell Publishing
Typical Listing ProvisionsListing period
Agreement should always specify date on which firm's agency authority will end.But termination date not required for valid
listing in Washington.If not specified, agreement ends after
a reasonable time.Agreement usually extends listing period
through closing date if seller signs a purchase and sale agreement.
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Typical Listing ProvisionsMLS provision
Agreement authorizes firm to submit listing to a multiple listing service.Allows information about the property to
reach more potential buyers.MLS agents are cooperating agents.Commission split will follow MLS rules.
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Typical Listing ProvisionsAgency disclosure
Most listing agreement forms include an agency disclosure provision.Seller authorizes firm to appoint listing
licensee to act as subagent of seller.Other licensees working for firm do not
automatically represent the seller, and may represent the buyer.
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Typical Listing ProvisionsAgency disclosure
If buyer found by another licensee affiliated with listing firm, firm will be acting as dual agent.By signing listing agreement, seller
consents to this dual agency.
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Typical Listing ProvisionsProperty not distressed
Agreement may also have provision in which seller warrants property is not distressed.
Distressed property: Home in foreclosure or imminent danger of foreclosure.
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Typical Listing ProvisionsAccess and keybox provision
Seller agrees to allow agents access to property at reasonable times.
Keybox: Secure device holding copy of house key, which seller locks to porch railing or other place outside house when leaving. MLS listing forms authorize installation of
keybox so agents can show property when seller is absent.
© 2011 Rockwell Publishing
Summary Elements of a Listing Agreement
• Basic requirements• Brokerage’s agency authority• Termination date• MLS provision• Agency disclosure• Property not distressed warranty• Access and keybox provision
© 2011 Rockwell Publishing
Typical Listing ProvisionsCommission provisions
Listing forms have a space for filling in commission amount or percentage.
To comply with antitrust laws, commission:cannot be preprinted on formmust be negotiable between firm and
seller for each transaction
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Commission ProvisionsNet listings
Net listing: Agreement specifies net amount that seller wants from sale; brokerage firm will keep any proceeds over that amount as commission.
Net listings prohibited in Washington.
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Commission ProvisionsEarning the commission
Under exclusive right to sell listing form, seller must pay commission if:ready, willing, and able buyer is found
during listing period;property sells during listing period; orextender clause applies and buyer is
found within extension period.
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Commission ProvisionsExtender clause
Extender clause: Provides that if property is sold during specified period after listing expires, seller may still owe commission.Also called safety clause or carryover
clause.
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Extender ClauseTerms of clause
Extender clause may apply:only if firm’s agent negotiated with
eventual buyer, orif buyer merely learned about property
through firm’s agent.
Firm may be required to give seller list of names of buyers that firm’s agents had contact with during listing period.
© 2011 Rockwell Publishing
Extender ClauseSafeguards for seller
Seller may relist property with different firm during first listing’s extension period. To protect seller from liability for two
commissions, extender clause may provide that seller doesn’t have to pay first brokerage if seller owes another brokerage a commission under a subsequent listing agreement.
© 2011 Rockwell Publishing
Typical Listing ProvisionsRental or option provision
Many listing forms prohibit seller from leasing or granting an option on the property during listing term.Seller who violates this provision liable
for entire commission.Brokerage firm not required to pass on
offers other than offers to purchase.
© 2011 Rockwell Publishing
Typical Listing ProvisionsProperty description
As mentioned earlier, listing agreement must include description of the property.Best to use complete legal description,
which will be needed later anyway.Can copy description from seller’s deed.If description won’t fit in space provided,
attach separate sheet.
© 2011 Rockwell Publishing
Typical Listing ProvisionsClosing costs provision
Seller customarily pays certain closing costs, such as:premium for buyer's title insurancestate excise taxhalf of escrow fee
Most listing agreement forms have provision specifying closing costs seller agrees to pay.
© 2011 Rockwell Publishing
Typical Listing ProvisionsSeller’s warranties
For brokerage firm’s protection, seller warrants that:seller has right to sell property as offeredproperty information provided in listing is
correct
Agreement may also include warranties concerning other matters such as encroachments and zoning compliance.
© 2011 Rockwell Publishing
Typical Listing ProvisionsSeller’s warranties
In seller’s warranties section or elsewhere, listing agreement usually includes a hold harmless agreement.
Hold harmless agreement: Clause in which seller agrees to indemnify brokerage firm for any losses that result from mistakes or omissions in information provided by seller.
© 2011 Rockwell Publishing
Typical Listing ProvisionsSeller disclosure statement
Agreement may require seller to give agent disclosure statement as soon as possible.Seller eventually has to provide it to
buyer.Allows agent to learn about potential
problems right away.
© 2011 Rockwell Publishing
Typical Listing ProvisionsSeller disclosure statement
Listing agreements also typically provide that seller takes full responsibility for information in the disclosure statement.
This protects the listing agent from liability if a buyer sues because of a problem with the information in the disclosure statement.
© 2011 Rockwell Publishing
Typical Listing ProvisionsAttorneys’ fees provision
Listing agreement usually provides that if either party has to sue to enforce contract, losing party will pay winning party’s attorneys’ fees.
© 2011 Rockwell Publishing
Listing AgreementsSignatures
Agreement signed by listing agent on behalf of firm and by seller(s).Agent fills in firm's name on 'Brokerage'
line, signs own name on 'By' lineAll co-owners of the property, and their
spouses, should sign as sellers.
© 2011 Rockwell Publishing
Listing AgreementsListing information
Listing input sheet: Form with detailed information for submission to MLS and distribution to MLS members.Property address and locationArchitectural style and age of homeListing price and commissionListing agent and expiration dateNumber of bedrooms and bathroomsCounty tax ID number
© 2011 Rockwell Publishing
Listing AgreementsSeller’s acknowledgment of receipt
Agreement may also have provision in which seller acknowledges that listing agent provided:copy of signed listing agreementcopy of pamphlet about real estate
agency
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Listing AgreementsDistressed property listings
Washington’s Distressed Property Law helps protect homeowners against foreclosure rescue scams.Special rules apply to certain
transactions involving distressed homes. Licensees who meet law’s definition of
distressed home consultant must comply.Licensees providing routine brokerage
services are exempt.
© 2011 Rockwell Publishing
SummaryListing Agreement Provisions
• Commission rate• Net listing• Extender clause• Rental or option provision• Closing costs provision• Seller’s warranties• Hold harmless agreement• Seller disclosure statement• Attorneys’ fees provision
© 2011 Rockwell Publishing