washington real estate fundamentals lesson 8: listing agreements © 2011 rockwell publishing

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.


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.


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.


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.


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.


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


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


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.


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.


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.


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.


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.


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.


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


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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


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


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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


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


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.


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


washington real estate fundamentals lesson 8: listing agreements © 2011 rockwell publishing

Documents

listing period

listing price

nonexclusive listing

terms of listing agreement

cause open listing

able buyer open listing

enforceable listing

type of listing agreement