A Real Estate Listing Agreement is an agreement contract between a real estate owner and a sales agent in which the agent agrees to find a buyer for the property at an agreed commission for the sale.
The primary purpose of the agreement is to give authority to the agent to sell the property. This document can thus be used in the court of law in case of a dispute between the property owner and the agent.
A real estate listing agreement specifies the terms and conditions for the contract between the property owner and the sales agent. It specifies the duties and responsibilities of the agent as well as the responsibilities of the property owner.
Additionally, the agreement is more of an employment contract between the property owner and the agent, and there is no property transferred between the two parties. Moreover, the property owner has the right to terminate the contract if they feel that the agent does not follow the procedures or any other inconveniences. Certain situations might necessitate the termination of a contract, such as the property owner’s death, bankruptcy, or if the agent does not market the property.
Note: Only a broker is allowed to list, sell or lease a property, according to the real estate license laws. It is also required by law, in most States, that these listing agreements must be written.
Types of Listing Agreements
There are various types of real estate listing agreements that are used between property owners and sales agents. They are discussed below:
Business Entity Listing Agreement
A business listing agreement is a document used when a company or individual wishes to sell their business through an agent. The owner gives the agent the right to market the business even though they do not sell it to the agent. The agent then finds a customer and sells the business on behalf of the owner at an agreed commission.
Download: Microsoft Word (.docx)
Buyer Agency Agreement
A buyer’s agency agreement is a residential listing document signed when a buyer wants to buy a commercial or a residential property through an agent. This document is meant to show that a buyer has hired an agent to look for property and negotiate on their behalf.
Download: Microsoft Word (.docx)
Exclusive Right to Sell Listing Agreement
An exclusive listing agreement gives an agent the sole right to sell property on behalf of the property owner, and the period runs typically between 6 months-12 months. During this period, no other agent can represent the property owner to sell the same property.
Download: Microsoft Word (.docx)
Exclusive agency listing agreement
An exclusive agency listing agreement states that despite the property owner signing an agreement with an agent, they reserve the right to sell their property themselves and do not have to pay their broker any commission. Alternatively, a broker can subcontract another broker to sell the property on their behalf, and they share the commission paid by the property owner.
Net listing agreement
A net listing agreement is used when the agents’ commission is paid as the excess amount above the property owners’ price. For example, if a property owner prices their selling price as $100,000, any amount above serves as the agents’ commission. In this situation, the agent then determines their preferred selling price for a piece of property by adding their commission to the original price. This practice is banned in some states as it might lead to unethical issues.
Open listing agreement
An open listing agreement is a document that clearly states that if a property owner or any other party sells the property being represented by an agent, the agent does not qualify for any commission. This listing agreement is used when the property owner seeks to sell the property within a short period and thus allocates the sales to multiple agents. However, most real estate brokers solemnly depend on the commission; therefore, open listing agreements are not very common.
How to Write a Residential Real Estate Listing Agreement
When writing a real estate listing agreement, certain aspects should be considered to ensure all essential components have been included in this agreement. Below is a brief description of the components of the document:
Identify the parties
When writing a real estate listing agreement, it is essential to identify the parties involved in the transaction. The parties are identified by highlighting the seller’s identity details, including their full name and address. In addition, the broker’s name representing the agency is also listed among the parties, along with the agency information and mailing address. Most importantly, the listing agreement must also specify the agreement date when the parties agreed to the terms of the document.
Describe the property
The residential real estate listing agreement should clearly describe the property so that the buyer does not miss any critical detail when purchasing the property. This property description includes:
- Street Address
Part of the important property description details captured in a real estate listing agreement includes the street address. The seller must mention the street address of their property to inform the real estate agent about the property’s physical location.
- Legal description
The seller should provide legal description details of their property in a real estate listing agreement based on the description documented in the government land records. In addition, the seller should obtain the property deed and lot number that contains the legal descriptive details showing the governmental survey, meters, bounds, and landmarks.
A real estate listing agreement should include fixtures that are sold together with the property such as, bulbs on ceilings, cabinets, or even safes. Any fixtures that the seller does not intend to sell together with the property are listed in section B.
- Personal property
While writing a real estate listing agreement, the seller’s personal property should be included with the building if the owner wishes to sell them. Personal property may include items such as furniture, grass trimmer, etc. Any personal property not mentioned in the agreement is excluded from the actual property sale.
- Page acknowledgement
A real estate listing agreement provides a page acknowledgment part at the bottom of the page. The page acknowledgment section requires the broker and seller to write their initials after reading and consenting to the document’s contents on each page.
Discuss agent’s right to sell
The residential real estate listing agreement should state the agent’s right to sell the property. The seller should tick the agent’s right, which the agent will be authorized to use to sell their property. The three main rights of an agent to sell are detailed below:
- Status of the agent’s exclusivity to property sale
This component gives the agent the exclusive right to sell the property on behalf of the property owner within the listing period. The seller is expected to pay a commission to the agency whether or not the agency sold the property.
- Exclusive agency
An exclusive agency is a selling right given to an agency by a property owner through a real estate listing agreement. Under the exclusive agency right, the seller pays the agency a commission if they successfully get a buyer for the property. The seller, however, reserves the right to sell the property to their own sourced buyer directly, and in such a situation, the agency does not get paid the commission.
- Open listing
A property seller can choose an open listing option in a real estate listing agreement that allows the property owner to select an agency to represents them in the sale if the agency provides a potential buyer. The commission is only paid to the agency when it completes the actual sale of the property. At the same time, the seller also retains the right to directly sell their property, in which case no commission is paid to the agency.
Enter the purchase price
The residential real estate listing agreement should entail the purchase price for the property. This helps guide the agent seller on selling the property without adding a different price for the property. Moreover, this detail is essential in the net listing agreement whereby the agent will add their commission on top of the listed selling property price.
Specify the duration of agreement
Time duration of a residential real estate listing agreement should be clearly stated, and it usually runs from 30 days to 12 months, depending on the type of property. The durations should be mentioned, including the commencement date, end date, and listing period extension
- Commencement date
The commencement date marks the initial date when the residential real estate listing agreement is signed between the property owner and the agent or broker. The parties involved are expected to comply with the agreement terms from the first day or the commencement day of the agreement.
- Ending date
The end date shows the time of the expiry of the residential real estate agreement contract. It also indicates the last day when the parties involved can stop complying with the agreement terms.
- Listing period extension
It is expected in real estate property sales that a buyer sourced by an agency may buy the property directly from the seller after the real estate listing contract expires. The agency and seller predetermine such occurrences. Both parties agree to have a listing period extension as a grace period that allows the agency to get a commission for sales made to customers sourced by them after the end date.
Note: Before signing the contract, the property owner must be well informed about the post-contract responsibilities and cancellation terms for the real estate listing agreement. If the agency or broker allows the seller to cancel the contract whenever they feel their service is unsatisfactory, the seller may not need a set contract duration.
Commission on residential real estate listing is determined through the evaluation of the property price. The property owner speculates the amount of commission to be paid to the agent after the property sale. There are different methods commission can be determined in the real estate listing agreement, they include:
- Percentage commission
This type of commission is calculated as a portion of the total amount a piece of property is sold for. The property owner sets the percentage, and the selling agent evaluates the ratio before signing the contract.
- Fixed payment commission
The property owner’s fixed payment commission is a standard value on the residential real estate listing agreement and is not subject to editing or change. However, the selling agent has to agree to the commission terms before signing the document.
The leasing option in the real estate listing agreement allows a broker/agent to lease the property on sale during its listing period. As a result, the property owner pays a certain percentage of the rental income to the agency for their effort.
- Deed type
Deed type relates to the type of property deed the seller is expected to transfer to the buyer after the sale. There are various types of deeds, namely grant deed, warranty deed, mortgage deed, and others.
Cooperation with other agents and agencies
An agent in the residential real estate listing can collaborate with other agencies to aid in the fast selling of the property. The document should indicate if such collaborations are acceptable in the specific project and the percentage commission the property owner is supposed to pay to the contracted agents.
- Commission offered
In a situation where a contracted agency may source for selling assistance from other real estate agents, the real estate listing agreement should state the agreed commission the seller should pay to the outsourced agents.
- Acknowledgment of page
If the seller and broker of a real estate property agree to the contract terms, in this case, the contents relating to the commission given to other agents, the seller and broker are expected to show their consent by writing their initials at the bottom part on the acknowledgment section.
Disclosed dual agency
Disclosed dual agency in a real estate listing agreement indicates whether the sellers allow disclosed dual agency or not.
- Allow disclosed dual agency
Allow disclosed dual agency means that an agent can represent the interests of the two parties; the property owner and the buyer. A seller can select the allowed dual agency option in the listing agreement if they are in a state that permits the dual agency.
- Not allowed the dual agency
Dual agency is not allowed in some states, which means that the agency can only represent the seller.
Marketing the property
The real estate listing agreement should state the marketing procedures to be used for the property. This instruction should therefore be explicit to guide the selling agency. Property marketing needs to follow the following aspects:
- Advertise the property
As part of the real estate listing agreement, the property seller allows the agency representing them in the sale to promote and advertise the property to attract potential buyers fast.
- Disclose the street address
The real estate listing agreement also expects the seller to submit actual address details of the property they are selling to the agency to be included in the property adverts.
- Third-party approval
Through the real estate listing agreement, the seller should allow third-party websites used by the agency to advertise a property to make price estimations of the property’s market value.
- Multi-listing on property
The seller must consent to the multi-listing on property in the real estate agreement that allows the agency to list other property offers.
- Publishing property information for sale purposes
The seller is expected to initial their consent on the listing agreement to allow the agency to use various media to publish property information for sale.
- Lockbox approval
Lockbox approval by the property seller on the real estate listing agreement enables the agency to access the property during the listing period and not hold the agency accountable for any damages, theft, or harm within the period.
- Signage on property
Signage on property in a real estate listing agreement enables a property seller to consent to the agency putting up a ‘for sale sign on the property as a means of creating awareness.
- Photogenic services
The property owner should approve through the real estate listing agreement the use of their property’s images to advertise the sale of the property.
- Page approval
After reading and consenting to the marketing page contents, the seller and broker/ agent should initially show acknowledgment and consent of the terms.
- Waiver of liability
The real estate listing agreement contains the Waiver of liability whereby the property owner signs to agree to waive or ignore all responsibilities or damages accrued due to the agent’s marketing process.
When writing a real estate listing agreement, the governing law should be included to show the attainment of the requirements before both parties can sign the document. Therefore, the laws should be clearly stated in the document.
Additional terms and conditions
Any additional terms and conditions required by the property owner should be included in the last part of the real estate listing agreement document. They are essential as there may be specifications that are not general. Additional information such as topics, payment terms, conditions, or even disclosures should be presented in the listing agreement in article XXIX.
Terminating the agreement
When a property owner decides to terminate a listing agreement, the consent of the marketing agency is required so that they can approve that they will no longer offer their services in the sale of this property. If the contract does not allow cancellation terms, the two parties have to maintain the agreement until the expiry of the contract.
Signatures are included as the last detail of the residential real estate listing agreement, and they are used to validate the document. Along with the signatures, dates should also be added. There should be a slot for the signature of the property owner and the real estate listing agent.
Free Residential Real Estate Listing Agreement Templates
Following are the free templates for you to download.
Agency Disclosure Forms By State
A residential real estate listing agreement is an important document used in all real estate listings. It helps create accountability and trust between the property owner and the selling agent. Additionally, for the document to be considered valid, both parties should sign, and each of them retains a copy of the agreement, which can be used in the case of a dispute or reference. Moreover, the real estate listing agreement should follow the governing laws according to the state it is being implemented in.
Frequently Asked Questions
What is meant by a For Sale by Owner property?
For sale by owner is whereby a property owner targets to sell the property on their own without the involvement of an agent. Marketing agents also seek to get the property under their listing, and in that attempt, they contact the property owner through calls and emails.
What is a lockbox, and what purpose it serves?
A lockbox is a box used by real estate agents whereby they let other agents in a house on sale. This secured box is accessible to any realtor. Its primary purpose is to create access to the property on sale even when it has occupants.
What is the difference between a real estate agent and a realtor?
A real estate agent is an individual licensed by their state to assist buyers, sellers, lessors, and lessees in the acquisition or sale of a property in exchange for a commission.
A realtor is a licensed agent but also a member of the local association of realtors which gives them the advantage of accessing the database of all listings within a given area through the MLS.
What is a Multiple Listing Service, and why was it used?
Multiple listing service (MLS) is a relators association that lists all the property on sale within a given area. Potential buyers mainly use it to identify the available property on sale, and it is also important for the property owner to ease the selling process.
Differentiate a listing agent from a buyer’s agent.
A listing agent represents the seller and their duty is to market and negotiate on behalf of the property owner. Whereas a buyer’s agent is hired to represent the buyer and their duty is to find a property and negotiate on behalf of the buyer.