Listing Agreement

A contract between a seller and a real estate professional to market and sell a home. A listing agreement obligates the real estate professional (or his or her agent) to seek qualified buyers, report all purchase offers and help negotiate the highest possible price and most favorable terms for the property seller.

A listing contract is a contract between a real estate broker (or his/her agent representatives, acting in the broker's name) and a seller or sellers of real property to give the broker the right to offer the property for sale. The contract is often referred to as a listing agreement and, if the broker is a member of the National Association of Realtors, it must include all of the following terms:In addition, other terms which may appear in the agreement can include:Typically, separate listing agreements exist for the sale of residential property, for land, and for commercial or business property. Upon listing the property, the real estate agency tries to obtain a buyer for the property and, in consideration of successfully finding a satisfactory buyer, the broker anticipates receiving a commission (fee) for the services the brokerage provided. Although the terms of the contract could vary, usually the payment of a commission (or fee) to the brokerage is contingent upon:If the seller refuses to sell the real estate when one of the above two conditions applies, it is typically considered that the real estate agent has done his job of finding a satisfactory buyer and the seller must still pay the commission, although the details are determined by the listing contract. Unless closing (or "settlement" or "close of escrow", as it is known in some parts of the country) is a condition of the listing agreement, the buyer's failure to complete the transaction may not require the seller to pay a commission to the broker. The commission is usually a percentage of the sales price of the property ranging from 2 or 3% up to about 10%, but usually in the range of about 3 - 7% for houses. The commission could also be a flat fee or some combination of flat fee and percentage, particularly in the case of lower-priced properties, vacant lots, or other unusual real estate. The commission is paid by the seller to the listing real estate broker, who will then compensate his/her listing agent and any co-operating brokers/agents from this commission by separate agreements with them. The listing contract typically also includes a listing price for the property and an expiration date by which the contract expires. However, if the property is sold at a lower or higher price, the seller pays a commission at a proportionally lower or higher amount. If the seller does not accept a price lower than the listing price, then the broker will have to wait until a satisfactory sale to earn the commission. In the event of multiple offers being presented, the seller may accept whichever offer is most suitable to him/her, even if the price is not the highest. The percentage commission will be paid according to the accepted price. The seller, often in concurrence with the real estate agent, may choose to accept an offer that is lower than the highest offer for various reasons, such as terms or contingencies in the purchase contract offered or perceived differences in financial qualification of the competing buyers. Typically, the real estate agent has the experience and data to determine a suitable listing price for the seller's property and will recommend a listing price to the seller. The seller can accept, reject, or try to negotiate a different listing price for the contract. If the seller's price is unrealistically high and the agent cannot convince the seller otherwise, the agent can decline to list the property. Listing a property commonly incurs certain expenses for the listing broker and takes some time and effort for the listing salesperson. To make it worthwhile, they want a certain minimum listing time period to have a good chance of selling the property. However, the listing contract must have an expiration date. A typical listing period is often from 3 or 4 months to 6 months. If the property is not sold or under a purchase contract by then, the seller may decide to re-list the property, perhaps with a different listing price, with the same or a different broker or agent, or not list it at all. The listing of the property can start at a date later than the date the listing contract is signed to allow the seller time to prepare the property for showing or sale. There can be several types of listing contracts: