A listing agreement is an employment contract between a property owner and a real estate broker. The listing agreement grants the real estate broker the authority to act as the owner’s agent (also known as a listing agent) in the sale of the property. The listing agreement also spells out the commission that the property owner agrees to the broker.
What is Included in a Listing Agreement?
A listing agreement is executed by the owner-seller and specifies the following 10 things:
- Beginning date and termination date (otherwise know as a “right to terminate” clause)
- Property owner’s name and contact information
- Address of the property for sale
- List price at which the property will be offered for sale
- Listing type (exclusive right-to-sell, exclusive agency, or open)
- Amount of compensation offered to the broker (whether flat fee or a percentage)
- Terms and conditions: This specifies the broker’s responsibilities to sell the property
- Dispute resolution: Measures that will be taken to resolve conflicts that may arise
- Authorization for the broker to cooperate with other brokers as subagents
- Authorization for the broker to reveal or not to reveal previous offers received
If you’d like to see what other information is commonly included in a listing agreement, click here to see a copy of an exclusive right to sell listing agreement from Propertyware.
What Are the Different Types of Listing Agreements?
There are three types of listing agreements in common use today:
1. Exclusive Right-to-Sell Listing Agreement
An exclusive right-to-sell listing agreement is the most common of the three. It gives the broker the exclusive right to earn a commission once the property is sold by the expiration date, regardless of whether they sell the house directly or through through co-broking the listing with an agent representing the buyer.
Even the owner cannot bypass the listing agent and sell the property on their own without owing the broker a commission (unless an exception is noted in the contract). Exclusive right-to-sell agreements also forbid the owner from listing the property with any other broker until the listing expires. The owner pays both the listing agent and the buyer’s agent commissions.
2. Exclusive Agency Listing Agreement
In an exclusive agency listing agreement, only one agency can list the home. The owner cannot list the property with another brokerage until after the listing contract expires with the property unsold. If the property is sold through that brokerage, the broker gets the commission.
The broker can cooperate with a second brokerage to bring a buyer whose offer the owner accepts. In this case the listing broker is paid a commission, and, if there is a buyer’s broker, they get paid a commission as well.
3. Open Listing Agreement
An open listing agreement allows a homeowner to list with more than one broker in a non-exclusive manner. The broker who brings the buyer receives the commission. If the owner eventually sells the home without the help of a broker, she isn’t required to pay anyone a commission. However, the seller might struggle to find a full-service agent willing to agree to an open listing.
How Long Do Listing Agreements Last?
Generally speaking, agents will have a homeowner sign a listing agreement granting them the right to represent the homeowner for around 3-6 months. Sometimes, in order to entice skeptical homeowners, Realtors will offer shorter listing agreements of 90 days or less.
Can a Listing Agreement Be Cancelled or Terminated?
Since listing agreements are bilateral contracts, both parties must perform. A listing agreement can be canceled or terminated only if there is a breach of contract or a valid cause. Check the provisions of the agreement in connection with early termination. If it’s not permitted, it’s best to have a conversation with your broker so you can explain your situation. Try to reach an agreement.
The Bottom Line
A listing agreement is an employment contract between the property owner and a real estate broker, authorizing the broker to sell the property on the owner’s behalf, in exchange for a commission. This agreement could be exclusive right-to-sell, exclusive agency, or open. Regardless, both parties must be clear on all the terms of the agreement (including early termination) before signing. If there are concerns or questions, they must be negotiated and frankly discussed first so that misunderstandings, conflicts, and disappointments can be avoided down the road.