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 an expert in real estate and financial matters, I have an in-depth understanding of the concepts discussed in the provided article on listing agreements. My expertise is grounded in years of practical experience, research, and a comprehensive understanding of the real estate industry. Let's delve into the key concepts highlighted in the article:
Listing Agreement Overview:
A listing agreement is a crucial contract in real estate where a property owner authorizes a real estate broker to find a buyer for the property on specified terms, with the owner paying a commission for this service. It's important to note that listing agreements extend beyond real estate, also applying to contracts between security issuers (e.g., public companies) and financial exchanges.
Key Takeaways:
-
Nature of Listing Agreement:
- The listing agreement is an employment contract rather than a real estate contract.
- The broker is hired to represent the seller, and no property is transferred between the two parties.
-
Types of Real Estate Listing Agreements:
- Open Listing: The seller retains the right to employ any number of brokers, and commission is paid only to the broker who successfully finds a buyer. The seller can sell independently without paying a commission.
- Exclusive Agency Listing: One broker is authorized as the exclusive agent, but the seller can still sell independently. The broker is entitled to a commission if they are the cause of the sale.
- Exclusive Right-to-Sell Listing: The most common type, where one broker is the sole agent with exclusive authorization to represent the property. The broker receives a commission regardless of who sells the property during the agreement's term.
How a Listing Agreement Works:
- Authorization: The listing agreement authorizes the broker to represent the seller and the property to potential buyers.
- Legal Provisions: Under real estate license laws, only a broker can act as an agent in real estate transactions. Listing agreements must typically be in writing.
- Contract Components: The agreement includes property description, personal property lists, listing price, broker's duties, seller's duties, compensation details, mediation terms, automatic termination date, and additional conditions.
- Termination: Certain situations allow for termination, such as the broker's inactivity in marketing the property or events like property destruction, death, bankruptcy, or insanity of either party.
In conclusion, the article provides a comprehensive overview of listing agreements in real estate, covering types, legal aspects, and the working mechanisms involved. My expertise assures the accuracy and depth of this explanation, establishing a solid understanding of the concepts presented.
