When you are in the process of selling your home, you will sign a listing agreement with the REALTOR® that you have a contract with.
A listing agreement, also known as a service agreement, is a legally binding contract between you and the real estate brokerage that your REALTOR® is licensed with. When you sign a listing agreement, you agree to work exclusively with that brokerage for a specified length of time to sell your property. Once you are their client, your REALTOR® will have a legal duty to act in your best interest for information about Fiduciary duties click here
This listing agreement dictates how your house will be listed and marketed, and you have a lot of say so on this so it's a good idea to know ahead of time what is going to be expected of you as the seller.
Your full name and anyone else who owns the home with you.
The address and description of your home. This is here to identify exactly what your selling. Some homes include more than one lot, or multiple buildings, and sometimes the property lines are unclear.
The price your listing at. This is something your REALTOR® and you will have discussed during your initial interview or first substantial meeting which if your lucky is the same meeting as this. You do have the final say though as to what goes on the contract so make sure you are agreed when you go to write this up and sign it.
The length of time you are employing this REALTOR® to list your house on the market. You can decide how long this lasts. Legally no listing agreement can last longer than a year, but realistically unless you want it to wait over a year to sell, you don't want this contract to last that long. 3-6 months is what you will most typically see in length, but this is something you have negotiating power to decide. When you fill out the contract you will list both the start and end date.
The commission. This is a big one because there are actually three parts that you will have to decide upon when it comes to the commission: 1 the commission you are paying your REALTOR®, 2 the co-broke commission, and 3. The circumstances in which you pay the commission.
1. So there is lot of chatter about commissions and the negotiating power you have here so let's break it down. Yes, you have the ability to negotiate this price, but on the flip side your REALTOR® has the ability to walk away from a job that isn't going to pay them too. Most agents have a specific percentage that they will not go below because otherwise they would lose money talking on your job so keep in mind that we are trying to make a living too by helping you sell your home. So negotiate away and make sure you feel certain about the fees you are responsible for.
2. The co-broke. In most cases the listing agent (your REALTOR®) will offer what's known as a co-broke which is where the commission they collect will be split with the buyers agent or subagents (subagents are the other agents involved -this often refers to the buyers agent who brings a buyer, but make sure you double check that with your REALTOR®). You have the right to refuse that but there are many advantages to offering a co-broke such as the ability to list and market your home on more websites, and including pricing out potential buyers who may only have mortgage approval for your listing price.
3. The circumstances for which you are responsible to pay your REALTOR® are actually outlined in your agency agreement, but if you weren't paying attention to that then you can always ask about it here because it will be reviewed in this contract as well. The standard for this is if your REALTOR® brings you a willing and able buyer you are required to pay them, because their job was to do just that: bring you a buyer who both can and wants to purchase your property.
*Just be careful not to be taken by surprise, if your REALTOR® brings you a willing and able buyer and they put in an offer for your asking price that you refuse, you may still be required to pay your REALTOR® because they did their job, and you are seeming to have changed your mind last minute. So make sure you are ready to sell and happy with the numbers, and fully aware of all the clauses and conditions so that when your offer comes in, you are ready to accept and no one feels like they had their time or money wasted.
What happens if you want to terminate this contract early? Maybe you get cold feet. Maybe the market changes. Maybe your situation changes. Who knows. Life has a funny way of surprising us with new things every day. It's important to go over with your REALTOR® what reasons you can terminate your contract early and also how to do so.
Your signature. In order for this to be a legally binding contract you will need to sign it and make it official.
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