What is a listing agreement when selling your home?
If you hire a Realtor when selling your home then you will be required to sign a listing agreement. As the home seller you want to ensure that the agent you hire follows certain guidelines and expectations while the agent wants to ensure that they have the legal authority to represent the seller and also make sure that they get paid for their efforts at closing.
Using a residential listing agreement is standard practice and ensures that both parties are on the same page and know what is required of them during the home-selling process. This article describes the different types of real estate listing agreements and also some of the additional documents and forms that a seller will sign as part of a complete listing agreement. Sellers should be aware of what they're signing, the purpose of each form and what happens if they break the contract.
What is the definition of a listing agreement?
A listing agreement is a legally binding document between the seller and a real estate brokerage that outlines the terms and conditions of how the Realtor will represent the seller on the sale of their home. The agreement specifies the commission fees, the listing price, the listing period, and when the home will go on the market. A listing agreement establishes expectations and outlines the responsivities of both the home seller and the listing agent while the home is listed for sale.
The different Types of listing agreements.
There are different types of real estate listing agreements that the agent and the seller can agree to and the type of agreement will depend on the type of service the seller is looking for and the willingness of the Realtor to agree to it. However, 99% of Realtors will probably not agree to two of them.
1. Exclusive Right to Sell Listing Agreement: This type of agreement gives the listing agent exclusive rights to sell the property and entitles the agent to a commission, regardless of who sells the property.
2. Exclusive Agency Listing Agreement: This type of agreement grants the agent exclusive rights to sell the property, but the seller has the option to find their own buyer without paying the agent a commission.
3. Open Listing Agreement: This type of agreement allows the seller to list the property with multiple agents. The agent who finds a qualified buyer first is entitled to the commission.
4. Limited Service Listing Agreement: This type of agreement is commonly used by For Sale By Owner (FSBO) or off-market home sales who just need an agent to add their listing to the multiple listing service (MLS) and help them with buyer offer paperwork !! 2 links!!
What is the most common listing agreement?
The vast majority of listings will involve an exclusive right-to-sell listing agreement. Very few Realtors would agree to an open listing agreement. Would you agree to spend hours working with a seller getting their home ready for market and then potentially thousands of dollars out of pocket spent on marketing and staging, only for the seller to then sell the home with a different real estate broker?
What should a listing agreement include?
The listing agreement is actually a package of different documents. The types and number of documents will depend on the type of property being listed. For example, it is a single-family home, a condo, or vacant land. Some of these are specifically related to the agreement between the seller and the agent and some are additional docs that need to be filled out and be available to prospective buyers.
Taking the Seattle area and Washington State as an example, here are the most common documents signed by a seller when listing their home with a Realtor.
Documents specifically related to the agreement between the seller and listing firm:
The Exclusive Sale and Listing Agreement is a 2-page contract between the home seller and a real estate brokerage that authorized that firm to represent the owner in the sale of their home. The listing agreement includes the name of the Realtor who will work with the sellers, the date the home will be listed for sale and how long the agreement lasts, the commissions the listing and buyer brokers will be paid plus the responsibilities of both the listing agent and the sellers before and while the home is on the market.
The listing Input Sheet: is a 5-page document that is filled out by the sellers and lists all the various details about the property including the size of the home and property, the constriction of the home, HOA information, and how offers will be reviewed. The listing input sheet is where the listing price of the home is added. The information in this document is used to complete the online multiple listing service (MLS) listing so the information needs to be accurate.
Additional documents needed to actually list the home:
These documents are not specifically listing the agreement form, but they are required in order to be able to sell the home and are part of the real estate contract between the seller and the buyer.
The Seller Disclosure Statement. With the exception of estate sales, every seller must fill out a 6-page questionnaire about their ownership of the home and includes items such as known defects, legal ownership, utilities, easements, and the HOA. A copy of this is provided to prospective buyers.
The Utilities Addendum lists the different utility services the home uses, a copy of which is provided to the escrow/closing agent to ensure that all the seller's bills are paid off up to the day of closing.
Lead-based paint addendum is a federally required for any homes built before 1978 that sellers answer questions related to whether they are aware of the presence or have tested for lead-based paint in the home. And yes, it reads like something the government wrote!
The FIRPTA Certificate stands for The Foreign Investment in Real Property Tax Act. Home sellers who are non-resident aliens are required to pay extra taxes on the proceeds of the sale. US residents just have to pay Federal Excise tax. This form may be submitted to the IRS.
The Legal Description is a one-page unique identifier for the property. Many homes in the US have similar addresses and so to avoid any possibility of confusion the sellers need to initial and date this page that is pulled from the Title Report. It's like a thumbprint for the home and must be included in all buyer offers.
Seller's contact information kept private: if the sellers wish to keep their contact information, including their phone number, off the MLS listing, then they can include a form for that. As the owners of homes that fail to sell discover the day their home comes off the market, they will be the most popular people in town as they get bombarded by agents who make a living chasing expired listings, aka the ambulance chasers of the residential real estate world! Also, while the home is on the market, some real estate agents have been known to contact sellers directly to try and extract useful information or even try and get them to dump their listing agent and work with them instead! Both of which can result in heavy fines for the agent.
The Resale Certificate. If the home is part of a homeowners association (HOA) the sellers will need to order a copy of the Resale Certificate for potential buyers to review as part of the real estate transaction. It can take up to 10 days for those documents to be assembled and delivered so it's a good idea to order them a couple of weeks before the homes goes on the market. If you wait to order one until after you get an offer, you will have to wait 10 days for delivery plus 5 more days for the buyer to review it before finding out of the buyer is going to continue with the purchase or not.
Listing agreement add-ons.
Although not regular MLS forms, sometimes the listing agent will request that the property owner sign additional documents related to marketing the property. The listing agent doesn't want to rely on verbal or email agreement with the sellers and wants to get stuff in writing so there's no "confusion". Here are some examples
Staging fees: staging homes can be expensive, anywhere between $1,500 and $6,000 and up unless you're going for cheap virtual staging. Some listing agents cover the cost and sometimes they will request that the seller pays for it. Additionally, if the home fails to sell or the seller pulls the property off the market early the agent may want some insurance that they will recoup some or all of their out-of-pocket expenses. In this case, the listing agent will have the seller sign an agreement regarding staging fees and cover who pays for what in different scenarios.
Price drops: sometimes a Realtor will agree to list a property at a price that they know is higher than the home is worth. The agent wants to avoid ending up with a listing that is sitting on the market with their for-sale signs swinging in the wind and the seller refusing to drop the price. Some agents will have the seller sign an agreement stating that if the home does not get an offer within a certain number of days then the seller agrees to drop the price by an agreed-to percentage,
Agent paid-for pre-listing upgrades: some listing brokers as part of their marketing will offer to pay, out of their own pockets, for some upgrades to the home before the home goes on the market. The owner agrees to reimburse the real estate agent from the proceeds of the sale at closing. And potentially get paid if the sale fails to close.
Here are some additional frequently asked questions about listing agreements.
Does a seller have to sign a listing agreement?
Yes. No sane Realtor would be willing to list your home if you're unwilling to sign a listing agreement because (1) they will never get paid and (2) it would be a legal liability for them to have access to your home without an agreement.
What happens if your home doesn't sell?
If the home fails to sell within the time period agreed to within the listing agreement then the listing expires and the seller is free to either take the home off the market, put it back on the market with the same agent, or list the home with a different Realtor.
Can a seller get out of a listing agreement?
It depends on the situation. Legally speaking when a seller signs a listing agreement they agree to give their agent a certain number of days to sell the home. If the seller decides they want to take it off the market then according to the terms of the contract they could be liable for reimbursing the agent for any expenses they incurred in marketing the home. However, if an unexpected life event occurs like a family emergency or death or an inspection reveals major issues with the home that prevents it from selling, then that case the listing agent should be open to taking the home off the market.
When do you sign the listing agreement?
In the Seattle area, for example, the listing would obviously need to be signed before the home goes on the market but it cannot be signed more than 30 days before the list date.
How long does the listing agreement usually last?
In general, it tends to be around a minimum of three months which allows time for the agent to prep the home for the market, put it on the market to elicit an offer, and then allow time for the sale to close. In a slower market, where homes are taking longer to sell the agent might request up to six months to list the property.
What's the Tail Provision in real estate?
The tail provision essentially states that if a home fails to sell while listed for sale with the agent and subsequently, after the listing period expires, a buyer who either saw the home while it was listed for sale or became aware of the property through the marketing efforts of the listing agent, purchases the property then the seller is still liable for paying the listing agent's commission. The purpose of this provision is to protect agents in the event that the seller is trying to save on paying commission fees by canceling the listing and then selling the home off-market to someone they know is interested in the home. The tail provision period is usually between 90 and 180 days.
This article was written by Seattle and Eastside Realtor Conor MacEvilly who has been in the business since 2008. I hope you enjoyed the post and thanks for visiting my website. If you have any questions about Puget Sounds area residential real estate feel free to contact me. I'm happy to help. My direct line (cell) is 206-349-8477.