Before signing a listing agreement with any broker, you should make sure you understand the agreement. Hopefully, the broker/agent will fully explain the agreement to you. However, the following may prove helpful to you:
Types of listing agreements:
– Most common in commercial setting.
– Usually an oral agreement.
– Seller is not obligated to pay any broker, unless an acceptable buyer is produced.
– Owner doesn’t hire any particular broker.
o Exclusive Agency
– Limited in time (ex. 6 months).
– Agency agreement – One broker is hired to sell the property on terms satisfactory to the seller or on terms listed in the listing agreement.
– During this time, the seller agrees not to list the property with any other broker.
– Broker ends up with more of a proprietary interest than in an open.
- BUT, the seller may sell on its own, without having to pay any commission.
o Exclusive Right to Sell
- Identical to an exclusive agency, but the broker earns a commission even if the seller sells privately without the broker.
- Broker will expend more time, energy, and money knowing that he/she stands to benefit from this exclusive relationship. Brokers do not want to invest their time, money, and energy in a deal that they may not get anything from.
- Brokers will typically advertise and call upon other brokers to work with them based on a split of the commission.
- Gives broker a greater incentive to find a buyer.
- Most sellers like the idea of looking to only one broker, who is controlling the process.
o Flat Fee Multiple Listing
– Combination of the exclusive and open.
– The listing broker (seller’s broker) will earn a flat fee for listing the property on a MLS.
– Broker will put the property into a computerized service and solicit buyer brokers.
– The buyer’s broker will earn whatever commission the seller has agreed to pay.
o Net listing Agreements
– Illegal in New York.
– A broker cannot negotiate an agreement with an owner where the owner says, “I want $400,000 and whatever
you get above that is yours.”
– A broker cannot have an incentive to sell for a higher price on its own account.