What you need to know about Listing Agreements

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:

o       Open

–        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.
    • Advantages:
      • 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.

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