The listing agreement sets up how your house will be listed and marketed by the brokerage. You should make sure the contract reserves your right to:
- Take the property off the market. Some listing agreements require you to keep your property on the market for the entire listing period. But your circumstances may change, and you may need to stay in your current home. The agreement shouldn't force you to sell if you haven't already made an agreement with a buyer.
- Pay commission out of closing proceeds, and only if the house sells. Some listing agreements may require you to pay if a "ready, willing, and able buyer" is brought to your property, even if no sale comes out of it.
- Terminate the listing agreement.
The listing agreement is a legally binding document. You have a right to have an attorney review it. If something isn't comprehensible to you, you have a right to strike it out and insert clearer terminology.
Exclusions
If you have been selling your home FSBO and then decide to list it, you can exclude in the listing agreement who have already seen the house. If you exclude those people, and one of them decides to buy the home, you don't have to pay a commission to the listing broker.
Types of listing agreements
Exclusive right to sell listing
One agent within the brokerage firm is designated as the sole agent for the property. If you sell the home while it is listed with the firm, you owe the agent a commission, regardless of who actually buys or sells the property. Exclusions (see above) still usually apply.
Exclusive agency listing
Only one broker is assigned as the exclusive listing agent. You only pay the broker if the broker, or broker's subagent, brings in the buyer. You can retain the right to sell the property yourself without paying commission.
Open listing
Any broker can act as your agent in soliciting buyers, but at closing you have to pay a commission only to the broker who brings a "ready, willing, and able" buyer to the transaction. You can sell the house by yourself without paying a commission.
Net listing
The seller chooses how much money he wishes to gain from the sale. The broker gets any excess over the net amount. It can be a great incentive, but it can also pit the broker's duty to you against the agent's own interests. Many states have banned net listings for residential sales.
Option listing
The listing broker has the option to purchase your home, then sell it for a profit. There's no reason for you to go this route: If your broker wants the property at that price, someone else will too, probably for a bit more. Some real estate companies may promise to purchase your home if it doesn't sell within a specific time period. Check the fine print. The sale may be quite a bit below market price, and there may be additional fees and obligations.
Multiple Listing Service
A Multiple Listing Service is a database of information on homes for sale. Only member brokers can list properties in the MLS.
Seller disclosure
Seller disclosure requires you to disclose any known material defects with your property. The questions you have to answer differ from state to state.
Sellers' errors and omissions insurance
Sellers' errors and omissions insurance is intended to cover you from lawsuits over possible misrepresentations about your property.
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