Listing Contract Details
Obviously the name of the seller and the property address will be included in the listing contract. There are many other things that are included, too, and you should be aware of them.
Price and Terms of Sale
When setting the terms of sale, the main thing you are concerned with is the price. You should have a basic idea of what your home is worth by keeping track of other sales in the neighborhood. Plus, you have probably interviewed at least two real estate agents and they have given you their own ideas. Exercise great care in determining your asking price, making sure not to set it too high or too low.
In addition to the price, you will disclose what personal property, if any, goes with the house when you sell it. Personal property is anything that is not attached or fixed to the home, such as washers, dryers, refrigerators, and so on.
There may be some item that is considered “real property” that you do not intend to include in the sale. Real property is anything that is attached to the home. For example, you may have a chandelier that has been in your family for generations and you take it from home to home when you move. Since the chandelier is attached to the house, it is considered “real property” and a reasonable buyer would normally expect it to go with the house.
The listing contract should make clear that it does not, and your agent should also enter this information with the Multiple Listing Service.
Real Estate Commission
- In most areas there is a “customary” percentage that real estate agents and companies expect to earn as a commission. The percentage varies from region to region, and depending upon whether it is residential real estate or commercial real estate. However, just like anything else in real estate, this amount is negotiable. When completing the listing agreement, you and your agent will agree on the amount of the real estate commission.
- The listing contract also specifies when the commission is earned. This is important and you should pay close attention:
- If a ready, willing and able buyer presents an offer that meets your listing price and terms, the agent has effectively earned the commission at that time. If a buyer presents an offer and you reach agreement on price and terms through counter-offers, the agent has also earned his or her commission.
- Sellers occasionally get cold feet, just like buyers do. If this is going to happen to you – make sure you consider it before you agree to terms with a buyer.
- Once you reach terms with a buyer, you have incurred two contractual obligations. One is to the buyer and the other is to your agent. if you should decide to cancel just because you’ve changed your mind about moving — the agent has earned their commission according to the terms of most contracts. They will probably want to be paid.
Multiple Listing Service
Your listing contract should specify whether or not the house will be listed with the local MLS (multiple listing service). It is definitely in your interest to have the house listed. This is because your sales force is automatically multiplied by however many agents are members of the local MLS. If your house is not listed, then you only have one agent working for you instead of many. This is where selling “by owner” generally fails.
Owners see that an agent puts a sign in the yard, prepares brochures, holds open houses, advertises in the paper and on the internet, and they think this is how houses are sold. It is easy to understand why owners believe that, but it just isn’t so.
Listing agents do those things for three main reasons. First, because the owners expect them to. Second, because it shows other sellers how much they do to market a home, and it gets more listings. Third, because it brings in clients who want to buy “some” house – though it probably will not be yours.
Practically no one buys the house in the ad or a home they visit during an open house. Think about your own experiences when you bought the house you are now selling. How did you find it? Probably through your agent, who found it in the Multiple Listing Service.
The MLS is a huge network and practically every local agent is a member — and those agents have clients looking to buy a home. That network is what sells your house.
Agency Duties of a Listing Agent
Many people think of the real estate agent as a salesperson. Many agents (perhaps most agents) would jump at the chance to be “just” a salesperson. But they aren’t just a salesperson. Most states have legislated it so that real estate agents are also — agents.
An agent is “responsible” to their clients. They have a duty, called a “fiduciary duty.” This means the agent is responsible to act in the best interests of their client. A car salesman does not have to act in your best interests — they just have to sell the car. It isn’t that simple for real estate agents.
Real estate agents not only have to sell the house, they have to be responsible. That involves a lot of liability, which is one reason for all the disclosures and the pages and pages of contracts, and why they want to be paid for being more than “just” a salesman.
The listing contract will specify that your agent is acting as a “seller’s agent.” This means that, in the sale of your house, they are working for you and only you — and looking out for your best interests.
However, there may be times when your listing agent has a client who wants to buy your home. For that reason, there is a little “wiggle room” in the listing contract. If your agent also represents the buyer, the listing contract should specify that they provide an additional disclosure that details whether they continue to act as your agent or assume the duties of a dual agent.
The contract also provides permission for your listing agent to act as an agent for others on other transactions. They can continue to list other properties, and represent buyers looking at other homes besides yours.
A lockbox is a basically a padlock with a cavity inside where a key to your home can be placed. Only someone with a key (electronic or mechanical) or the combination can get into the lockbox and access the key to your home. Having a lockbox available at your house makes it easy for other agents to get access to your house.
Without the lockbox, agents representing buyers would have to set appointments to meet you or your agent at the house so they could gain access and view the home. This would be inconvenient. Since almost every other house does have a lockbox available, if you do not allow one most agents will simply not show your property. You will miss out on lots of potential buyers.
The listing contract specifies whether you allow a lockbox or not. It is locked into place, usually on the front door and cannot be removed. Only other agents can access the key that is located within the lockbox.
Resolution of Disputes
There are times when you and your agent have a disagreement that you cannot resolve by yourselves. Maybe the agent did a poor job or misrepresented something. Maybe your agent was really doing their job correctly, but you did not understand. Perhaps the agent will have a dispute with you.
The listing contract specifies what methods will be used to settle such disputes. You can choose to accept binding arbitration, which is usually cheaper than hiring a lawyer and going to court. Usually, matters that can be dealt with in a small claims court are excluded from having to go to binding arbitration.
You are not required to sign or initial the binding arbitration clause. This would leave you free to hire an attorney and pursue disputes in civil court instead of binding arbitration. However, we are not recommending one choice or the other. That is your decision.