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Once you’ve decided on an agent, you will sign a listing agreement with them. The listing agreement spells out the specific terms under which you utilize them as an agent.
Signing a listing agreement creates two main responsibilities, one for you and one for the agent. The agent has a fiduciary obligation to you (see more about OLD CAR on the next section). The second responsibility is for you, the seller, to work exclusively with that agent for the duration of the agreement (usually 3-6 months).
The Paragraphs
Note: I am not a lawyer. Nothing herein should be construed as legal advice. The TAR and TREC contracts change regularly. Contact me for current versions.
Follow along with a copy of the TAR Residential Real Estate Listing Agreement Exclusive Right to Sell
1. Parties
This section simply identifies the seller and the brokerage entering into the agreement.
2. Property
The contract includes the legal address of the property being sold.
It also spells out exactly what is included as part of that property in sections B, C, and D. As it says in the contact, anything “permanently installed and built-in items” is considered part of the property and you are selling it. It goes on to mention specific examples. Also, property “accessories” like fireplace tools, garage door openers, and keys convey with the property.
If there is something in your home that is attached and you want to keep, you can specify it in section D. Maybe your family chandelier, or a favorite shrub in your yard you want to take with you for some odd reason.
You would also not whether or not the property is subject to an HOA.
3. Listing Price
Pretty straightforward – the listing price!
But you are agreeing to a little more than just that. You are agreeing to sell, including customary closing costs, if you receive an offer at that price from a buyer. For example, if you receive a full price offer for your home, decline, and delist your home, you in theory would owe your listing agent a commission, even though you didn’t sell your home.
Bottom line – only list your home if you are serious about selling.
4. Term
The duration of the initial listing term, often 3-6 months. Listing agreements can be extended if you haven’t found a buyer during the initial term.
If you happen to sell before the listing agreement begins, for example, as a FSBO, then you would not owe the listing agent anything.
I generally do 3-month listing agreements, but for paper-wary sellers who are serious about selling, I have done 1-month listing agreements in the past. If it isn’t working with your listing agent, there are ways to terminate the relationship before the term is up, but they generally have to agree.
5. Broker’s Compensation
Most brokers charge a percent commission, though some charge a flat fee. I charge 6%.
It is important to note when the commission is “earned” and “payable”. A broker can earn a commission if:
- The property sells
- A qualified buyer makes a full price offer, regardless of whether the property sells
- The seller breaches the contract
The commission is not payable until closing (or when the seller breaches the contract). How can you owe a commission if you didn’t sell? You are paying an agent to find a buyer and negotiate the sale of your home. If they successfully do that, but you change your mind about selling, they still kept their end of the deal and have earned their commission, with a few exceptions noted in section C.
Brokers might also charge an additional amount, like a transaction fee, which would be noted in section D. They also have the right to be refunded for certain expenses, like photography. I, for example, include that I will be refunded for any utilities, cleaning, lawn or pool care that I do on my own dime. However I have no other fees, and do not charge anything for photography and videography.
The protection period is a major source of confusion. If the listing terminates, the listing agent can submit the name of buyers who they brought to the property. If the seller sells or enters into a contract with those buyers during the time specified in the protection period, the listing agent still earns a commission. The purpose of the protection period is to prevent a seller from terminating a listing agreement once a buyer is found in order to cheat the listing agent from the commission. 30 days is common.
The county only matters in that it notes the jurisdiction that any suit or legal proceedings would be initiated related to the money.
And the escrow authorization, Section G, gives permission to the title company to pay the broker from the closing funds.
6. Listing Services
This paragraph notes how quickly the agent has to submit the listing into the MLS after the date of the listing agreement – or whether they are submitting it to the MLS at all (you should!).
Reasons to delay (Box B) might be if you are still getting the property ready for market.
7. Access to the Property
As the seller, you are permitting access to the property to conduct showings, as well as access to your agent (and buyer’s agents) to permit access to clients, contractors, inspectors, and appraisers.
You also might be permitting your agent to use a showing service like Showing Time or Centralized Showing Service (CSS), which is a phone service that agents call to schedule showings with you, the seller. I highly recommend showing services, and CSS is free to local agents.
You should permit a keybox in most cases for easy access for showing agents. You are also agreeing not to hold the broker liable for anything the broker themselves did not cause (get your valuables out of the house!).
8. Cooperating with Other Brokers
The buyer’s agent is called the “cooperating broker” in the transaction. This paragraph is the section in which your agent is promising cooperating brokers a piece of the commission from paragraph 5. For example, I would put 6% in paragraph 5, and 3% in paragraph 8 to offer buyer’s agents half the commission.
It is possible to discriminate against brokers who are not members of the MLS. I don’t know why you would. Subagents are a complicated topic – essentially those are cooperating agents who do not represent the buyer. I’ve never worked as or with a subagent. They are rare, and I usually don’t offer a commission for it.
9. Intermediary
Do you want your listing agent showing your home to buyers they represent? I don’t see why not.
Presumably, the fear is that a dastardly agent could represent you, get you to underprice your home, and then bring a buyer they represent to get the full commission to the benefit of themselves and their buyer. If you are afraid of that, you should probably find a better agent.
My own policy regarding intermediary is to not represent both parties in the same transaction. I have shown my own listings to my buyers. If a buyer wanted to make an offer, I would refer the party I have been working with the shortest length of time (usually the buyer) to another agent to work through the offer. That way, everybody is represented!
10. Confidential Information
I cannot share the seller’s confidential information with other folks, even after the listing agreement.
An example: a listing agent lists a home but it fails to sell. The seller chooses to move on and use a different listing agent. The original agent then happens to have a buyer who loves the home and wants to make an offer. Even though the original agent knows the seller’s situation, payoff info, and more, they cannot share it with their buyer. That information was confidential.
11. Broker’s Authority
The broker has to be competent and work to market the property.
To achieve this, paragraph 11 gives them the authority to do specific marketing and transaction-related powers, like advertising it, putting up a for-sale sign, and chase down lien info.
If for some reason the seller did not want the listing displayed on the internet (usually for high dollar listings or very specific privacy concerns), the seller can refuse that here in section B.
Are you willing to offer owner financing? Do you know your beat up home will only go for cash buyers? Specifying that here, giving your broker permission to advertise just those terms, is appropriate.
Section E is just a reminder that the broker/agent works for the seller, and cannot agree to anything without the seller’s instructions to do so, of course.
12. Seller’s Representations
- You own the home
- don’t already have it listed with someone else
- don’t already have it under contract with someone else
- are taking care of the pool
- are current on your mortgage
- don’t have any other liens except those specified
- ownership isn’t in dispute (like with a divorce)
- telling the truth everywhere else in the contract
- and disclosing and relocation company involved
This would be where you might note if you have a short sale, or are behind on the mortgage. You can still list and sell a property while behind, but it is important for your agent to be aware, and you must disclose that here.
13. Seller’s Additional Promises
Don’t rent the property (especially if under contract), refer buyer inquiries to your listing agent, keep the seller’s disclosure up to date, and more.
14. Limitation of Liability
Be sure to let your insurance know if the property is vacant! And I do try to check on my vacant listings from time to time, but can’t guarantee I will catch issues, or promptly.
Your agent is generally not responsible for any damage or issues that they themselves did not cause. That is why it is important to keep good insurance coverage, and maybe even consider home warranty protection while on the market. A home warranty can help during the inspection and negotiating with a buyer, too.
15. Special Provisions
Anything you and your agent want to include that isn’t already in the contract. For example, I have written here that the property is both for sale and for rent, so that the seller doesn’t have to get my written permission to rent the property as they otherwise would.
16. Default
If the seller defaults, they owe a commission to the broker.
17. Mediation
Before you sue, you should try the mediation process to negotiate disputes with your agent.
18. Attorney’s Fees.
Loser pays.
19. Addenda and Other Documents
Everything else related to the listing must be listed here. In addition to the listed items, I often attach pictures of the listing for my seller to sign off on, as well as an exhibit I wrote specifying who is taking care of lawncare and utilities.
- Information About Brokerage Services
- Seller Disclosure Notice
- Lead-Based Paint Disclosure
- T-47
- MUD, Water District, or Statutory Tax District Disclosure Notice
- Request for Information from an Owner’s Association
- Information About Mineral Contracts in Forms
- Information About On-Site Sewer Facility
- Information About Property Insurance for a Buyer or Seller
- Information About Special Flood Hazard Areas
- Condominium Addendum to Listing
- Keybox Authorization by Tenant
- Seller’s Authorization to Release and Advertise Certain Information
20. Agreement of Parties
This is the legalese section. If it’s not in writing, it doesn’t exist.
21. Additional Notices
This is a hodgepodge of notices that didn’t find a home elsewhere in the contract. Realtors can’t violate fair housing laws even if you want them to. Get valuables off the property. Check your mortgage payoff. And agents are not lawyers!