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Listing contract
A listing contract is a contract to list some
real estate by a real estate agency (or brokerage) as being offered
for sale at a given listing price. It is a contract which is agreed
to and signed by a real estate agent/broker and the owner(s) of
the property (real estate) who want(s) to sell it. The contract
is often referred to as a listing agreement. Upon listing the property,
the real estate agency tries to get (or find) a buyer for the property.
In consideration of the brokerage successfully finding a satisfactory
buyer for the property, a real estate broker anticipates receiving
a commission (fee) for the service the brokerage provided.
Contents
* 1 Commission
* 2 Listing price
* 3 Expiration date
* 4 Types of listing contracts
Commission
Although the terms of the contract could vary,
usually the payment of a commission to the brokerage is contingent
upon:
* the successful negotiation of a purchase
contract between a satisfactory buyer and seller and the subsequent
ability and willingness of the buyer to close the deal, or
* finding a satisfactory buyer who is ready,
willing, and able to pay the full listing price (or more) for the
real estate for sale without any contingencies.
If the seller refuses to sell the real estate
when one of the above two conditions applies, it is typically considered
that the real estate agent has done his job of finding a satisfactory
buyer and the seller must still pay the commission, although the
details are determined by the listing contract. If the buyer cannot
or does not buy the property, then the brokerage has not yet done
its job and the seller does not yet owe the broker a commission.
The commission is usually a percentage of the
sales price of the property ranging from perhaps a couple percent
to about 10%, but usually in the range of about 3 - 7% for houses.
The commission could also be a flat fee or some combination of flat
fee and percentage, particularly in the case of lower-priced properties,
vacant lots, or other unusual real estate. Again, the details are
typically determined by the listing contract. The commission is
paid by the seller to the listing real estate broker, who will compensate
his/her listing agent and any other brokers/agents from this commission
by a separate agreement with them.
Listing price
The listing contract typically also includes
a listing price for the property and an expiration date by which
the contract expires (ends). However, the property may be sold at
a lower or higher price. If the seller agrees to and successfully
sells (i. e. closes the deal) the property at a lower price, the
seller must still pay the broker a commission, although a percentage
at a lower price would result in a proportionally lower commission.
If the seller does not accept a price lower than the listing price,
then the broker will have to wait until a satisfactory sale to earn
the commission. If the price obtained is higher than the listing
price and the commission is based on percentage, then the broker
is paid a proportionally higher commission. Furthermore as mentioned
before, if the price offered is equal to or higher than the listing
price by a ready, willing, and able buyer (without contingencies),
then the broker has earned a commission and the seller must pay
it regardless of whether the sellers sells the property. In practice,
if multiple offers are presented, the seller may accept whichever
offer is most suitable to him/her even if the price is not highest,
and the percentage commission will paid according to the accepted
price. The seller, often in concurrence with the real estate agent,
may choose to accept an offer that is lower than the highest for
various reasons, such as terms or contingencies in the purchase
contract offered or perceived differences in financial qualification
of the competing buyers.
Typically, the real estate agent has the experience
and data to determine a suitable listing price for the seller's
property and will recommend a listing price to the seller. The seller
can accept, reject, or try to negotiate a different listing price
for the contract. If the seller's price is unrealistically high
and the agent cannot convince the seller otherwise, the agent can
decline to list the property.
Expiration date
Listing a property commonly incurs certain
expenses for the listing broker and takes some time and effort for
the listing salesperson. To make it worthwhile for them, they want
a certain minimum listing time period to have a good chance of selling
the property. However, the listing contract must have an expiration
date. A typical listing period is often from 3 or 4 months to 6
months until the listing expires. If the property is not sold or
under a purchase contract by then, the seller may decide to re-list
the property, perhaps with a different listing price, with the same
or a different broker or agent, or not list it at all. The listing
of the property can start at a date later than the date the listing
contract is signed to allow the seller time to prepare the property
for showing or sale.
Types of listing contracts
There can be several types of listing contracts:
* Exclusive right to sell - The seller must
pay the agency (brokerage) a commission if, by the expiration date
in the listing contract, the real estate is sold, regardless of
whether the buyer is gotten through the agency or not. Even if the
seller finds the buyer him/herself, a commission is still owed to
the agency. Furthermore, the seller cannot list the property with
any other agency until the listing expires with the property unsold.
* Exclusive Agency - The seller can only list
the property with one agency (brokerage) until that listing expires
with the property unsold. The seller must pay the agency a commission
if the real estate is sold to a buyer gotten through the agency.
If the seller finds the buyer him/herself, the seller does not have
to pay the agency a commission.
* Open Agency - A seller can list the property
with more than one agency (brokerage) in open agency listings. The
seller must pay a commission to that agency which finds the buyer
that the real estate is sold to. If the seller finds the buyer him/herself,
the seller does not have to pay any agency a commission.
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