The Listing Contract

Also referred to as a listing agreement, the listing contract gives a licensed real estate professional authorization to act on your behalf in the sale of your home. Listing contracts come in all shapes and sizes, but there are characteristics which are common to all.  Among the elements of any valid listing contract are:

Writing - All real estate contracts must be in writing.

Employment - The listing contract is a personal services contract between you and the broker.  It contains all of the terms and conditions of employing the broker and authorizing the broker to represent you in marketing and selling your home.

Compensation - For any contract to be valid, there has to be compensation.  The listing contract will specify the amount and timing of payment to your broker.  Typically, payment is an agreed upon percentage of the sales price, payable at closing.  It is important to note that your obligation to pay your broker may not absolutely depend on a finalized sales transaction.  For example, if the broker finds a bona-fide buyer who is willing to pay your asking price and agree to the terms you have offered, but you get cold feet at the last moment and decide not to sell, the broker has done his job and is entitled to be paid under the terms of the listing contract.

Title - All listing contracts will ask who has title to the property.  Property can't be sold unless everyone with holds title interest in the property are part of the sale.

Termination date - You shouldn't sign any listing contract without a specific termination date.  The most common duration is 180 days.  If the contract has an indefinite duration such as until sold, or no duration specified at all, don't sign it.  The listing contract is a legally binding document and you don't want to get locked into one with no clearly defined termination date.  If the contract expires before your home sells and you still want to keep using the same broker, you can simply sign a new contract.

There can be and often are other elements to a listing contract.  As with any legal document, you should read the listing contract very carefully and be sure you understand exactly what you are agreeing to before signing.  If you have any questions about your listing contract it would be wise to consult a lawyer for clarification.

Types of Listing Contracts
A listing contract is an agreement between you and a licensed real estate broker authorizing the broker to represent you in selling your home. By far the most common type of listing contract is the “Exclusive Right to Sell”, but there are several other types. 

Exclusive Right to Sell Listing
This is the most popular type of listing with sellers and brokers.  Under a right to sell listing contract, the broker is the only one authorized to sell your home.  If another agent finds a buyer, your broker earns a commission.  If you find a buyer on your own, your broker still earns a commission.  This arrangement gives your broker the most incentive to spend time, money and energy marketing your home.  Especially to the other agents in the area who can show your home to their buyer clients.  Only with an exclusive right to sell agreement can you expect to get a full service marketing effort from your broker, since it is the only listing type that assures a broker will get paid for his marketing expense and efforts when the home sells.

Exclusive Agency Listing
This is similar to the right to sell listing, with the significant difference that you reserve the right to sell your home yourself and not pay the broker a commission.  The broker only gets paid if your home is sold through a licensed real estate professional.  If you find your own buyer and sell the home yourself, you pay no commission.  On the face of it, this might sound like an attractive arrangement.  But it's not a popular listing type with brokers, and for good reason.  Under an exclusive agency agreement, the broker is exposed to the risk of putting forth considerable effort and expense marketing your home, only to come away empty handed.  The attraction to the seller of this type of contract of course, is the possibility of finding their own buyer and not paying a commission.  This puts the seller and broker in competitive roles, which usually isn't in the best interest of either party.  Since the broker stands a good chance of not reaping any reward, it's unlikely that any effort or expense will be put into marketing an exclusive agency listing.

Open Listing
The open listing is a non-exclusive contract.  It gives the broker permission to show potential buyers your home, and the broker will only earn a commission by bringing in a client who buys the home.  Since the open listing isn't exclusive, sellers can sign these listing agreements with as many brokers as they want.  The bottom line with an open listing is that no broker has any incentive to market the home at all.  They won't even place the home on the local MLS service with an open listing.  Further, it's up to the seller to field all phone calls and coordinate all showings etc….  Generally, the only people who use open listings are FSBO's (for sale by owner) who are willing to pay a partial commission to an agent for finding a buyer.  You shouldn't expect any marketing or advertising at all with an open listing contract.

Showing Listing
Also called the “one time” agreement.  This is an agreement whereby a FSBO agrees to let an agent show the home to an interested client and pay a commission to the agent if that showing results in a sale.  The purpose being to prevent a seller from letting an agent show the property, then deal directly with the client, to avoid paying any commission.