You’ve decided to sell the family home. You’ve also interviewed several real estate agents and have decided which one to use. What’s next?
The agent will ask you to sign a document called a “listing agreement.” That is a contract between you and the real estate brokerage firm, spelling out what the agent will do to assist with finding a buyer and what your obligations are, including what the commission will be.
Before you sign the contract, here are some terms you should understand:
● Exclusive right to sell: This is the standard that all agents want to use. The agent gets paid regardless of who sells your house. That means that if your next-door neighbor approaches you directly about buying your home so they can expand their property, your agent still gets paid.
● Exclusive agency: This means the agent gets paid only if he or she sells your house. Obviously, most agents do not want to use this type of listing.
● Open listing: This allows sellers to use as many agents as they want and pay a commission only to an agent who brings in a buyer who signs a contract and goes to closing. This is almost like a “for sale by owner,” or FSBO. Once again, it is doubtful you will find agents willing to enter into such an agreement; they may spend a lot of time and money looking for a buyer only to be cut out because someone else was the procuring cause of the sale.
● Net listing: The listing agreement sets a price the seller is willing to accept. The agent keeps anything exceeding that amount. Such a listing is illegal in most states and in any event is unethical. The agent can lowball the projected price knowing the house will sell for more. Or if an offer comes in below the listing price, an agent may be tempted not to present it to the seller, which is required by law.
● Multiple listing: Placing a property on the multiple listing service (MLS) allows it to be viewed by brokers, agents and buyers.
● Pocket listing: Often — with the permission of the seller — the agent will not put the listing on MLS. There are advantages and disadvantages to such a listing. Your broker may have a pool of potential buyers and believe that MLS will not be that helpful, particularly for high-end properties. On the other hand, a pocket listing limits access to your house. If your agent proposes such a listing, ask for a list of pros and cons before you make a commitment.
Once you have been presented with a listing agreement, here are some suggestions:
● If the agent made certain commitments, such as how many open houses they will conduct, make sure those promises are spelled out in the agreement and that all such out-of-pocket costs are paid by the broker.
● The commission is paid only if the sale takes place or if the seller is in default and breaches the listing contract. If the buyer defaults and the seller keeps the earnest money deposit, the listing agreement should spell out how much the broker will receive.
● Finally, how long should the home be listed? I generally recommend no more than six months. If after that time you are satisfied with the way the agent has been working, the agreement can be extended. But if you are not happy, why prolong it? Get another agent.
Benny L. Kass is a Washington and Maryland lawyer. This column is not legal advice and should not be acted upon without obtaining legal counsel. Send questions to email@example.com.