Understanding the Terms of Your Broker Listing Agreement

A broker listing agreement is a binding contract between a real estate broker and a seller. This agreement states the broker has a legal right to list, advertise, and broker the sale of your property. These agreements are extremely common in the real estate world, but before you sell your business, you should have a firm understanding of its terms. Before you place your signature on the dotted line, learn more about what will be included.

What Is Included in an Agreement?

•Duration: A true broker listing agreement will set forth the amount of time you are obligated to retain the services of the broker. Shorter listing agreements give you the leeway to select another broker if yours does not live up to his or her responsibilities. As a seller, shorter agreements are favorable to you since you will be able to discharge your broker if he or she fails to satisfy you in a shorter amount of time. If you sign a longer agreement, you may be forced to retain the services of your agent for a longer amount of time than you would prefer.

•Commission: Listing agreements also provide you with details about your broker’s commission. The commission is the percentage of the proceeds you will pay your broker after the transaction is complete. The average broker demands between five and six percent of the proceeds, but this is not a hard and fast rule. Brokers are allowed to set their own commission rates, so it is imperative that you know the rate before signing the agreement.

•Responsibilities: This section of the agreement is one of the most important since it will detail the duties and obligations your broker is required to perform on your behalf. This section is not ironclad, and there are small requests you can make of your broker, such as creating a listing sheet or placing your property on the MLS.

•Right to Sale: The agreement will give your broker the exclusive right to sell your property for the specified duration of time. This means you will not be able to use the services of another broker or agent, but other arrangements can sometimes be made in your favor.

•Protection Clause: The protection clause protects the broker in the event you attempt to avoid paying commission after the agreement’s expiration date. This is important to your broker since some sellers attempt to avoid paying commission by finding a buyer early on and conducting the sale after the agreement ends. If you want the freedom to change brokers during representation, be sure to include it in your contract. This will prevent you from having to pay two separate commissions.

•Representations: Most agreements require sellers to confirm certain facts prior to retaining a broker’s services. These facts include whether or not you are legally able to sell your property. It also verifies that you are the sole owner of the property. This will ensure that the transaction is legal and irreversible.

•Dispute Resolution Terms: This is another important element of any broker listing agreement. The dispute resolution section of the agreement will outline the steps for resolving a conflict between you and your broker. Some brokers prefer litigation while others prefer legal mediation. Whatever the method may be, you should take the time to understand this section thoroughly.

Many brokers and agents utilize standard agreement forms that have been created by national or local real estate associations, so your broker may be hesitant to alter the terms. This can be upsetting at first, but if you don’t feel comfortable with a certain part of the agreement, you should avoid signing it. By reading your agreement and understanding all of its components, both you and your broker can benefit from a sale.

Legal Disclaimer

The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.