Selling a home is a lot easier and more streamlined when you’ve got a professional real estate agent blazing a trail for you and ensuring all items on the list are checked off. After you’ve chosen the right agent to market and sell your home, you’ll both sign a listing agreement, and in California, this document is referred to as the Residential Listing Agreement.
But before you enter a listing agreement with your real estate agent, it’s in your best interests to understand exactly what you’re signing, since this is a legally binding contract.
So, what’s included in a listing agreement?
Expiry Date
Your listing agreement is not binding forever. There will be an expiry date stipulated somewhere in the contract that specifies how long the agreement is in effect. This can be as long as six months or even longer if you agree to it.
Having said that, it’s usually best for you if the time frame is shorter. That way you’ll be off the hook sooner rather than later if you’re not happy with your agent’s work. Of course, you can always renew the agreement after the expiry date comes and goes.
Commission Paid to Your Agent
Your real estate contract will specify exactly how your real estate agent will be compensated for the work they’ve done with the transaction. Usually, agents are paid a percentage of the sale price of the home, or a commission. While this number can be negotiated, it’s typically in the 5% to 6% range. However, there may be some instances where agents are paid a flat rate for their services, though this isn’t typical.
Exclusive Right to Sell
This section of the contract specifies the exclusive right that your real estate agent has to sell your home before your contract expires. While there are other types of arrangements with a real estate agent that are possible, your agent will likely prefer an exclusive arrangement. An exclusive right to sell basically means that regardless of who buys the home, your agent will get the listing commission.
Protection Clause
As stated above, your listing agreement will contain an expiry date. However, it will probably also contain a protection clause that protects your real estate agent. Some buyers may attempt to avoid paying their agent’s commission by finding a buyer on your own while still bound to your Listing Agreement. They then wait until after the contract expires to sell to that buyer. A protection clause will help your agent recoup their owed commission in a case like this.
Fiduciary Duties
The Listing Agreement will detail the fiduciary duty that your agent has to you while you’re being represented under contract. The agreement will specify what the agent is permitted to do on your behalf. This can include things such as posting your property on the Multiple Listing Service (MLS), making a listing sheet with details of your property, and so forth.
The agreement will also list the duties that agents are obligated to follow through with while representing you throughout the duration of the contract. These typically include loyalty, confidentiality, disclosure, obedience, accounting, and reasonable care.
How Disputes Are to Be Resolved
If there is an issue between you and your agent, your listing Agreement will specify how disputes are to be resolved. If you feel that your agent is not fulfilling his or her duty, you can first ask if you can be let out of the contract. Many time agents are willing to dissolve the contract with little issue.
If you want to list your home with another agent, you will have to ask for an Unconditional Release, which differs from just getting your listing off the MLS. After you’ve been released, you can sign on with another agent.
The Bottom Line
A listing agreement is an important document in the sales process because it outlines all the terms involved in the transaction, and basically protects both you and your agent. It lists all the agreement terms, such as the listing price, listing time period, agent commission, and legal requirements that are involved in the transaction.
But this is a legal contract, and as such, you’ll be bound to it under the law after signing it. Like any other type of contract, it’s always best to fully understand precisely what’s in the document before signing on the dotted line.
