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Listing Agreements in Real Estate

The listing agreements They are fundamental documents in the real estate industry in the United States. These contracts represent a legally binding agreement between a listing broker and a client, establishing a relationship of special agency and defining the roles and responsibilities of the parties involved. Through these agreements, fiduciary duties are created for the agent and the agent's authority in the transaction is outlined. Let's look at the key aspects of listing contracts in detail.

  • broker's enforceable contract of employment
  • establishes special agency relationship
  • you define roles of parties
  • creates fiduciary duties for the agent
  • describe agent's scope of authority

Parties involved

  1. Listing Broker: Acts as fiduciary of the client, whether a buyer or a seller. The listing broker represents the interests of the client and has fiduciary duties towards him.
  2. Subagent (Subagent): The subagent is an agent who works on behalf of the listing broker and is therefore a fiduciary for the listing broker's client. In some states, subagency is not allowed.
  3. Customer: In a transaction, the client is a non-fiduciary party, meaning that he or she is not represented by the listing broker as an agent. However, the broker must still act fairly and honestly towards the client.
  • listing broker – fiduciary of buyer client or seller client
  • subagent – fiduciary of listing broker's client
  • customer – non-fiduciary principal in transaction

Fiduciary Duties

Fiduciary duties are legal obligations that the listing broker has towards his client. These duties vary depending on whether the broker represents the buyer or the seller.

For the Client:

  • loyalty: The broker must place the client's interests above his own interests or those of third parties.
  • Obedience: The broker must follow the client's legal instructions.
  • Disclosure: The broker must disclose all relevant information to the client.
  • Care and Diligence: The broker must act competently and diligently.
  • accounting: The broker must properly handle the funds and documents related to the transaction.

For the Non-Fiduciary Client (Customer):

  • Honesty and Fair Treatment: The broker must treat the non-fiduciary client with honesty and fairness.
  • Reasonable Care and Ability: The broker must exercise reasonable care and skill in dealing with the non-fiduciary client.
  • Adequate Disclosure: The broker must provide adequate disclosure to the non-fiduciary client.

Authority

The authority of the listing broker is limited to what is established in the listing contract. The broker cannot enter into contracts on behalf of the client unless specifically authorized to do so. Clients are only responsible for the actions of the broker within the scope of its authority.

Contract Law

The listing agreements are unilateral contracts, which means that only one of the parties (the broker) commits to carrying out a specific action, which is to find a buyer or seller. These contracts can be oral and, in some states, an exclusive listing agreement must be in writing to be legally enforceable. Additionally, these contracts are considered personal service contracts and are not transferable or assignable.

Types of Listing Agreements

There are several types of listing contracts used in real estate in the United States:

Exclusive Right-to-Sell:

  • It is granted to a single broker.
  • Generally, it must be in writing.
  • It has an expiration date.
  • The broker receives a commission if the property sells during the contract period.

Agency Exclusive (Exclusive Agency):

  • Exclusive except for the owner.
  • It can be written or oral.
  • It has an expiration date.
  • The broker receives a commission unless the owner sells the property.

Open Listing:

  • It is non-exclusive, meaning the owner can work with multiple brokers.
  • It can be written or oral.
  • It does not have an expiration date.
  • The commission is awarded to the broker who was the “efficient cause” of the sale.

Net Listing:

  • All proceeds from the sale above a minimum price set by the seller go to the broker.
  • This type of listing is discouraged and, in some cases, illegal due to potential conflicts of interest.

Multiple Listing:

  • The listing is placed on the Multiple Listing System (MLS).
  • The owners agree to the rules and regulations of the MLS.

Buyer Agency Agreements:

  • These agreements create a fiduciary relationship with the buyer.
  • If exclusive, the buyer agrees to work only with the buyer's representative to purchase a property.
  • They must have an expiration date and meet other requirements to be valid.

Compensation/Termination

Compensation: Compensation is negotiated between the agent and the principal and is based on results. The commission is awarded to the agent who has been the “efficient cause” of finding a ready, willing and able buyer or seller.

Causes of Termination: Listing agreements may terminate for a variety of reasons, including performance, impossibility, mutual agreement, revocation, abandonment, default, expiration, invalidity, incapacity or death, involuntary transfer or destruction of property.

Agent Performance

The agent can only perform tasks authorized by the listing agreements and must verify the owner and property details. The agent may also delegate duties to sales agents and other brokers.

Revocation of a Listing

Clients always have the power to revoke a listing contract during the period stated in the contract. However, they could incur liability for commissions or damages as agreed in the contract.

Legal and Tax Disclaimer

Please be advised that the content presented in this blog is for informational purposes only and should not be construed as legal or tax advice. The articles and information provided here are written from the perspective of a real estate agent affiliated with Keller Williams, and do not represent legal or tax counsel.

As the author, I am a licensed real estate professional under Keller Williams, holding Brokerage DRE License Number: #02197031. However, it is important to note that my expertise is in the field of real estate, and not in legal or tax matters. The insights and opinions shared on this blog are based on my experiences and knowledge in the real estate industry and should be treated as general guidance rather than definitive legal or tax advice.

For specific legal or tax concerns relating to any real estate transactions or investments, readers are strongly encouraged to consult with a qualified attorney or tax advisor who can provide tailored advice based on your individual circumstances and the latest legal and regulatory requirements.

The information on this blog is provided "as is" without warranty of any kind, and I, along with Keller Williams and its affiliates, disclaim all liability for any loss, damage, or misunderstanding arising from reliance on the information contained herein.

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