Basic guide about Commercial Real Estate Listing Agreement

Most often, commercial real estate sales need brokers without whom selling a property is just impossible. Brokers prepare the listing agreements required for the proposed transaction. The type of listing agreement that they prepare also varies from state to state and broker to broker.

Every listing agreement addresses some critical issues, but some information is always the same in every listing. If you are also thinking of selling your property, you should have basic knowledge about listing agreements.

The type of listing agreement you choose depends on your preference, market inclination, and how you would manage your property selling duties. Continue reading to know what listing agreements are and what are their terms and conditions.

What is a Listing Agreement?

This is a contract that authorizes the real estate brokers to find the buyer of the property based on the owner’s terms. In return, the broker gets the commission from the owner for his services.

It is not a real estate contract; instead, it is an employment contract where the property owner hires the real estate broker to represent the owner. In this type of agreement, no property transfer occurs between broker and property owner.

The common types of listing agreements that brokers use are available listing, exclusive agency listing, and a complete right-to-sell listing agreement.

Types of Listing Agreements

Open listing

The seller retains his right to hire any number of brokers. It is a non-exclusive listing, and the seller has to pay the commission only to those brokers who find a willing buyer. The seller also holds the right to sell his property independently without paying any commission to any broker.

Exclusive agency listing

In this type of listing, the property owner authorizes the broker to act as his exclusive agent. The seller keeps the right to sell the property independently. If the broker finds a willing buyer, the seller has to pay the commission to the broker.

Exclusive right-to-sell listing

Right to sell is the exclusive listing that is most commonly used. This listing enables the property owner to hire a broker that acts as a sole agent who has the exclusive right to represent the seller and his property.

With this agreement, the seller is obligated to pay the commission to the broker, no matter who is responsible for selling the property.

In exclusive right to sell listing, the property owner pays the listing fee and the broker fee. When a broker sells a property, the owner is obligated to pay the commission.

However, an additional clause in the contract can liberate the owner to pay commission to the broker. This exception allows the owner to sell the property himself without involving the broker.

Therefore, if you found a relative who is willing to buy your house, your broker will produce an agreement for your relative without owing any commission.

For your convenience, here is a sample of a general exclusive right-to-sell listing agreement.

Exclusive Right-To-Sell Listing Agreement Sample

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Terms and conditions for listing agreement

– Under real estate license laws, only brokers are responsible for listing, selling, or renting the owner’s property.

– Most of the listing agreements require the same information and start with the property description. The property description typically includes the property list left after selling the current property and the list of personal property that the seller wants to remove.

This agreement also enlists the commission structure and amount, listing price, broker’s responsibilities, the seller’s responsibilities, termination date, additional terms and conditions, and mediation terms.

– The listing agreement can be terminated if:

  • The broker did not perform his duties responsibly
  • The broker did nothing to market the property
  • The property was destroyed (fire, flood)
  • Death or insanity of broker or seller

– The termination date is mentioned in the listing agreement and is also negotiable. It can be for 30 days, 90 days, 6 months, 1 year, or more than 1 year. Typically, the time frame for exclusive right-to-sell listing is 60-90 days which can be renewed.

– If the property is not sold till the end of the exclusive right-to-sell agreement, the seller can find another agent to sell his home.

– The real estate commission ranges between 2.5% -3% of the sales price.

– The seller can terminate the agreement if it is mentioned. While signing a contract, make sure that you can terminate the contract with the broker whenever you want. Moreover, carefully read about the hold-over agreements and post-contract responsibilities of the broker and seller.

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