Listing agreement
A listing agreement is the contract between a property owner and a real estate broker. It engages the broker to market the property and sets out what they are paid and when.
It is a binding contract, and it is frequently signed with less attention than a document of that consequence deserves.
What it sets#
Price, and often a mechanism for adjusting it.
Term — how long the listing runs.
Commission, and critically the circumstances in which it is earned.
Type of listing, which determines who has to find the buyer for the fee to be due.
Scope — what is included in the sale, how the property will be marketed, and any restrictions on showings.
Types#
Exclusive right to sell is the standard. The broker earns the commission on a sale during the term whoever finds the buyer, including the seller's own brother-in-law.
Exclusive agency pays the broker unless the seller finds the buyer entirely independently — which sounds better for the seller and in practice produces disputes about who introduced whom.
Open listings engage multiple brokers with only the procuring one paid. They attract very little marketing effort, for obvious reasons.
Commission is earned on procuring a buyer#
A detail worth understanding.
Under most agreements the commission is earned when the broker procures a ready, willing and able buyer on the listed terms — not necessarily only on closing.
In practice it is nearly always paid at closing from the proceeds. But a seller who accepts an offer and then declines to complete may find the commission is owed regardless of whether the sale happened.
The protection period#
A clause under which the broker is owed commission if the property sells, after the listing expires, to a buyer the broker introduced during the term.
It usually runs for a stated number of days and often requires the broker to have provided a list of protected buyers.
This is a reasonable provision rather than a trap: it stops a seller and a buyer waiting out the listing to avoid the fee. Knowing it exists prevents the unpleasant surprise.
Selling a distressed property#
Two things differ.
Where the sale requires a lender's approval — a short sale — the listing needs to anticipate the timeline and the possibility that the price is set by the lender rather than the seller.
Where an estate or a personal representative is selling, the authority to sign comes from the probate court, and a listing signed by someone without that authority binds nobody.
Both are worth settling before marketing rather than after an offer arrives.