THE HOME BUYING & SELLING PROCESS - THE LISTING (SELLING) AGREEMENT

Selling your home creates availability in the home buying market place. When you decide to sell your home, your options are to sell it yourself or hire an Agent. This series of articles will illustrate pitfalls of selling on your own through the various steps of the process and why it's a good idea to have an Agent. At a minimum, you can take advantage of Agents representing buyers of your home (otherwise, you will have to find Buyer’s yourself).

Real estate Agents represent you with a signed agreement. When selling your home, this agreement is referred to as a Listing Agreement since Agents almost always list the home on a multiple-listing-service (MLS). Listing on an MLS advertises your home directly to other Agents representing Buyers’ interested in buying a home. There is no other direct marketing more effective than the MLS.

The Listing Agreement is a contract between you and the Broker that sponsors your Agent. The Broker takes full responsibility for the Agent’s duties. The Agent represents the Broker and is authorized to act on his behalf to represent you. Therefore, the Agent has a fiduciary duty to ensure that your interests are always held above his or the Broker's. This is binding in real estate law and Agents can be penalized and even lose their license for lack of duty.

One of the key items in the Listing Agreement is the selling price. You must decide on a selling price, normally with the help from your Agent. A separate article is presented in this series describing how the optimum selling price is determined.

As with any contract, the Listing Agreement includes a timing component for the beginning and end of the agreement. If your home has not sold by the time the agreement expires, there are no further obligations from either party to continue. However, the agreement can be terminated at any time by either party through mutual agreement.

Once signed, the contract obligates your Agent to represent and work for you in all aspects of selling your home. Your Agent’s fiduciary (trust) duties include obedience, loyalty, disclosure, confidentiality, accounting, and reasonable care. This means that as long as the contract is in place, your Agent must remain loyal to you. Even after termination of the contract, your Agent must still maintain confidentiality and accountability.

The agreement also lists out the commission to be paid to your Agent/Broker when earned and payable. The terms earned and payable are defined in the contract. Agents work very hard to earn this commission and put in a lot of time. Their business has numerous expenses that are often not disclosed to you. Some may include signs, advertising, professional photos/videos, MLS subscriptions, association memberships, etc.

In nearly all cases, only half of the commission is actually paid to your Agent. The other half is paid to the Buyer’s Agent. This is to ensure the best opportunity to match a Buyer to your home being sold. While commissions are negotiable, Agents may lack motivation to spend money on advertising or professional services needed to optimize the selling process at non-competitive rates.

Commissions are normally not payable until the transaction is closed. You pay the commission as a debit at closing and are not required to pay the Agent directly. Settlement of these debits and credits are handled by the Escrow Agent.

As with any contract, if there is anything that you do not understand, you should consult an attorney. Consulting cost is often more affordable than expected and is almost always worth it. The Agent cannot provide you legal advice unless he is an attorney himself. Otherwise, he could lose his license.

Once the Listing Agreement is in place, your Agent can then proceed immediately with making arrangements to sell your home. Preparing your home for sale is an important step before listing your home. This is covered in a separate article of this series, in addition to showing your home to prospective Buyers.