Listing agreements are a necessary part of a real estate sale if you plan on using the services of a real estate agent. The listing agreement provides a structure for details about the sale of your home, while also providing a framework for the duties and expectations of you and your real estate agent. A listing agreement takes place in every market when you are using an agent, whether you are in Virginia Beach, VA, or Denver, CO. Below we will answer all the questions you may have regarding a listing agreement.
What is a listing agreement?
A listing agreement is a legally binding contract between a home seller and a real estate broker. The seller hires the broker or agent to handle the sale of the home, authorizing them to find a buyer for the house, and in exchange, the seller agrees to pay a commission to the agent. The commission is usually a percentage of the sales price of the home. For example, if the house sells for $225,000 and the agreed-upon commission is 6%, (though this fee is negotiable) the seller would owe the agent $13,500. This amount is typically split evenly between your listing agent and the buyer's agent.
What are the 3 most common types of listing agreements?
Your listing agreement will have a title on top of the contract. These titles vary across the country, so be sure to read the listing agreement closely to understand the agreement you have with your particular broker or agent. Listing relationships commonly come in 3 types:
Exclusive Right-to Sell Agreement: This type of listing agreement is the most common. It is a contractual agreement between the seller of a property and the listing broker, where the broker has the exclusive right to represent the property. With this agreement, the broker is entitled to their commission regardless of who sells the property so long as the listing agreement is in effect.
Exclusive Agency Listing: This listing agreement is a contractual agreement between the property owner and the broker, where the broker acts as the exclusive agent for the seller. The seller can sell the property on his or her own and not owe the broker a commission. However, if the broker is the one who sells the property, the commission will be owed to the broker.
Open Listing: This listing agreement is a contractual agreement where a home seller has given permission for more than one broker to advertise a property and the broker is only paid commission if they sell the property. If the house is sold by the home seller, no commission is paid out.
What does a listing agreement entail?
The listing agreement usually encompasses multiple items. First is a description of the property, including any personal property that will be left when the property is sold (such as curtains) and any personal property you will be taking with you when you move (like a pool table).
Also, the listing agreement specifically states the duties of both the home seller and the broker. It gives the agreed-upon listing price for the home, the terms of the broker’s compensation, the date the agreement terminates, information on conflict resolution between the seller and the broker (should that be necessary), and any additional conditions about the sale of the house.
When do you sign the listing agreement?
The listing agreement is signed once you and the broker have worked through all the details of the sale of your home and agree on each point. By signing, you are stating you are ready to have the agent proceed with the steps necessary to sell your home.
Do I have to sign the listing agreement?
You have to sign a listing agreement if you have decided to hire an agent to help you sell your home. It is a legally binding document that outlines your preferences relative to the sale of your home. If you choose to sell your house on your own, then there would be no listing agreement to sign since no broker would be involved in the transaction.
Can I negotiate on a listing agreement?
Yes, you can negotiate certain terms on the listing agreement. For instance, the amount of commission you pay to the agent is negotiable and so is the length of time the agreement will remain active. Usually, small changes can be made right on the contract and larger changes can be addressed in an addendum as needed.
How long does a listing agreement last?
Whether in Hampton Roads or elsewhere, a listing agreement lasts for as long as you and your agent agree. Typically, listing agreements last three to six months. A shorter time frame gives you the ability to hire a new agent if you aren’t happy with the services being provided by your current agent. However, at the end of any listing agreement, if you are satisfied with the work the agent has been doing on your behalf, it is easy to renew the contract for another three months.
What are the main things I need to look for in a listing agreement?
The duration of the agreement: Most listing agreements have a default duration, but this is negotiable. Some agents will prefer a longer-term (six months) while you may decide a shorter term would be better (three months).
List price: This is the sales price you and the agent agree to list your home at.
Commission: This will be spelled out in the listing agreement and is also negotiable. It is usually a percentage of the sales price, from 3-6%, and is paid by you to the broker or agent for their help in selling your home. If you agree to pay a “cooperating commission” to the buyer’s broker, that broker is paid out of this commission.
Types of listing agreement: The title will be something like Exclusive Right to Sell Agreement, Exclusive Agency Listing, or Open Listing, but read the agreement closely to understand your relationship and when commission is owed to the agent.
Responsibilities of each party: For example, whether you give permission for the agent to hold an open house.
What is the cost associated with a listing agreement?
There are typically no costs associated with the listing agreement specifically. However, the agreement does specify the broker or agent’s commission fee. This fee is paid to the agent at the time of closing, after the title company has confirmed a clear title and the property is formally signed over to the buyer.
What if my home doesn’t sell?
If your home doesn’t sell within the timeframe outlined on the listing agreement, you can renew your listing agreement with the realtor if you have been pleased with the work they have been doing on your behalf. You are also free to hire a new broker to sell your home if that fits best with your home selling goals. Be sure to review the termination language to confirm if you’ll owe any fees for the time and expense your agent incurred during the listing period.
What is a protection period?
A protection period, sometimes called a tail period, in a listing agreement helps to protect the agent against losing their commission. It is for a specific amount of time after the listing agreement expires. The protection period states that if someone who the agent showed the house to decides they would like to buy the home after the listing agreement has expired, but during the protection period, the agent would still be entitled to their commission.
Can I make changes to the listing agreement after signing?
You can make changes to the listing agreement after you have signed, but only if all parties agree. Usually, modifications to a listing agreement are completed in writing, either right on the agreement itself or in an addendum to the agreement.
The Bottom Line
When it comes to listing your home for sale in Hampton Roads, signing a listing agreement with an agent should not be stressful! The listing agreement protects both you and the agent, while creating a clear path to reach your selling goals.
If you are considering selling your home in Virginia Beach, we'd love to talk! Our listing commission fee structure is flexible and based on the specific property. Contact licensed associate broker Scott Westfall today for more information!
*This blog post is for informational purposes only and is not a substitute for legal advice. CGP Real Estate Consulting does not provide legal advice.