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Washington Real Estate Practices

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Presentation on theme: "Washington Real Estate Practices"— Presentation transcript:

1 Washington Real Estate Practices
Lesson 2: Listing Agreements © 2013 Rockwell Publishing

2 Listing Agreements Listing agreement is contract between brokerage and seller. Three types: open listings exclusive agency listings exclusive right to sell listings © 2013 Rockwell Publishing

3 Open Listings Open listing: seller pays commission only if brokerage sells property. To be paid, brokerage must be procuring cause of sale. © 2013 Rockwell Publishing

4 Open Listings Procuring cause
Procuring cause: person primarily responsible for bringing about purchase agreement between parties. If buyer sells property on his own or through another agent, brokerage will not receive commission under open listing. © 2013 Rockwell Publishing

5 Open Listings Rarely used
Open listings rarely used in residential transactions. Agents dislike them because disputes may arise over who was procuring cause of sale. Many multiple listing associations won’t accept open listings. © 2013 Rockwell Publishing

6 Exclusive Agency Listings
Exclusive agency listing: brokerage entitled to commission if anyone but seller finds buyer. © 2013 Rockwell Publishing

7 Exclusive Agency Listings When commission owed
If different brokerage sells home, firm that originally took listing receives commission. If seller sells property without assistance from any brokerage, no commission is owed. Doesn’t solve problem of potential disputes over who procured buyer. © 2013 Rockwell Publishing

8 Exclusive Right to Sell Listings
Exclusive right to sell listing: brokerage receives commission regardless of who sells property. If another brokerage or seller sells property, listing brokerage still receives commission. Gives brokerages greatest amount of protection. Most common type of residential listing. © 2013 Rockwell Publishing

9 Summary Types of Listings
Open listing Procuring cause Exclusive agency listing Exclusive right to sell listing © 2013 Rockwell Publishing

10 Listing Agreement Elements Basic contract elements
Listing agreement must contain all basic contract elements: competent parties offer and acceptance consideration legal purpose © 2013 Rockwell Publishing

11 Listing Agreement Elements Other required elements
Required elements specific to listing agreement: property description promise of compensation (conditions) amount of compensation agreement in writing and signed by seller © 2013 Rockwell Publishing

12 Listing Agreement Elements Property description
Property must be clearly identified, usually through legal description. Street address is never sufficient since it does not refer to property’s boundaries. © 2013 Rockwell Publishing

13 Listing Agreement Elements Property description
Legal description may be obtained from: title insurance company, county tax records, or seller’s deed. © 2013 Rockwell Publishing

14 Listing Agreement Elements Promise of compensation
Listing should include promise to compensate brokerage for services. Compensation is conditioned on finding ready, willing, and able buyer. © 2013 Rockwell Publishing

15 Promise of Compensation Ready, willing, and able buyer
Ready and willing buyer: makes offer that meets terms of listing agreement or is otherwise acceptable to seller. Able buyer: has financial ability to complete transaction. © 2013 Rockwell Publishing

16 Promise of Compensation Fixed amount
Compensation is usually fixed figure, such as: percentage of sales price (most common), or set dollar amount. © 2013 Rockwell Publishing

17 Promise of Compensation Net listings
Net listing: provides seller gets certain amount of cash from sale and brokerage receives anything over net amount. Net listings are illegal in Washington because they allow unscrupulous agents to take advantage of clients. © 2013 Rockwell Publishing

18 Listing Agreement Elements In writing
Under statute of frauds, all listing agreements must be in writing. If agent works under oral listing and seller refuses to pay commission, agent will be unable to sue to collect commission. © 2013 Rockwell Publishing

19 In Writing No specific format required
Any written agreement will meet writing requirement as long as it contains all necessary elements. Most brokerages use pre-printed listing forms. © 2013 Rockwell Publishing

20 In Writing Signature Agreement must also be signed by party contract is being enforced against. Seller cannot be sued for commission unless seller signed listing agreement. © 2013 Rockwell Publishing

21 Summary Listing Agreement Elements
Promise of compensation Net listing Writing requirement © 2013 Rockwell Publishing

22 Listing Agreement Provisions Brokerage’s authority
Listing agreement should state extent of brokerage’s authority, such as authority to: list property with MLS place advertisements for property receive offers and good faith deposits on seller’s behalf © 2013 Rockwell Publishing

23 Brokerage Authority Agency relationships
In listing agreement, seller agrees that only the firm and named agent are his agents. There is no seller agency with any of the other affiliated agents of the brokerage. (So the firm’s other agents can seek buyers for the property and act as buyer’s agent.) © 2013 Rockwell Publishing

24 Listing Agreement Provisions Listing period
Listing agreement form asks for beginning and ending dates of listing. Ninety days is common, but longer periods may be needed: for properties that are more expensive than average, or if local real estate market is slow. © 2013 Rockwell Publishing

25 Listing Agreement Provisions Termination of agreement
Listing may be terminated by: closing of sale of property, seller dying or losing competence brokerage going out of business or losing its license, mutual agreement, or unilateral decision by seller or brokerage. © 2013 Rockwell Publishing

26 Listing Agreement Provisions Property description
Listing agreement requires legal description. If description is too lengthy, it may be photocopied and attached. © 2013 Rockwell Publishing

27 Listing Agreement Provisions Listing price
Listing agreement should include listing price, as well as any particular requirements concerning financing or closing. © 2013 Rockwell Publishing

28 Listing Agreement Provisions Commission
Listing agreement form has blank for amount of commission: percentage of sales price, or fixed dollar amount. Listing form cannot fix rate of compensation; rate must be fully negotiable. © 2013 Rockwell Publishing

29 Listing Agreement Provisions Commission
Agreement should state under what conditions brokerage earns commission. Typically, commission earned if ready, willing, and able buyer is found. © 2013 Rockwell Publishing

30 Commission Extender clause
Extender clause (or protection or safety clause): clause that protects brokerage’s right to commission. Offers protection from parties who decide to wait to sign purchase agreement until after listing period to avoid paying commission. © 2013 Rockwell Publishing

31 Commission Extender clause
If seller sells property: within certain number of days after expiration of listing, to someone who learned about property through brokerage, then brokerage is entitled to commission. © 2013 Rockwell Publishing

32 Commission Extender clause
Many extension clauses state that no commission will be due if property listed with another firm during extension period. This way, seller won’t be liable for two commissions. © 2013 Rockwell Publishing

33 Listing Agreement Provisions Keybox
Listing agreement authorizes brokerage to install keybox on property. Form often includes a disclaimer of liability for misuse of keybox. © 2013 Rockwell Publishing

34 Listing Agreement Provisions Marketing property
Listing agreement states: brokerage promises to use reasonable care and due diligence in performing its duties seller promises to consider all offers and act in good faith to sell property © 2013 Rockwell Publishing

35 Listing Agreement Provisions Indemnity
Listing agreement includes “hold harmless” clause, in which seller takes responsibility for all information given to brokerage. If brokerage is sued because of misinformation provided by seller, seller will reimburse brokerage. © 2013 Rockwell Publishing

36 Listing Agreement Provisions Multiple listing service
Listing agreement states that: data will be submitted to MLS, and brokerage will cooperate with other MLS agents to sell property. MLS is not party to listing agreement—only function is to provide property information to other MLS members. © 2013 Rockwell Publishing

37 Listing Agreement Provisions Deposit
Listing agreement often states that if buyer breaches purchase and sale agreement, and seller keeps good faith deposit, then: seller will reimburse firm for costs from deposit, and split remainder of deposit with firm to cover firm’s commission. © 2013 Rockwell Publishing

38 Listing Agreement Provisions Attorneys’ fees
If dispute about listing agreement goes to trial, party that prevails will be entitled to award of attorneys’ fees and expenses. Amount will be fixed by court. © 2013 Rockwell Publishing

39 Listing Agreement Provisions Listing information
Seller with agent’s help fills out listing input sheet used by MLS to create listing. Sheet is considered part of listing. Should be completed before seller signs agreement. © 2013 Rockwell Publishing

40 Listing Information Input sheet
Listing input sheet asks for: property location square footage number of rooms energy sources and energy-efficient features features such as views or waterfront access neighborhood amenities such as nearby schools and parks © 2013 Rockwell Publishing

41 Listing Agreement Provisions Signatures
All sellers should sign names in full and note relationship (example: “a married couple”). If one member of married couple is selling separate property, include something like “a married person, selling her separate property” with signature. © 2013 Rockwell Publishing

42 Signatures Business entities
If corporation is selling property, officer of corporation may sign listing agreement. The officer must be expressly authorized to do so by resolution of corporation’s board of directors. © 2013 Rockwell Publishing

43 Signatures Business entities
If property is owned by partnership, any general partner can sign listing agreement. It’s best to have all partners sign. If property is owned by trust, trustee must sign listing agreement. © 2013 Rockwell Publishing

44 Listing Input Sheet Most listings are accompanied by listing input sheet. Used to provide MLS with information about property. Information provided will be available to public, so it must be absolutely correct. © 2013 Rockwell Publishing

45 Listing Agreement Provisions Receipt of copy
Agents are required by law to provide parties with copy of any document at the time of signing. Listing agreements include seller’s acknowledgement of receipt of copy. © 2013 Rockwell Publishing

46 Modifying the Listing Agreement Requires written consent
Listing agreement can be modified only with written consent of both parties. Any change must be initialed and dated by both parties. © 2013 Rockwell Publishing

47 Modifying the Listing Agreement Addendum form
If change is simple, it can be made on original listing form by crossing out original language. For more complex changes, use addendum form. © 2013 Rockwell Publishing

48 Summary Listing Agreement Provisions
Termination Commission rate Extender clause Hold harmless clause Signatures Listing input sheet Modifying a listing agreement © 2013 Rockwell Publishing

49 Seller Disclosure Statement
Washington law requires certain disclosures to prospective buyers. Required disclosure statement form must be given to buyer when purchase and sale agreement is signed. Seller, not agent, is responsible for filling out form. © 2013 Rockwell Publishing

50 Seller Disclosure Statement When required
Seller disclosure statement required in sale of: single-family homes multi-family dwellings up to four units mobile homes sold with real property “for sale by owner” homes new construction (Disclosures for condos may be handled by public offering statement instead.) © 2013 Rockwell Publishing

51 Seller Disclosure Statement Disclosure requirements
Disclosure form contains instructions to seller, and notice of buyer’s legal rights. Questions about property are broken down into ten major sections. © 2013 Rockwell Publishing

52 Seller Disclosure Statement Disclosure sections
1. Title Includes questions about encumbrances, easements, encroachments, and other restrictions that affect use of property. © 2013 Rockwell Publishing

53 Seller Disclosure Statement Disclosure sections
2. Water Seller must disclose source and condition of water supply and any water rights. © 2013 Rockwell Publishing

54 Seller Disclosure Statement Disclosure sections
3. Sewer/On-site sewage system Information about sewer or septic system, and type of sewage disposal system used. © 2013 Rockwell Publishing

55 Seller Disclosure Statement Disclosure sections
4. Structural components Includes information about structural components of property (roof, foundation, etc.). Seller must disclose any additions, remodeling, pest problems, settling, and inspections. © 2013 Rockwell Publishing

56 Seller Disclosure Statement Disclosure sections
5. Systems and fixtures Section lists types of systems, fixtures, or appliances, such as the: electrical system plumbing system hot water tank security system heating and cooling system © 2013 Rockwell Publishing

57 Seller Disclosure Statement Disclosure sections
6. Homeowners association/common interest Seller discloses information about homeowners association, assessments, and commonly owned areas. © 2013 Rockwell Publishing

58 Seller Disclosure Statement Disclosure sections
7. Environmental Section discloses soil and water problems, fill materials, damage caused by hazards such as flooding and earthquakes, the presence of shorelines or other critical areas, utility equipment, and radio towers. © 2013 Rockwell Publishing

59 Seller Disclosure Statement Disclosure sections
8. Lead-based paint Required disclosure of possible presence of lead-based paint if house was built before 1978. © 2013 Rockwell Publishing

60 Seller Disclosure Statement Disclosure sections
9. Manufactured and mobile homes If property includes a manufactured or mobile home, seller must disclose any alterations made. © 2013 Rockwell Publishing

61 Seller Disclosure Statement Disclosure sections
10. Full disclosure Seller must disclose any other material defects affecting the property or value that buyer should be aware of. Material defects that aren’t specifically addressed on form must still be disclosed. © 2013 Rockwell Publishing

62 Seller Disclosure Statement Disclosure requirements
Seller must sign the verification provision and acknowledge receipt of a copy of the form. Buyer signs the acknowledgement section. © 2013 Rockwell Publishing

63 Seller Disclosure Statement Timing of disclosure
Seller must give disclosure form to buyer within 5 days after the purchase and sale agreement is signed. Parties may agree in writing to different deadline. © 2013 Rockwell Publishing

64 Seller Disclosure Statement Waiver
Buyer may waive right to receive completed statement. If any answer to a question in form’s Environmental section was “yes,” buyer can’t waive receipt of that portion of statement. © 2013 Rockwell Publishing

65 Seller Disclosure Statement Right of rescission
Buyer has right to rescind purchase agreement within 3 business days of receiving the disclosure statement. Notice of rescission must be in writing. Buyer is entitled to a full refund of deposit upon rescission. © 2013 Rockwell Publishing

66 Seller Disclosure Statement Right of rescission
If seller fails to give buyer a disclosure statement, buyer can rescind the agreement at any time until closing. © 2013 Rockwell Publishing

67 Seller Disclosure Statement Right of rescission
Decision to rescind or not is entirely up to buyer. Buyer does not need to reveal specific concerns about disclosure statement. © 2013 Rockwell Publishing

68 Seller Disclosure Statement Updated disclosure
If new information arises or circumstances change after seller disclosure statement has been given, seller should give new disclosure statement. This reactivates 3-day period. © 2013 Rockwell Publishing

69 Seller Disclosure Statement Limitations on liability
Information in the disclosure statement is based on the seller’s actual knowledge of the property. Seller and real estate agent aren’t liable for inaccuracies in the statement, unless they knew of the inaccuracies. © 2013 Rockwell Publishing

70 Seller Disclosure Statement Limitations on liability
If seller fails to disclose a latent defect that agent knows about, agent must disclose. Otherwise, agent can be held liable. © 2013 Rockwell Publishing

71 Listing Vacant Land A listing input sheet for vacant land is quite different from a residential listing input sheet. Seller must fill out a property condition report for vacant land, instead of a seller disclosure form. © 2013 Rockwell Publishing

72 Listing Vacant Land Vacant land has special considerations, such as:
available utilities zoning restrictions dimensions of property © 2013 Rockwell Publishing

73 Listing Vacant Land Seller is prohibited from offering a portion of a larger property for sale, unless it has been platted and plat is properly recorded. © 2013 Rockwell Publishing

74 Summary Required Disclosures
Seller disclosure statement Right of rescission Disclosure of defects Lead-based paint disclosure Vacant land © 2013 Rockwell Publishing

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