1. Washington Real Estate Practices
Lesson 2:
Listing Agreements
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2. Listing Agreements
Listing agreement is contract between brokerage and seller.
Three types:
open listings
exclusive agency listings
exclusive right to sell listings
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3. Open Listings
Open listing: seller pays commission only if brokerage sells property.
To be paid, brokerage must be procuring cause of sale.
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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.
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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.
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6. Exclusive Agency Listings
Exclusive agency listing: brokerage entitled to commission if anyone but seller finds buyer.
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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.
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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.
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9. Summary Types of Listings
Open listing
Procuring cause
Exclusive agency listing
Exclusive right to sell listing
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10. Listing Agreement Elements Basic contract elements
Listing agreement must contain all basic contract elements:
competent parties
offer and acceptance
consideration
legal purpose
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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
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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.
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13. Listing Agreement Elements Property description
Legal description may be obtained from:
title insurance company,
county tax records, or
seller’s deed.
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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.
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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.
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16. Promise of Compensation Fixed amount
Compensation is usually fixed figure, such as:
percentage of sales price (most common), or
set dollar amount.
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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.
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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.
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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.
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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.
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21. Summary Listing Agreement Elements
Promise of compensation
Net listing
Writing requirement
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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
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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.)
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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.
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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.
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26. Listing Agreement Provisions Property description
Listing agreement requires legal description.
If description is too lengthy, it may be photocopied and attached.
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27. Listing Agreement Provisions Listing price
Listing agreement should include listing price, as well as any particular requirements concerning financing or closing.
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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.
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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.
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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.
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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.
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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.
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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.
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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
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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.
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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.
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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.
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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.
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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.
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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
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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48. Summary Listing Agreement Provisions
Termination
Commission rate
Extender clause
Hold harmless clause
Signatures
Listing input sheet
Modifying a listing agreement
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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.
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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.)
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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.
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52. Seller Disclosure Statement Disclosure sections
1. Title
Includes questions about encumbrances, easements, encroachments, and other restrictions that affect use of property.
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53. Seller Disclosure Statement Disclosure sections
2. Water
Seller must disclose source and condition of water supply and any water rights.
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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.
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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.
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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
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57. Seller Disclosure Statement Disclosure sections
6. Homeowners association/common interest
Seller discloses information about homeowners association, assessments, and commonly owned areas.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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72. Listing Vacant Land Vacant land has special considerations, such as:
available utilities
zoning restrictions
dimensions of property
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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.
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74. Summary Required Disclosures
Seller disclosure statement
Right of rescission
Disclosure of defects
Lead-based paint disclosure
Vacant land
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