Modern Real Estate Practice in Illinois Chapter 6: Brokerage Agreements

Listing Agreements with Sellers Types of listing agreements Exclusive right-to-sell listing Exclusive-agency listing Open listing Net listing Option listing © 2008 Dearborn Real Estate Education

Listing Agreements with Sellers Expiration of listing period Broker Protection clause Provides that the property owner will pay the listing broker a commission if, within a specified number of days after the listing expires, the owner transfers the property to someone the broker originally introduced to the owner © 2008 Dearborn Real Estate Education

© 2008 Dearborn Real Estate Education The Listing Process Pricing the Property Competitive market analysis (CMA) Calculating sales price, commission and net to seller © 2008 Dearborn Real Estate Education

Information Needed for Listing Agreements Names and relationship, if any, of owners Street address and legal description of property Size, type, age, and construction of improvements Number of rooms and their sizes Dimensions of the lot © 2008 Dearborn Real Estate Education

Information Needed for Listing Agreements Details about any existing loans and the possibility of seller financing Amount of outstanding special assessments Zoning classification of property Current property taxes Neighborhood amenities © 2008 Dearborn Real Estate Education

Information Needed for Listing Agreements Any real property to be removed from the premises Any additional information that would make the property more appealing and marketable Any required disclosures concerning agency representation and property conditions © 2008 Dearborn Real Estate Education

© 2008 Dearborn Real Estate Education The Listing Agreement Illinois law requires the following disclosures be included with listing contracts Disclosure of material facts Disclosure of interest Disclosure of any special compensation Earnest money and purchase default Disclosure of property condition © 2008 Dearborn Real Estate Education

© 2008 Dearborn Real Estate Education The Listing Agreement Listing Agreement Issues Type of listing agreement Broker’s authority and responsibilities Names of all parties to the contract Brokerage firm Listing price Real property and personal property © 2008 Dearborn Real Estate Education

© 2008 Dearborn Real Estate Education The Listing Agreement Listing Agreement Issues Leased equipment Specific identification of the property Proposed dates for closing and buyer’s possession Closing issues Evidence of ownership © 2008 Dearborn Real Estate Education

© 2008 Dearborn Real Estate Education The Listing Agreement Listing Agreement Issues Encumbrances Homeowner warranty program Commission Termination Broker protection clause Warranties by the owner with reference to type of deed that will be used © 2008 Dearborn Real Estate Education

© 2008 Dearborn Real Estate Education The Listing Agreement Listing Agreement Issues Indemnification (“hold harmless”) wording Nondiscrimination Antitrust wording The signatures of the parties The date the contract is signed © 2008 Dearborn Real Estate Education

Buyer Agency Agreements A buyer agency agreement is an employment contract under which the broker is employed as the buyer’s agent the buyer is the principal the purpose is to find a suitable property for the buyer © 2008 Dearborn Real Estate Education

Buyer Agency Agreements Types of Buyer Agency Agreements Exclusive buyer agency agreement Exclusive-agency buyer agency agreement Open buyer agency agreement © 2008 Dearborn Real Estate Education

Buyer Agency Agreements Buyer Representation Issues The licensee should make the same disclosures to the buyer that the licensee would make in a listing agreement The licensee should explain the forms of agency available and the parties’ rights and responsibilities and services provided under each type © 2008 Dearborn Real Estate Education

Buyer Agency Agreements Compensation Issues Buyer’s agents may be compensated in the form of a flat fee for services, an hourly rate or a percentage of the purchase price © 2008 Dearborn Real Estate Education

Termination of Broker Employment Agreements An employment contract may be cancelled when the agreement’s purpose is fulfilled when the agreement’s term expires without a successful transfer if the property is destroyed or its use is changed by some force outside the owner’s control, such as zoning change or condemnation by eminent domain © 2008 Dearborn Real Estate Education

Termination of Broker Employment Agreements An employment contract may be cancelled if title to the property is transferred by operation of law, as in the case of the client’s bankruptcy if the broker and client mutually agree to end the agreement or if one party ends it unilaterally (in which case he or she may be liable to the other party for damages) © 2008 Dearborn Real Estate Education

Termination of Broker Employment Agreements An employment contract may be cancelled if either party dies or becomes incapacitated if either the broker or client breaches the contract, the agreement is terminated and the breaching or canceling party may be liable to the other for damages © 2008 Dearborn Real Estate Education