If you’re planning to sell your home in the near future, you’ve got a few tasks on your plate, and one of the more important ones is teaming up with a real estate professional. Having an agent by your side guiding you throughout the listing and selling process is extremely helpful and will significantly improve the odds of a successful transaction.
This relationship is a professional one, and the services that your agent provides you with will need to be documented and signed by both you and your agent. Such documentation is called a Listing Agreement, and it outlines all the duties that your agent is responsible for providing you with, as well as your obligations in the transaction.
But this is a contract, which means it is legally binding after you sign it. As with any other type of contract, it’s important to know exactly what you are signing before you get yourself into any type of legal obligations.
Here are a few things you should know about Listing Agreements before you sign one.
Listing Agreements are not meant to last forever. You and your agent are not supposed to be bound to the agreement for an infinite amount of time, which is why there will typically be a term specified in the contract that details when the contract takes effect and the date that it expires. During the term, the contract is in effect and all parties are bound by its terms.
The length of the term depends on a few things, including the temperature of the market. If the market is relatively slow, a longer term will give your agent more time to market your home before finding a willing buyer. On the other hand, a hot market will likely make it easier for your agent to find a buyer, in which case a shorter term may suffice.
The Commission Will Be Detailed
Real estate commissions are typically up for negotiation, though the average rate tends to stick around the 5% to 6% mark of the sale price of the property. That amount is then usually split between your listing agent and the buyer’s agent, but not necessarily evenly. Many times buyer agents get a larger chunk of the cut, though that is left up to the agents and their brokerages to decide.
In any case, the commission rate that is owed to your agent will be outlined in the contract so there are no surprises when all is said and done. The time that the commission is due should also be specified, but it’s usually not payable until the deal closes.
The Use of MLS Will Be Stipulated
The overwhelming majority of listings are included in the Multiple Listing Service (MLS) to be broadcast to all participating agents in the local area. The MLS is a powerful marketing platform for your real estate agent because it allows as many eyes as possible to see your home. Obviously, the more people see your listing, the higher the odds that you will be able to find a qualified buyer.
Unless you have specific reasons not to list on the MLS, such as privacy concerns, your Listing Agreement will specify that your listing will be posted on the MLS.
Your Agent’s Duty to You Will Be Outlined
Your real estate agent owes you a fiduciary duty to uphold your best interests throughout the selling process as your representative. Such a duty will be outlined in the contract and will need to be upheld throughout the entire duration of the contract’s term.
The agreement will usually list the activities that your agent is required and authorized to carry out on your behalf, such as informing you about all offers, putting up a For Sale sign, posting your listing on the MLS, and so forth.
Your Duties Will Also Be Outlined
Your agent certainly has a duty to fulfill when marketing and selling your home, but you have some responsibilities as well, and the Listing Agreement will outline them. One of the big ones involves your obligation to pay your agent the commission earned and due after your agent finds you a buyer within the term of the contract.
Many Listing Agreements will include a safety clause that protects the agent should a seller attempt to wait until the listing expires before accepting an offer from a buyer so they can avoid paying commissions.
How Disputes Are to Be Handled Will Be Detailed
Unfortunately, disputes can occur between sellers and their real estate agents. If this should happen between you and your agent, your contract will outline exactly how such disputes should be handled and carried out.
The Bottom Line
Listing Agreements are required before a real estate transaction can be completed, which is why they are often signed before an agent actually starts listing and marketing homes for sellers. Your real estate agent will go over the Listing Agreement in great detail before you sign it in order to help you understand it.
If at any point something does not make sense, do not hesitate to interrupt your agent for a more in-depth explanation. Remember, this is a contract that makes you legally bound to its terms, so you want to be sure that you know exactly what you’re signing.