© 2013 rockwell publishing washington real estate practices lesson 2: listing agreements

Washington Real Estate Practices

Lesson 2:

Listing Agreements

Listing agreement is contract between brokerage and seller.

Three types:open listingsexclusive agency listingsexclusive right to sell listings

Open Listings

Open listing: seller pays commission only if brokerage sells property.To be paid, brokerage must be procuring

cause of sale.

Open ListingsProcuring 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.

Open ListingsRarely 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.

Exclusive Agency Listings

Exclusive agency listing: brokerage entitled to commission if anyone but seller finds buyer.

Exclusive Agency ListingsWhen 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.

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.

SummaryTypes of Listings

• Open listing• Procuring cause• Exclusive agency listing• Exclusive right to sell listing

Listing Agreement ElementsBasic contract elements

Listing agreement must contain all basic contract elements:competent partiesoffer and acceptanceconsiderationlegal purpose

Listing Agreement ElementsOther required elements

Required elements specific to listing agreement:property descriptionpromise of compensation (conditions)amount of compensationagreement in writing and signed by seller

Listing Agreement ElementsProperty description

Property must be clearly identified, usually through legal description.Street address is never sufficient since it

does not refer to property’s boundaries.

Listing Agreement ElementsProperty description

Legal description may be obtained from:title insurance company,county tax records, orseller’s deed.

Listing Agreement ElementsPromise of compensation

Listing should include promise to compensate brokerage for services. Compensation is conditioned on finding

ready, willing, and able buyer.

Promise of CompensationReady, 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.

Promise of CompensationFixed amount

Compensation is usually fixed figure, such as:percentage of sales price (most

common), orset dollar amount.

Promise of CompensationNet 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.

Listing Agreement ElementsIn 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.

In WritingNo 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.

In WritingSignature

Agreement must also be signed by party contract is being enforced against.Seller cannot be sued for commission

unless seller signed listing agreement.

SummaryListing Agreement Elements

• Listing agreement• Promise of compensation• Net listing• Writing requirement

Listing Agreement ProvisionsBrokerage’s authority

Listing agreement should state extent of brokerage’s authority, such as authority to:list property with MLSplace advertisements for propertyreceive offers and good faith deposits on

seller’s behalf

Brokerage AuthorityAgency 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.)

Listing Agreement ProvisionsListing 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, orif local real estate market is slow.

Listing Agreement ProvisionsTermination of agreement

Listing may be terminated by:closing of sale of property,seller dying or losing competencebrokerage going out of business or losing

its license,mutual agreement, orunilateral decision by seller or brokerage.

Listing Agreement ProvisionsProperty description

Listing agreement requires legal description.If description is too lengthy, it may be

photocopied and attached.

Listing Agreement ProvisionsListing price

Listing agreement should include listing price, as well as any particular requirements concerning financing or closing.

Listing Agreement ProvisionsCommission

Listing agreement form has blank for amount of commission:percentage of sales price, orfixed dollar amount.

Listing form cannot fix rate of compensation; rate must be fully negotiable.

Listing Agreement ProvisionsCommission

Agreement should state under what conditions brokerage earns commission.

Typically, commission earned if ready, willing, and able buyer is found.

CommissionExtender 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.

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.

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.

Listing Agreement ProvisionsKeybox

Listing agreement authorizes brokerage to install keybox on property.Form often includes a disclaimer of

liability for misuse of keybox.

Listing Agreement ProvisionsMarketing 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

Listing Agreement ProvisionsIndemnity

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.

Listing Agreement ProvisionsMultiple 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.

Listing Agreement ProvisionsDeposit

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.

Listing Agreement ProvisionsAttorneys’ 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.

Listing Agreement ProvisionsListing 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.

Listing InformationInput sheet

Listing input sheet asks for:property locationsquare footagenumber of roomsenergy sources and energy-efficient featuresfeatures such as views or waterfront accessneighborhood amenities such as nearby

schools and parks

Listing Agreement ProvisionsSignatures

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.

SignaturesBusiness 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.

SignaturesBusiness 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.

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.

Listing Agreement ProvisionsReceipt 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.

Modifying the Listing AgreementRequires written consent

Listing agreement can be modified only with written consent of both parties.Any change must be initialed and dated

by both parties.

Modifying the Listing AgreementAddendum 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.

SummaryListing Agreement Provisions

• Termination• Commission rate• Extender clause• Hold harmless clause• Signatures• Listing input sheet• Modifying a listing agreement

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.

Seller Disclosure Statement When required

Seller disclosure statement required in sale of:single-family homesmulti-family dwellings up to four unitsmobile homes sold with real property“for sale by owner” homesnew construction

(Disclosures for condos may be handled by public offering statement instead.)

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.

Seller Disclosure Statement Disclosure sections

1. Title

Includes questions about encumbrances, easements, encroachments, and other restrictions that affect use of property.

2. Water

Seller must disclose source and condition of water supply and any water rights.

3. Sewer/On-site sewage system

Information about sewer or septic system, and type of sewage disposal system used.

4. Structural components

Includes information about structural components of property (roof, foundation, etc.).

Seller must disclose any additions, remodeling, pest problems, settling, and inspections.

5. Systems and fixtures

Section lists types of systems, fixtures, or appliances, such as the:electrical systemplumbing system hot water tanksecurity systemheating and cooling system

6. Homeowners association/common interest

Seller discloses information about homeowners association, assessments, and commonly owned areas.

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.

8. Lead-based paint

Required disclosure of possible presence of lead-based paint if house was built before 1978.

9. Manufactured and mobile homes

If property includes a manufactured or mobile home, seller must disclose any alterations made.

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.

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.

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.

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.

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.

If seller fails to give buyer a disclosure statement, buyer can rescind the agreement at any time until closing.

Decision to rescind or not is entirely up to buyer.Buyer does not need to reveal specific

concerns about disclosure statement.

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.

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.

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.

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.

Listing Vacant Land

Vacant land has special considerations, such as:available utilitieszoning restrictionsdimensions of property

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.

SummaryRequired Disclosures

• Seller disclosure statement• Right of rescission• Disclosure of defects• Lead-based paint disclosure• Vacant land

© 2013 rockwell publishing washington real estate practices lesson 2: listing agreements

rockwell publishing

compensation listing

seller slide

compensation agreement

cause exclusive agency

different brokerage

required elements

elements specific

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