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If you are considering selling your home, you are most likely considering a real estate agent to assist you. And if this is the case, you need to understand the finer points of your real estate agent’s listing agreement.
The listing agreement is the contract between you and the real estate agent that outlines the details of your home selling and listing arrangement.
But before you sign the contract blindly, you want to carefully consider several points before binding yourself to that specific agent. Also, it is important to keep in mind that the contract is negotiable. Reading through it with care can reveal several areas that you may want to further research or negotiate before you decide to sign.
1. Commission
The commission amount for real estate agents is typically between 5% to 6% of the proceeds of the sale. Many agents may try to start off at 7%, but you should definitely negotiate that number down to at least a more reasonable 6%.
It is also important to understand when the agent will receive their commission. You may find that the commission is earned if the real estate agent finds you a willing and capable buyer who offers the price you specified, even if you decide not to accept the offer. Or, in some cases, even if the offer was accepted but falls through during the closing process, you may still owe the agent their commission. Although, if the problem was with the buyer, this is typically not the case.
You definitely want to understand any details about when the agent is receiving commission before signing, and, in most cases, you will want to change this section so that the agent only receives commission after the property is closed on.
2. Types of Listing Agreements
An exclusive right to sell will be your agent’s first choice, because it gives them the exclusive right to sell your property. But you may decide you want to retain the right to sell the property on your own, without paying your agent a commission. If this is the case, you need to be sure that is spelled out very clearly in the agreement so that there are no gray areas.
3. Duration
The listing agreement will last for a set period of time, usually around 3 to 6 months. From the seller’s perspective, you want a shorter duration, that way if you don’t like the agent, it is easier for you to walk away and find someone else. It also puts more pressure on the agent to sell your house as quickly as possible.
From the agent’s perspective, they will want a longer duration. After all, they have put a lot of work into getting your property ready to sell, only to lose it right when it might be gaining some real interest.
This section may require negotiation and some compromise, but definitely do not sign unless the time frame specified is one you feel comfortable with.
4. Duties
In the listing agreement, the agent’s duties should be clearly outlined to ensure that they are taking every step necessary to sell your house. A few examples include:
- Listing your property on the MLS.
- Posting a sign in the property’s yard.
- Installation of an electronic lockbox on the property.
- Specifics on when the real estate agent should notify you about offers.
- A commitment to a certain number of open houses in a given period.
There are obviously many other duties you may want to see from your agent specifically. Be sure to include the items you want and any that they previously promised in your listing agreement to ensure that the agreement clearly states what you expect from them.
5. Fees
Keep an eye out for any hidden fees, specifically administration or document preparation. You definitely don’t want to be surprised by a fee. And in some cases, you may be able to get the agent to waive some, or all, of these hidden charges.
In the end, selling a house is stressful enough without the added worry of an unclear listing agreement. Don’t sign anything until you completely understand it. And keep in mind that you can always negotiate the terms.
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