What is a Listing Agreement?
A listing agreement is a contract between a real estate agent and a property owner that gives the agent the right to access the property for the purposes of selling or renting out the owner’s property. With a signed listing agreement, a real estate agent can take action to list a property, to sell or rent out that property, to advertise the property in different ways (including through exclusive services) and to handle other important actions connected with the sale or rental of the property in order to market the property as much as possible and to get the best price for the owner.
Essentially, a listing agreement is an agent’s authority to represent an owner in marketing and selling a property . A listing agreement is a subsection of an agency contract that gives an agent the right to market a property on behalf of an owner and to receive the commission from any sale that results from the sale of the property. Because of Florida’s requirement that real estate contracts be in writing to be enforceable, a listing agreement has to be in writing to be enforceable. (However, Florida law provides that a purchaser of real property can elect to sue on an oral contract if there is fraud or unjust enrichment.) A listing agreement must be signed by the owner and by the agent or the broker to be valid. A "multiple listing agreement" is simply a listing agreement that has been entered into with a broker so that the broker can add a property to a MLS, as a cooperative only with other licensees.
Different Types of Listing Agreements in Florida
There are several types of listing agreements available to Florida sellers. Each will be discussed here, but the most commonly used type is the exclusive right to sell agreement.
Exclusive right to sell agreements are the most commonly used because they are advantageous to the seller in many ways. For example, this type of listing gives the broker full control of the sale and the authority to bind the seller to a transaction (under certain circumstances). Also, the broker is incentivized to use his or her best efforts to market and sell the property because the broker will earn a commission regardless of who sells the property. In fact, the listing agreement may entitle the broker to commission even if the seller sells the property to the buyer introduced by the broker.
Exclusive agency agreements are less common than the exclusive right to sell agreements but they still allow for a good deal of control for the broker and create a binding real estate deal. Under the exclusive agency agreement, however, the seller can sell the property without paying a commission provided that the seller does not make any efforts to contact a broker. The seller will, of course, have to show by clear and convincing evidence that the seller did not participate in any way in the marketing, listing or sale of the property.
Open listings are the least frequent type of listing because they provide the least amount of control to the broker and provide the least financial benefit to the broker if the property is sold. In an open listing, the seller can sell the property, list the property with multiple brokers, or employ various marketing methods provided that the seller is willing to pay a commission to whomever brings the highest price to the seller (including the seller himself).
Main Elements of a Listing Agreement in Florida
To assist the buyer or seller in meeting his or her objectives, it is important to understand the basic concepts contained in a listing agreement. The written agreement entered into between a real estate agent and the seller of real estate is an agency contract or employment contract.
The written employment contract details the duties and obligations of a seller and a broker or real estate agent. The agent is hired as a result of the employment contract to promote the sale of the property. The duties of a real estate agent or broker are as follows:
a. to be loyal to the principal;
b. to conduct all dealings honestly;
c. to be diligent and to seek all information regarding the transaction including the readiness of the buyer to proceed and the financial ability of the buyer to perform;
d. to disclose to the principal all material facts which he knows or should know regarding the property;
e. to account for all monies received;
f. to disclose to all parties all material facts known by the agent; and
g. to treat all parties fairly and honestly.
The basic rights that the agent has under the listing agreement are as follows:
a. commission;
b. the right to cooperate with all brokers;
c. the agent has the right to use the MLS (multiple listing system) if the seller gives permission; and
d. the agent has the right to display a "for sale" sign on the property if the seller gives permission.
In most cases, the agreement will specify a term or duration of the contract. Florida real estate agents and brokers usually prefer the exclusive right-to-sell listing although they will consider other contract types.
Exclusive right-to-sell listing agreements obligate the agent to use best efforts to sell the property within the specified term and obligate the principal to pay the agent the agreed upon commission provided that the agent obtains a ready, willing, and able buyer who is legally qualified to purchase the property within the contract term. Many times the property owner will allow the agent to place an "exclusive listing" sign in front of the property. If the contract does not permit the sign to be placed on the property, the real estate agent may be unhappy.
Other types of listing agreements can include an exclusive agency listing agreement in which the seller retains the right to find a buyer and make the sale without incurring the obligation to pay a commission to the agent. In this scenario, the seller must be ready and willing to fully cooperate with the agent without any advance notice. The seller must treat the agent as a partner.
Another type of listing agreement is called a net listing. It is not very popular because it is an agreement in which the seller is to receive a specified amount of money from the sale. Any money received in excess of the specified amount constitutes the commission that the agent is entitled to receive. Net listings are not generally permitted in Florida.
Duties and Responsibilities of Sellers and Agents
Listing agreements in Florida fall under the purview of Florida’s Real Estate Commission (FREC). The following statutes and regulations highlight legal obligations for sellers and real estate agents when listing agreements are put into place. When the seller signs the agreement with their agent, they are making a commitment to sell their home for a specified price under an agreed-upon time frame and are agreeing to pay the broker a commission for their services.
FREC’s regulations state that when a buyer is interested in purchasing the listed property, and an offer has been made to the list agent, the agent must present the offer to the seller. The seller can accept the offer, make a counteroffer, or reject it entirely. If the agent makes the offense of concealing or failing to disclose the existence of a buyer, that agent will be committing a third degree felony under Florida Statute 475.25(1)(j) and could also lose his or her license under Florida Statute 475.42. Under FREC rules, listings agreements can be classified into one of two categories—open listings and exclusive listings. Open listings mean the seller can have more than one agent trying to sell the home. It does not contain a commencement or expiration date, and no exclusive agent has been appointed the seller’s sole representative. In essence, the seller is acting as his or her own agent. Exclusive listings mean the seller has appointed an agent to act on his or her behalf as the sole negotiator for the sale of the property. The seller agrees to pay the exclusive agent a commission if the agent is the procuring cause of the sale, whether or not the agent was involved in the negotiations. Exclusive listings do have a set time with a designated start and finish, called the exclusive right of sale. Even though FREC does not require a written listing agreement, when seller and agent sign the agreement, it must, at a minimum, identify the parties involved; state the price, terms, and duration of the listing (right to sell); describe the property; state the duties of the agent; the amount of commission due the agent upon sale of the property; and include relevant dates.
Common Pitfalls in Listing Agreements
When drafting listing agreements, there are several common mistakes that Florida real estate attorneys must be wary of or else the consequences can be serious for both the attorney and the client. One of the most common mistakes is when an attorney will customize a listing agreement by typing on the blank lines, and will then sign and date the agreement in the section provided for the seller(s) to do so. Attorneys must be sure not to sign and date listing agreements without expressly marking it as "Reviewed." See Fla. Bar 2013-1 Opinion. Below is a few examples of issues associated with a listing agreement mistake.
Listing agreement docs for a condominium unit were being drafted. The condominium unit owner was also an attorney. The attorney was asked to review and sign the listing agreement, and after his review, he signed it and placed his initials all over in different locations throughout the document. To this day, the attorney has stopped practicing full-time because he fears that he may have signed and initialed either too much or not enough. The seller, an attorney, was also an officer of the homeowner’s association and was unlawfully representing the association. The listing agreement was never turned over to the homeowners association either. The attorney is now being sued for malpractice even though he knows he never wrote a contract on a condo that he sold .
A real estate transaction attorney was explaining why he signed that particular listing agreement. He stated that what he typically does is he looks at the MLS page for all the details and he typically copies the MLS page right into the documents. On this particular occasion, this attorney forgot to document that it was "the listing agent’s responsibility to submit any changes to the MLS" and the deal went south. The listing agent was not held accountable for anything. The deal fell apart and the seller lost a large sum of money because this clause was missing. The seller ended up suing the attorney, and the case was settled out of court for over $100,000. The attorney was greatly embarrassed because this case was widely publicized at the time. His career and future in practice have also suffered because of this. Slowly but surely, he is beginning to "pick up the pieces." He has not had a single incident since then and is quieter and more careful in his practice. The key point here is that failure to include the entire and correct clause can be extremely dangerous. He thought this was going to be the last sale he had sold for a long time. If you experience any hiccup, be sure to look at the listing agreement. It can sometimes be the potential pitfall for absent-mindedness. Always remember to review your documents carefully and check for any potential pitfalls.
How To Amend or Terminate a Listing Agreement
In these days of tight inventory, it seems the norm that a property has gone through at least one, if not multiple, listing agreements before it sells. In other words, a listing agreement can be amended or cancelled and listings even more than one year old have been sold. So how do you amend or cancel a listing agreement?
Not only can the listing agreement be amended to reflect new terms between the parties, but you can also terminate the listing. If you are considering listing a property, make sure that you are familiar with the terms of your agreement so you don’t get stuck with an agreement you don’t want. If you don’t like the term of the agreement you will be stuck with it for as long as the contract says. As stated above, listing agreements often have an initial term which may be extended. You don’t want to go to all the trouble of cancelling a listing agreement only to have it start over again.
If you want to change the listing agreement, all you have to do is fill out a Change Memorandum and sign it. It will become a part of the listing agreement and supersede any provisions of the listing agreement. The Change Memorandum basically becomes an amendment that changes the previous terms. You can cancel the agreement by signing a Cancellation Agreement and paying the MLS cancellation fee.
Tips for Negotiating Listing Agreements
The following expert tips can help sellers and agents protect their interests when negotiating a listing agreement.
Be Honest: When it comes to pricing a home and determining the length of the listing agreement, both parties should be honest with themselves. A listing agreement that isn’t based on fair market value or is only for a month won’t be in anyone’s best interest.
Don’t Rush: A real estate agent shouldn’t try to rush you into accepting a listing agreement. You need time to review it, ask questions and seek the advice of someone who is experienced in real estate transactions and legal issues. By taking your time, you can ensure that you fully understand the agreement and that it meets your needs.
Aim High, Start Low: When discussing your desired sale price, it is acceptable to aim high, but you need to be open to coming down quickly if necessary. Your listing agreement should have a place for you to agree on the listing price as well as a reduced listing price if the property hasn’t sold within 30 days. This can prevent you from overpricing your property.
Be Willing to Negotiate: Your listing agreement will offer a chance to negotiate with your agent. Speak up about any terms that don’t work for you. You shouldn’t just sign a listing agreement because the agent is unhappy with any objections you have.
Professional Insight: "Negotiating a listing agreement is similar to negotiating any other business contract , " says Angela Williams, a realtor in Cape Coral, Florida. "It is important to take your time though, and not to rush the process. Both sellers and agents should look at their return on investment and be reasonable."
Ask Questions: If you don’t know much about real estate law, you can still ask questions about any legal jargon that you don’t understand. Rodrigo Ortellado, a Cape Coral-based realtor, says, "I make sure that all my clients understand everything in the listing agreement, because I want them to know what they are agreeing to."
Take Your Time: It is essential to take your time when reading and signing a listing agreement. In many ways, this agreement is the most important factor in conducting a real estate transaction, and this is especially true with a short sale or foreclosure. "A good listing agreement protects everyone," adds Ortellado.