"Brokerage service contracts" include, but are not limited to agreements between principals as well as agreements between principals and their brokers. Brokerage Service contracts include purchase and sale agreements, lease or rental agreements, listings, options, agency agreements, or property management agreements.
We will begin by looking at the brokerage service contract called the listing agreement between the seller and the listing brokerage firm.
LISTING AGREEMENT - BETWEEN SELLER AND LICENSED REAL ESTATE FIRM
The first step to receiving a commission is to have a written listing agreement with the seller. This is a contract between the licensed real estate firm and the seller (the principal).
Commission - To insure that a commission will be paid for the sale of a specific piece of property, a firm must prove that a written listing agreement was present. The listing agreement between the seller/principal and the listing firm. The firm always owns listings. A lot brokers find this out when they leave to another firm. The current firm decides to keep the listing. You as the broker might say, "the seller is my client and it's my listing!" The firm owns the listings, now the firm might let you take the listing with you; review the employment contract before leaving... The listing agreement does the following:
Example: Open Listing - The seller will pay a commission only if the firm brings the buyer. The seller can sell their own home and any licensed broker can bring a buyer forward and obtain the commission. This type of listing has no promise of commission to the listing broker, but the seller is giving up part of their rights to sell and promises to pay in certain cases. In Washington, open listings are not allowed.
Listing Rule - If the firm is not motivated by a listing commission, it's unlikely the firm will spend advertising dollars and work hard to sell the property.
Types of Listings
The following pages will show the different types of listing agreements that a seller (principal) and the firm (designated broker) can enter into.
Listing Rule - The more likely the firm is to receive a commission, the more likely the firm will spend time on promotion and advertising.
Open Listing - An open listing is exactly that. All licensed brokers in the State as well as the owner have the right to sell the property . The listing is OPEN. A commission is only paid to a broker that sells the property. No commission is paid to any other Designated broker's regarding the listing.
No Commission - The owner does not have to pay a commission if the owner sells the property himself/herself.
Unilateral - This is our unilateral (one-sided) contract that we discussed earlier. The designated broker is not required to perform. The designated broker simply promises to try to find willing and able buyers. The seller must perform and pay a commission if the firm/Designated broker finds that buyer.
Net Listing -. These are agreements, but they are not truly a type of listing. This is basically a way of stating the commission terms. The firm and the seller establish a minimum price (seller's net). The problem is that the firm receives any amount in excess of a minimum price.
Restrictions - For this reason, some States restrict the firm's commission right to no more than a "reasonable and customary" commission.
Termination of a Listing Agreement
When a sale is not consummated during the period specified on the listing agreement, the listing agreement will expire.
No Commission - The seller is not required to pay a commission to a firm if a listing agreement has terminated. Termination of the agreement would occur under the following situations and no commission is due.
Mutual Rescission - If both parties (mutual) agree to return to their original position (rescission) and not have a contractual relationship, the listing agreement is terminated by mutual rescission. The seller and the firm agree to terminate.
Expiration - When the expiration date specified on the listing agreement has reached the stated time and no subsequent sale to a customer of the firm occurs in the future.
Abandonment - If the listing firm fails to perform and abandons all efforts to find a willing and able buyer.
Destruction - If the property is destroyed and title was not yet transferred, the sale is not complete. The destruction of the property does not bind the firm and seller to further obligations under the listing agreement.
Personal Aspect - The death, insanity, or bankruptcy of the firm or the seller allows the listing agreement to be terminated. The seller and broker agreed to do business under "Personal Aspect" and are not required to do business with anyone else without permission.
Loss of License - If the firm loses their license, the seller cannot continue business with that firm. The listing agreement is terminated.
Fraud - If a brokerage or one of the affiliated licensees commits misrepresentation, concealment, or fraud, the seller/principal can terminate the listing agreement.
A real estate broker using a Exclusive Agency Sale and Listing Agreement contract signed by the seller owes a fiduciary obligation:
A) to the buyer only
B) to the seller only
C) only as stated in the listing agreement
D) primarily to the seller and partly to the buyer
Ted Logan listed his home with Broker John Burton for a 90 day period. One month later Logan died. the listing:
A) terminated at Logan's death
B) is binding on Logan's heirs
C) will continue to be valid until the 90 day period expires
D) must be reaffirmed by the personal representative of Logan's estate
An owner of property gave a listing to a broker. Shortly thereafter, the owner died. In this case the:
A) agency is immediately terminated
B) broker is entitled to their full commission from the estate
C) listing agreement is binding on the heirs of the deceased owner
D) broker is entitled to a reasonable time thereafter to procure a buyer during which time the listing will remain in force
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