Introduction
The Residential Listing Agreement is a contract between the owner or owners of a piece of residential real property and a real estate broker. By entering into this contract, the owner agrees to hire the Broker as an exclusive agent to sell the property. The owner also agrees to compensate the Broker for procuring a "ready, willing, and able" buyer during the listing period.
A Watkins Realty Group agent should have the following documents signed and initialed when formalizing a residential real estate listing with a client:
- The Residential Listing Agreement – Exclusive Authorization and Right to Sell
- Seller’s Advisory
- Real Estate Agency Relationship Disclosure
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Examining the Contract – Point for Point (LA page 1)
This paragraph provides the Broker with the exclusive right to sell the subject property. Seller: List the names of all sellers.
In most situations, the sellers should be the owners of the subject property, the persons who intend to sell the property, and the persons with the authority to both list and sell the property. See also "Ownership, Title and Authority" in paragraph 5 below.
Practice Pointer: Before taking a listing, it is a good idea to obtain a property profile or check the public records for the subject property. Use this information to verify that the Seller(s) entering into the listing agreement matches exactly with the owner(s) of record. If the purported Seller is not the owner of record, or not the only owner of record, the listing agent's efforts in listing and marketing the property might turn out to be a waste of time.
Broker: Insert the name of the Listing Broker.
The Seller enters into the Listing Agreement with the real estate broker or brokerage, not the individual salesperson or broker-associate.
Beginning Date: Insert the calendar date the listing period will begin.
Practice Pointer: The listing period should begin, if possible, on the day the parties enter into the Listing Agreement. This is because the Seller is less likely to have misgivings about the listing if the listing agent immediately begins advertising and marketing the subject property. Of course, in some situations, the listing agent has no choice but to schedule the listing period to begin at a later date (e.g. when waiting for a prior listing agreement to expire).
Ending Date: Insert the calendar date the listing period will end.
Always fill in this blank with an ending date! A listing agent cannot claim, demand, or receive a commission under an exclusive listing agreement unless that agreement contains "a definite, specified date of final and complete termination" (see California Business & Professions Code Section 10176(f)).
Determining the proper length of time for a particular listing requires a careful weighing of various countervailing factors, such as the listing price, the condition of the property, the parties' requirements, and market conditions. If the listing period is very short (e.g. 30 days), the listing agent may spend a lot of time, money, and effort to market the property, yet neither find a buyer, nor earn a commission, within the specified time. On the other hand, if the listing agent insists on a lengthy listing period (e.g. 12 months), the seller may distrust the listing agent's ability to sell the property.
City: Insert the name of the city where the subject property is located.
County: Insert the name of the county where the subject property is located.
- Items Excluded and Included
A sale will include all fixtures and fittings attached to the subject property. Fixtures are items that become so related to a piece of real property that they become part of the sale of that real property. In contrast, items of personal property are not included in the sale of real property (unless specified otherwise by contract).
Whether an item is a fixture or personal property is a question of fact to be determined on a case-by-case basis. Many items are obviously a fixture (e.g. roof) or personal property (e.g. lawn chair), but some items are not so easily characterized (e.g. custom-made drapes)
- Items Included in Sale: List any and all items of personal property to be included in a subsequent sale.
Whenever in doubt, simply list any and all items the Seller wants to include in a subsequent sale, such as appliances, custom-made items, and the like.
- Items Excluded From Sale: List any and all items attached to the subject property to be excluded from a subsequent sale.
When in doubt, list anything attached to the property that the Seller wants to exclude from a subsequent sale. Pay particular attention to items out of the ordinary, such as family heirlooms, chandeliers, antique fixtures, etc.
- Listing and Pricing Terms
- List Price: Write out the List Price using words, and in the parenthesis after the dollar sign, using numbers.
The List Price is the target price at which, if offered by a ready, willing, and able buyer, the Broker earns his or her compensation. Hence, the List Price is usually what the Seller is willing to sell the property for.
As with the listing period, determining the correct List Price requires a careful balancing of various factors, including, among other things, the condition of the property, the parties' requirements (e.g. how quickly the Seller wants to sell the property), comparable sales, and market conditions. If the List Price is too low, the Seller may get frustrated receiving a lot of offers that never amount to anything. If the List Price is too high, the Seller may get no sales activity at all.
- Additional Terms: Insert any additional terms and conditions.
This section contains any additional terms of sale. If the space provided is not enough, insert here "See attached Addendum Number incorporated herein."
Set forth the additional terms on a separate piece of paper entitled "Addendum Number ," and attach it to the Listing Agreement.
Note: The terms of sale are set forth here primarily to help the listing agent advertise and market the property. For a subsequent sale, be sure to reiterate the items to be included and excluded, and any additional terms of sale, in the sales contract between the Seller and the buyer.
- Compensation to the Broker
This paragraph contains the terms and conditions of the Broker's compensation.
Notice: The amount or rate of real estate commissions is not fixed by law. They are set by each Broker individually and may be negotiable between Seller and Broker.
This Notice must be set forth in not less than 10-point boldface type on any printed or standard-form agreement establishing or altering a listing agent's right to compensation in the sale of one-to-four residential units (see California Business & Professions Code Section 10147.5(a)).
- (Rate or Amount of Broker's Compensation).
The Broker's commission can be expressed either as a percentage of the List Price (or the sales price if the Seller has entered into a sales contract) or as a flat fee. The advantage to the Seller of paying a commission rate (e.g. 6%) is that it gives the Broker an incentive to bring as high of an acceptable offer as possible. On the other hand, by using a flat fee, the Seller will know exactly how much the Broker's commission will be, regardless of the sales price.
Check the appropriate box and insert either the commission rate or amount. Keep in mind that, for one-to-four residential units, the Broker should never pre-print the commission rate or amount (see California Business & Professions Code Section 10147.5(b)).
Some brokers charge some sort of administrative or transaction fee. Before writing in such a charge in addition to a flat fee or commission, the Broker's policy should be consulted. If allowed, any recommended language should be used and any additional required documentation should be attached.
A(l) (Exclusive Authorization).
By entering into this exclusive Listing Agreement, the Seller agrees to compensate the Broker as long as anyone procures a ready, willing, and able buyer during the listing period. It makes no difference if the procuring cause is the Broker, the Seller, a cooperating broker, a neighbor, anyone else, or no one at all.
If, however, the Seller refuses to compensate the Broker for a buyer procured by the Seller, the proper listing agreement to use is the "Exclusive Agency Authorization and Right to Sell" (C.A.R. Form EA-11). If the Seller refuses to compensate the Broker for a buyer procured by anyone other than the Broker, the proper listing agreement to use is the "Non-Exclusive ("Open") Agency Authorization and Right to Sell" (C.A.R. Form NEA-11).
A(2) (Safe Harbor Provision): Insert the number of "safe harbor" days after the listing period ends.
This subparagraph is the safe harbor provision. To avoid paying the Broker's compensation, a seller may be tempted to reject an offer from a buyer procured by the Broker, only to sell the subject property to that same buyer after the listing period ends. The safe harbor provision reduces the possibility of this type of abuse by protecting the Broker's compensation for a certain number of days after the listing period ends.
The safe harbor provision, however, has two limitations. First, it only pertains to prospective buyers who, during the listing period, physically entered and were shown the property, or who submitted written offers to the Seller. Hence, the Broker is not protected if the property is sold to someone other than one of the Broker's prospective buyers or related entities. Second, the safe harbor applies only if, within 3 calendar days after the listing period ends, the Broker provides the Seller with a written list of these prospective buyers.
Determining the proper number of safe harbor days requires a weighing of various factors. If the safe harbor period is too short (e.g. 30 days), the Broker has very little protection. On the other hand, if the Broker demands a lengthy safe harbor period (e.g. 12 months), the Seller may not give the listing to the Broker.
A(3) (Seller's Interference).
The Broker is entitled to full compensation if, without the Broker's consent, the Seller withdraws the property from sale, transfers the property, or renders the property unmarketable.
B. (Third-Party Default).
If a subsequent sale falls through at no fault of the Seller, the Broker's compensation is limited to one-half of whatever the Seller collects as money damages, not to exceed the agreed-upon commission (plus the administrative/transaction fee).
C. (Other Fees): List any costs to be paid by Seller, other than the commission.
Other costs to be paid by the Seller could include MLS fees, special advertising fees, or other costs for marketing the property. If there are no other costs to the Seller, insert "N/A" to emphasize this fact.
D. (Cooperating Brokers).
The Broker has the discretion to determine the rate or amount of compensation for any cooperating broker, unless such compensation is specifically set forth below in paragraph 4 entitled "Multiple Listing Service."
E. (Irrevocable Assignment; Payment Through Escrow).
This provision entitles the Broker to receive his or her compensation through escrow, thereby avoiding any problems of collecting such funds from the Seller directly. Also, the irrevocable assignment language means that the Seller agrees not to revoke, cancel, or put on hold any instruction to escrow to pay such compensation to the Broker at close of escrow.
F. (Previous Listings): Identify any prior listing agent(s) to whom the Seller may owe compensation, AND list the names of the prospective buyers procured by that agent.
Even if a listing period has ended, a seller who had a Listing Agreement with Broker A will not want to enter into a new Listing Agreement with Broker B during Broker A's safe harbor period (see paragraph 4A(2) above). Otherwise, the Seller risks being obligated to pay full commissions to both brokers if a buyer procured by Broker A buys the property during both Broker A's safe harbor period, and Broker B's listing period.
To avoid this result, subparagraph 4F allows the Seller to exclude prospective buyers procured by Broker A from Broker B's Listing Agreement. Broker B will not receive any compensation if anyone on this list buys the property.
Practice Pointer: A prudent listing agent in Broker B's position will carefully review the terms of the Seller's Listing Agreement with Broker A, and verify that Broker A's list of prospective buyers has been timely and properly submitted to the Seller. Also, if Broker A's safe harbor period ends before Broker B's listing period ends, Broker B may want the exclusion to terminate when Broker A's safe harbor period ends. For example, Broker B takes a listing from January 1 to March 31, but Broker A's safe harbor period for certain buyers ends January 31. Broker B may want to exclude these buyers until January 31 only, and not for the full duration of Broker B's listing period to March 31.
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Examining the Contract – Point for Point (LA page 2)
- Multiple Listing Service ("MLS"): Do nothing if property will be listed in MLS; otherwise, check "will not" box.
Unless otherwise checked, the Broker has the authority to list the property in the MLS, and in any Internet service approved by the MLS.
- Ownership, Title and Authority
The Seller warrants that he or she owns the property, that no one else owns the property, and that the Seller has the authority to both enter into the Listing Agreement and any subsequent sales contract. Any exceptions to these warranties of ownership, title, and authority should be explained under "Exceptions."
The Seller must disclose any knowledge of certain facts likely to affect the marketability of the property, such as recorded notices of default, delinquent obligations, bankruptcies, pending or threatened lawsuits or other actions, and special assessments. The existence of any of these facts affecting marketability should be explained under "Exceptions."
- Broker's and Seller's Duties
The Broker agrees to work diligently to achieve the purposes of the Listing Agreement. The Broker has the authority to advertise and market the property in any medium, including the Internet.
The Seller agrees to consider all offers, to act in good faith to sell the property, to make the property available for showings, to refer all inquiries to the Broker, and to assume responsibility for determining the List Price. The Seller also agrees to indemnify, defend, and hold the Broker harmless from all claims arising from any misrepresentation or concealment of fact made by the Seller.
The Broker has the authority to accept and hold, on the Seller's behalf, any earnest money deposits received.
A. Disclosure: For one-to-four residential units, provide the Seller with the "Disclosure Regarding Real Estate Agency Relationships" (C.A.R. Form AD- 11).
The agency disclosure form, which sets forth the various types of agency relationships, must be provided by the listing agent to the Seller "prior to entering into the listing agreement." Both the Seller and the listing agent should sign and date the disclosure form where indicated.
B. Seller Representation.
The Broker will represent the Seller in any subsequent sale of the property.
C. Possible Dual Agency With Buyer.
The Seller consents that, upon proper disclosure, the Broker may act as a dual agent representing both the Seller and the buyer.
D. Other Sellers.
The Seller consents that the Broker may have other listings and other clients.
For one-to-four residential units, the Broker agrees to confirm his or her status as the listing agent, or to modify his or her status to dual agent, before the Seller enters into a sales contract.
The Seller agrees that the Broker is not responsible for any loss or damage caused by using a keysafe/lockbox or by showing the property. The Seller is advised to take all reasonable precautions for safeguarding the real property and its contents, and to obtain insurance to protect against any risks.
The Broker is authorized to install a keysafe/lockbox on the property.
The Broker is authorized to install a For Sale/Sold sign on the property.
- Equal Housing Opportunity
Both the Seller of real property and a listing agent are prohibited from discriminating against a protected class, including, but not necessarily limited to, classes of race, color, religion, sex, handicap, familial status, and national origin.
In the event of a lawsuit or other proceeding involving the Broker's compensation, the prevailing party can recover attorney's fees and costs.
- Additional Terms: Set forth any additional terms to the Listing Agreement.
Compare: All additional terms involving a subsequent sale of the property should be set forth in paragraph 3B above whereas all additional terms involving the Listing Agreement should be set forth here in paragraph 16.
A salesperson or broker-associate often enters into a Listing Agreement on behalf of the Broker. In most cases, this poses no problem. However, if the salesperson agrees to terms that are unacceptable to the Broker/manager, this provision allows the Broker/manager to cancel the Listing Agreement within 5 days of execution.
The Listing Agreement is binding upon the Seller's successors and assigns. If, without the Broker's consent, the Seller transfers the property in violation of the Listing Agreement (see paragraph 3 A(3) above), the Broker may prefer to act as the listing agent for the transferee, rather than sue for compensation. This provision may be used to assist the Broker in convincing any transferee to continue with the listing.
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Examining the Contract – Point for Point (LA page 3)
A. Mediation.
The parties agree to mediate any dispute arising out of the Listing Agreement (with certain exceptions set forth in paragraph 19B(2) below). Mediation is required even if the parties do not initial anything.
Mediation entails an attempt by a neutral third-party to convince the contractual parties to voluntarily resolve their differences. If a party commences an action without first attempting mediation pursuant to this provision, that party is barred from recovering attorneys' fees.
B. Arbitration of Disputes: Both parties must insert their initials for this clause for the Arbitration Clause to apply.
If properly initialed, the parties agree to submit to binding arbitration for any dispute arising out of the Listing Agreement, which is not settled by mediation (with certain exceptions set forth in paragraph 19 B(2) below). The "Notice" must be set forth in at least 10-point boldface type for an arbitration agreement to be enforceable.
Arbitration is an alternative dispute resolution to the court system. The parties submit their arguments and evidence to an agreed-upon arbitrator (rather than a judge or jury). The arbitrator shall render a decision. The arbitrator's decision or award can only be set aside by the losing party in very limited circumstances, such as failure of due process, fraud, or corruption by the arbitrator. Otherwise, the prevailing party can have the arbitrator's award confirmed as a judgment in any court having proper jurisdiction.
Determining whether arbitration is a better way to resolve a dispute as compared to the court system entails legal opinion. Thus, the Broker should not advise the Seller to initial or not initial the arbitration clause.
B2. Exclusions from Mediation and Arbitration.
Various matters are excluded from the obligation to mediate or arbitrate, including foreclosures, unlawful detainer actions, mechanic's lien procedures, probate, small claims, and bankruptcy matters, notices of lis pendens, attachment orders, and receivership, injunction, and other provisional remedies.
The Listing Agreement supercedes any and all prior negotiations and agreements between the parties regarding this matter. The Listing Agreement, including any photocopy or facsimile, can be signed in counterparts.
Signature by Sellers
By signing the Listing Agreement, the Seller acknowledges that he or she has read and understands the agreement and has received a copy. The Seller should insert the date of signature, and provide an address, phone, fax, and e-mail information. The Seller should also initial the bottom of pages 1 and 2.
This section has space for two sellers to sign. However, in most situations, all owners of the subject property should sign the Listing Agreement. Thus, if there are additional sellers, use additional signature pages.
Signature by Broker
The salesperson or broker-associate taking the listing can complete the Broker's information and sign as authorized representative of the Broker. The listing agent should also write in the property address and date of execution on the top of pages 2 and 3, and initial the bottom of pages 1 and 2.
No one should sign the Listing Agreement until all pages have been completed. Upon completion and signature, the listing agent should immediately provide the Seller with a copy of the entire Listing Agreement.
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Addendum to the Listing Agreement
Seller's Advisory (SA)
The 2-page Seller's Advisory is attached to the Listing Agreement. Its purpose is to inform the Seller up front of various matters that may arise when selling real estate in California, including disclosure issues (including those related to death on the property), contract terms and legal requirements, pre-sale considerations, post-sale protections, safety precautions, and expenses.
The goal of the form is to make the seller aware of these issues early on, encouraging the seller to identify, address, and resolve potential problems as soon as possible. These issues should be considered either before the property is put on the market or before the negotiating and selling process consumes the seller's attention. This approach establishes expectations and helps avoid surprise and efforts to sidestep or bypass necessary steps in the sale process that can result if expectations are not met. The form is both an educational and preparation tool.
Fill in the property address of the subject property at the top of pages 1 and 2. Any additional advisory items should be set forth in paragraph 5 on page 2. The Seller should initial page 1, and sign and date page 2 where indicated. Upon signing, the listing agent should immediately provide the Seller with a complete copy of the Seller's Advisor
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Sample Forms to Download
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