You’re ready to sell your home. You found the perfect real estate agent, and you’re more prepared than ever to get your property on the market. But first, you’ll probably need to sign a listing agreement.
A listing agreement is a legally binding contract between the seller (you) and the real estate brokerage that helps you sell your home. It states that the seller is hiring the agent to handle their home sale and authorizes them to find a buyer. In exchange, the seller agrees to pay the agent a commission fee .
Only sellers need to sign a listing agreement. But potential buyers may need to sign a buyer’s agency agreement before an agent will represent them.
Signing any contract can be nerve-wracking, but it doesn’t have to be as intimidating as it sounds. Here’s what you need to know.
A real estate listing agreement lays out a framework of duties and expectations between you and your agent. They’re used almost everywhere, from homes in Miami, FL to Vancouver, BC , and in countless markets in between.
The agreement usually includes several essential details about the upcoming sale. You’ll want to look them over carefully to make sure everything checks out.
The listing agreement will include things like:
Here’s what to expect from each one:
This can include names, phone numbers, addresses, and other information for the seller and real estate broker or agent. Which contact details are included depends on how the agreement is written.
This is the sales price your home will be listed at. You and your agent will talk about the listing price ahead of time, so make sure it matches your earlier conversations.
Real estate agent fees usually come as a percentage of the home’s final sale price. Total commissions tend to hover around 6%, split evenly between the buyer’s and seller’s realtors. The seller usually pays both.
For example, if a property sells for $250,000 and the agreed-upon commission is 6%, the seller would owe 3% to their agent ($7,500) and 3% to the buyer’s agent ($7,500). Real estate commissions are negotiable .
These are your expectations of the agent and what you give them permission to do. For example, if you want your agent to hold open houses or list your home on an MLS (multiple listing service), you’ll grant them formal permission in this section.
Understanding the agent’s responsibilities will give you a clear idea of what they will (and will not) do during the selling process.
The property description includes:
Items included in the sale: Here you’ll find any personal property left behind after the property is sold. It often includes large appliances like washers, dryers, ovens, and refrigerators.
Items not included in the sale: Anything you’re taking with you or getting rid of before the buyer takes possession of the home.
The amount of time the realtor will represent you before the agreement terminates. Most real estate listing agreements include a default duration, but this is negotiable.
Some agents prefer a longer term (six months), but you may decide a shorter period would be better (three months). An agent may be willing to change these details if you’d like them to.
This legal-heavy part of the document lays out how any potential disputes are resolved between the property owner and agent. It will probably specify whether conflicts are settled using mediation (a third party helps the parties reach an agreement) or arbitration (a third party makes the decision).
Odds are you probably won’t have to deal with a formal dispute. But it always helps to understand this section, just in case you need it down the road.
A protection period, sometimes called a tail period, helps protect the seller’s agent from losing their commission. It stays in effect for a certain amount of time after the listing agreement expires.
A protection period kicks in when the agent shows the house to someone during the listing agreement period, but that person doesn’t buy the home until after the listing agreement has expired. If there’s a protection period clause in the agreement, the seller would still pay the agent their full commission.
Most agreements will specify one of four types of listings:
Read on to learn how each type changes your relationship with a real estate agent .
