Listing Contracts: Ten Questions for Sellers to Ask
After you have interviewed agents and found someone your are comfortable with, it is time to signing a listing contract with your real estate agent. A listing contract is a legal agreement and like any other agreement, you must be sure you agree with the terms before you sign it.
Here are ten questions that you should ask an agent before you sign a listing contract.
1. What type of listing contract is this?
“Exclusive right to sell” means that you will pay a commission if the property is sold during the contract duration, no matter what.
“Exclusive agency” means you will pay if the agency brings the buyer, but you can also find a buyer on your own.
“Open listing” allows you to work with multiple agents/agencies. You pay commissions if they bring the buyer.
2. Is the agent (or agency) a dual-agent, ie, representing both the buyer and the seller?
If you are not familiar with Buyers agent, Sellers Agent, and Dual Agent, please read our article, “What kind of agent do I need?” As a seller, your best bet is a sellers agent, who is only representing your interests.
3. What is the duration of this contract?
The length of time for the listing often depends on the market. It can be anywhere from 1 month to 3 months, 6 months or a year.
4. What are the termination clauses in the contract?
What happens if you are not satisfied? You need to know if there's a way for you to terminate the contract should you have problems with your agent, or if something unforeseen comes up.
5. How long after the contract expires are the terms in force?
What happens if the property sells after the contract has ended, to someone who saw it while the contract was in force? The amount of time that you still owe the commission can be negotiated, standard is 6 months.
6. Is there a listing exclusion?
If you have some personal contacts who might be able to purchase the property, you can negotiate to have them exluded from the contract for a short period of time. If they buy within that window, you would not have to pay the commission.
7. What is the commission rate? What else am I obligated to pay you?
Typical commission rates are between 6 and 7 percent. They are negotiable. If a buyer agent is involved, he will get half. Normally the seller pays the full commission, regardless of who is getting it. What is expected in terms of payment if you sell it on your own.
8. How will you market my property? Will it be on the MLS? Do you have other ways of promoting my property?
What does the contract say in terms of the effort the agent will make on your behalf? What does it say about the use of lock boxes, signs on the property, newspaper ads, etc.
9. How do you handle open houses?
Some agents feel an open house is an essential part of the selling process. It is certainly a major event for the people living in the house. Discuss any potential issues before signing the contract. It's best to spell out how many open houses will you hold and how often.
10. What is the listing price on the contract?
Be sure you have agreed with the price that is listed on the contract.
Remember that a listing contract is a legal agreement that binds you to certain obligations, including payments. Be sure you read and understand the contract, and agree with its contents, before signing. If in doubt, you may want to use a lawyer.