For many sellers out there, this spring is like a dream come true: There are too many buyers for too few good homes, and prices are heating up.
But before you jump right in and list your home, you may want to take a close look at the listing agreement your agent gives you. Before you sign, you may even want to negotiate it.
Here are some issues to think about. In a listing agreement, you want to the right to:
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Take the property off the market. Some listing agreements will require you to keep your property on the market for the entire span of the listing period. But circumstances change, and if you decide to stay in your home (for whatever reason), the broker shouldn’t be able to force you to do something you don’t want to do.
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Switch brokers and not pay a double commission. Sometimes things don’t work out with the listing broker. It can happen if you and your broker differ on a marketing strategy, or the listing price, or if you have a clash of cultures. Or, if you love your agent, but he or she leaves to work for another broker, you may prefer to have him or her still list the house.
You want the right to switch brokerage firms and not owe both your former broker and your current broker a commission on the sale of your home. Brokerage firms know that if you take away the listing, they won’t get paid a commission. So they try to hang onto the milk after the cow has left the barn. The clause in the contract basically says, if someone who saw the house while it was listed with us comes back and buys it, you owe us a commission also. If you allow that language to stand, you could end up paying a double commission.
- Pay the commission only out of closing proceeds. In real estate agent schools, agents are taught that they have earned their commission if they bring “a ready, willing, and able buyer” to your door. In other words, if the agent brings someone who presents a full-price contract, they can demand you pay them the commission right then and there.
You want to pay the commission only out of the closing proceeds. That way, if the buyer has a change of heart, you won’t have paid out the commission for nothing.
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Terminate the agreement. There are many valid reasons why you might want to cancel a listing agreement. Whatever the reason, you want the right to terminate your contract upon written notice. If the broker balks, suggest that you’ll terminate with two weeks’ notice, unless you terminate for cause. That means the broker has somehow lied to you or otherwise cheated you. Then the contract should terminate immediately.
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Not pay a commission six months after termination. Let’s say you listed your home in November, and a young couple made an offer. But they didn’t offer enough and you decided not to move. So you canceled your listing agreement. Four months later, it’s spring, and the buyers come back. They raise their offer and you come down and you agree on a price. Everyone’s happy until you go back to your listing agreement and realize that you owe a commission up to six months after the contract has been canceled.
The idea is to keep you from going around the broker’s back and making a deal. So the standard listing agreement says if a buyer saw your property while it was listed, and then you take your home off the market and the buyer comes back within six months, you owe a commission to the broker.
In principle, the clause is fair. Six months seems a long time, however. Try to negotiate for a shorter clause. Just in case.
Finally, remember that a listing agreement is a legal document. You’re perfectly within your rights to have an attorney review it with you and suggest changes. If you don’t understand the listing agreement, and aren’t using an attorney, ask the broker to explain it to you. If you don’t understand a paragraph, cross it out and write in the broker’s explanation.
March 2, 1998.
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