WHAT YOU NEED TO KNOW BEFORE YOU SIGN A LISTING AGREEMENT
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What You Need to Know Before You Sign a Listing Agreement
Many sellers only pay attention to one thing on a listing agreement —
the commission amount. That's a big mistake. The listing agreement is
a binding contract between you and the listing broker, and it contains
a number of clauses that can make a huge difference in whether your
house sells. Here are some very important items to pay attention to:
Open Listing or Exclusive Listing
An "open listing" is somewhat archaic, predating the Multiple Listing
Service. With an "open listing", you go to each broker in your area
and sign a listing agreement. You can sign an open listing agreement
with as many brokers as you want. With an "exclusive listing", you
have one listing broker who exclusively represents you, and other
brokers who want to show and sell your property have to work through
that broker. (A cooperating broker, who doesn't have the exclusive
listing but sells your property, is paid a portion of the commission
that you pay to your listing broker.) Only property that is
"exclusively" listed can be included in the Multiple Listing System.
(This is to avoid duplication of properties, and the possibility of
inconsistent listings.) When you have an "open listing", your property
will not be included in the www.palmasMLS.com, will not show up in the database
accessed by www.palmasMLS.com participants throughout the region, and will not
appear on www.point2homes.com. Brokers are also reluctant to put any marketing
money behind an open listing, because the sale may well be made by
another broker, and they end up putting out money for nothing.
Exclusive Agency or Exclusive Right to Sell
If you enter into an exclusive listing agreement, it will grant either
"exclusive agency" or "exclusive right to sell" to the listing broker.
Under an "exclusive agency" agreement, any sale generated through the
real estate brokerage system must go through the listing broker, but
you, the seller, have the right to sell the property on your own, as a
"For Sale By Owner" transaction. Under an "exclusive right to sell"
agreement, any sale during the period of the listing agreement, even
if the buyer is found by you, must be handled by the listing broker.
"Aha", you say, "of course I want exclusive agency, so I can still
sell it on my own." Not so fast. Many brokers, including possibly the
one that's best positioned to sell your property, will only handle
"exclusive right to sell" listings. Brokers may also be reluctant to
put much marketing money behind a listing they know you're trying to
peddle on your own. A broker may agree to an "exclusive agency"
listing if you agree not to put a "For Sale By Owner" sign on your
property or post your property on "For Sale By Owner" websites.
Depending on the broker, the terms of the "exclusive right to sell"
agreement may be negotiable. For example, if you've talked with
relatives or neighboring property owners about buying your property,
you can ask that they be excluded — by name — from the agreement. Many
brokers will agree to a limited number of exclusions, but not for an
umlimited amount of time. Exclusions from 14 to 30 days are
reasonable; an unlimited exclusion really isn't. Again, the listing
broker doesn't want to put out a lot of time, effort and money only to
end up without the sale. They don't want to be in the position of
bringing you a good offer, when you really plan to sell it to Uncle
Harry, who's agreed to match any offer you get.
One option to an "exclusive right to sell" agreement is a clause that
if you find the buyer, the listing broker will reduce the commission —
in effect, giving you the value of the 'co-broke' portion of the
commission that would go to a selling broker.
Co-Brokerage
Sellers gloss over this section, which is tremendously important. The
cooperating broker section of the listing agreement states the terms
under which a listing broker will share a portion of the commission,
known as the 'co-broke' with a selling broker. There will be 2
sections — one for selling agents who act as "subagents of the
seller", also known as CSO's (cooperating selling office), and one for
selling agents who act as "buyer agents", representing the buyer. The
shorthand for the 2 categories in the real estate business is
"subagency" and "buyer agency."
In Puerto Rico, most brokers recommend offering co-broke compensation
on an equal basis to both "subagents" and "buyer agents". However,
most brokers no longer offer compensation to coooperating brokers who
act as subagents of the seller, and only offer compensation to
cooperating brokers who act as buyer agents. The reason is liability.
As a seller, you're liable for the actions of agents acting as your
subagents (through your listing broker), even though your listing
broker has little or no control over them.
As a seller, you probably don't care all that much about the nuances
of "subagency" versus "buyer agency." You just want to get your house
sold. You want to make sure that every agent in Puerto Rico with a
potential buyer — whether acting as a subagent or buyer agent — has
the ability to show and sell your property, and that means offering
co-brokerage equally to both categories.
Commission
There is no standard commission. In fact, brokers are prohibited by
law from even discussing commissions with each other. Its considered
price fixing under anti-trust laws. If you ever hear an agent say,
"The standard commission around here is X%", run, do not walk, from
that agent. Its clear they don't have even the basics of real estate
law under their hats, and who knows what misrepresentations they may
make on your behalf downline.
An agent can say, however, that their agency's standard commission is
X%. Commissions can be negotiable. If you interview two brokers, for
example, and Broker A offers a lower commission than Broker B, but you
like Broker B better, you can go back to Broker B and ask about
negotiating the commission. But make sure you're comparing apples to
apples. A broker with a staffed office, prominent internet presence
and extensive marketing has a very different cost structure than a
single freelance agent with no office and limited advertising.
If you want a lower commission, suggest to the broker things that you
can do to make it easier to sell your house — like agreeing to a lock
box for access, getting a home inspection or bringing the listing
price into their recommended selling range. Also, the listing broker
may agree to a lower commission if you offer to reimburse them for
part of their advertising expenses on your house if it doesn't sell.
Like any successul "win win" negotiation, what are you willing to give
in order to get?
Agreement Length
Sellers often think they're being shrewd by getting a listing broker
to agree to a short listing period. But short listings backfire.
Puerto Rico has a relatively long sales cycle. Unless a property is
very aggressively priced, or has stand-out appeal to a certain market
segment, time on market can easily exceed 90 days. Many brokers won't
heavily market a 60 or 90 day listing.
If you've done your homework, you should have confidence that you've
chosen the right broker to sell your house. But before signing the
listing agreement, look at your "outs" if you're not satisfied. You
want a termination clause with minimal penalties. If you terminate
before the expiration of the agreement, it is reasonable, however, for
the listing broker to seek compensation for any out of pocket
expenses, like print advertising, MLS listing fees or costs associated
with preparing a virtual tour or brochure.
Note that almost every listing agreement has a post-expiration clause
that typically runs for 180 days, stating that the terms of the
agreement remain in force if the property is purchased within that
time by a buyer who was shown the property during the term of the
agreement. The clause prevents the buyer from being shown the property
by the listing agent, and then calling the seller up directly and
saying "Hey, cancel your listing agreement and I'll make a deal with
your directly."
Have All Your Paperwork Together
When you list your property, should should have all the paperwork for
the property available. This includes a copy of your deed — because
the listing agent will need to verify that the person or persons
listing the property is the same as on the deed. You should have a
copy of your survey, as well as copies of any homeowner's association
documents (if you're in a development) as well as any covenants and
restrictions. Its helpful to have copies of your most recent property
tax bills, as well as your electric and water bills. Blueprints for
the house, if you have them, are also useful to verify square footage.
For more information Call Elder and send him an email at
An Exclusive Listing will give the realtor a more serious business and
will focus more on selling your property and not be affraid of
loosing potential clients over competitors. Elder has over 1000 credits
hours of Real Estate Education with a Master Degreed in Busines
Administracion Management, a BA in Business with a Minor in
Real Estate. over 75 credit hours of Computer programing,
Lisence Realtor in Illinois and Puerto Rico and with more than
130 Millions in Sales. You want to work with the best, you have the Choice.
Elder in English means the leader in the business.
The most knowledgable. www.palmasmls.com
Elder@palmasmls.com
787-207-4255