Understanding the Listing Contract: Key Terms for Sellers
Understanding the Listing Contract: Key Terms for Sellers
When selling your home, one of the most important documents you will sign is the listing contract. This agreement outlines the terms of your relationship with your real estate agent and defines the expectations for both parties. While many sellers focus primarily on the commission rate or listing price, it is crucial to understand all aspects of the contract before signing. Below, we break down key sections of the listing contract to help you make an informed decision.
Term of Agreement (Section 1)
The listing contract will specify the duration of your agreement with the real estate agent. This section outlines how long your property will be listed for sale under this contract.
Listing Price (Section 3)
Your agent will help determine a competitive listing price based on a Comparative Market Analysis (CMA). This analysis considers market conditions, recent sales, and your selling goals. If the market is shifting or your price is aggressive, your agent may discuss potential price adjustments and the timeline for reassessing your pricing strategy.
Cooperating Brokerage (Section 4)
The commission you agree to pay the listing brokerage is typically shared between your agent’s brokerage and the brokerage representing the buyer. It is essential to understand that while commission is split, the buyer’s agent does not work for you and will not share any confidential information with your listing agent.
When Commission Gets Paid (Section 5A)
Commission is generally payable once you enter into a legally enforceable or subject-free contract with a buyer. Additionally, if a buyer who was introduced to the property during the term of the listing contract purchases your home within 60 days after termination, commission may still be payable.
How Much Commission is Paid (Section 5D)
Your agent should explain the commission structure, including how the commission is calculated based on the list price. Additionally, Goods and Services Tax (GST) is typically applied to the commission amount.
Designated Agency (Section 7) and Agent’s Services (Section 9)
Your agent is legally obligated to represent your best interests throughout the selling process. The duties they owe to you are outlined in the Disclosure of Representation in Trading Services form. However, you should be aware that your agent cannot follow any unlawful instructions and must adhere to ethical guidelines.
Seller Agreements (Section 10)
As the seller, you also have responsibilities within the listing contract. You are expected to work cooperatively with your agent, keep them informed of any changes regarding the property, and ensure you have the legal right to sell. If someone else holds the title to the property, such as in the case of a power of attorney or a probated will, these documents must be verified.
Conflict of Interest (Section 12)
A conflict of interest can arise if your agent also represents a buyer interested in purchasing your property. In such cases, your agent should communicate transparently about the conflict and outline how they will handle it while ensuring fairness to all parties. This is a good opportunity to review the Agreement Regarding Conflicts of Interest between Clients to understand your rights.
Termination (Section 14)
The listing contract outlines the circumstances under which the agreement may be terminated. The contract will automatically end upon its expiration date unless the property is sold beforehand. It may also be terminated earlier if both the seller and the listing brokerage agree in writing. Additionally, termination may occur if the listing brokerage can no longer provide services due to regulatory reasons, insolvency, or license suspension.
Upon termination, the listing brokerage will remove the property from the Multiple Listing Service® (MLS), cease all marketing efforts, and remove signage from the property. If requested, any documents provided by the seller will be returned. It is important to clarify the specific termination conditions with your agent to avoid misunderstandings.
Schedule A – Brokerage Services
Schedule A of the listing contract details the specific services the brokerage will provide, at a minimum, to facilitate the sale of your home. This can include listing your property on the Multiple Listing Service® (MLS), marketing the property through various channels, coordinating showings, and providing professional advice on pricing and negotiations. Reviewing this section ensures you clearly understand what services will be provided to help sell your home.
View a sample multiple listing contract here >>
Final Thoughts
A listing contract is a legally binding agreement, and understanding its key terms is essential for a smooth and successful home-selling experience. Your real estate agent should take the time to explain each section in detail and answer any questions you may have. By reviewing this contract carefully, you can confidently move forward in selling your home with a clear understanding of your rights and obligations.
If you have any questions about the listing contract or the home-selling process, don’t hesitate to reach out to our team of professionals.