Chapter 18 Listing Agreements and Buyer Representation Contracts

  1. Agency Contracts
    • May be used to hire the broker to represent the buyer, the seller, the landlord, or the tenant
    • Employment contracts for the personal professional services of the broker and are not contracts for transfer of real estate or a real estate interest.
  2. Written Agreements
    • PA licensing law requires a written agreement between a broker and a consumer when the consumer is or may be obligated to compensate the broker for services
    • Proof of what the parties are expected to do
  3. Licensing Law (RELEA) requires written agreements to contain
    • statement that the broker's fee and the duration of the contract
    • statement describing the nature and extent of the broker's services provided and the fees that will be charged
    • statement identifying any possibility that the broker or any licensee employed by the broker may provide services to more than one consumer in a single transaction, along with an explanation of the duties owed to each party
    • statements about the brokers's policies regarding cooperation and compensation arrangements with subagents, buyer agents and listing agents and potential for dual agency
    • statement describing the purpose of the Real Estate Recovery Fund and the telephone number where a consumer may receive further information, and
    • a statement regarding any possible conflicts of interest and ongoing duty to disclose conflicts in a timely manner
  4. Listing Agreements
    • Client can be a buyer, seller, landlord or tenant
    • Agreement is not for the transfer of property
    • tje broker is authorized to represent the principal and the principal's real estate to consumers
    • The listing remains with the broker, although the salesperson may preform most or all of the services
    • Only a broker is authorized to act as an agent to list, sell, rent or purchase another person's real estate and provide other services to a principal.  A salesperson performs these acts under the supervision of the broker.  Salesperson is the general agent of the broker
  5. Three Types of Listing Agreements
    • Exclusive Right to Sell Listing
    • Exclusive Agency Listing
    • Open Listing
  6. Exclusive Right to Sell Lisiting
    • One authorized broker-agent receives a commission
    • Seller pays broker-agent regardless of who sells the property

    Agreement must contain the following: "the broker earns a commission on the sale or lease of the property, regardless of who, including the owner, makes the sale during the listing period."

    • Agreement must also contain the following:
    • Seller's asking price
    • broker's expected commission on the sales prices
    • explanation that payments of money received by the broker will be held by the brokers in an escrow account and
    • duration of the agreement
  7. Exclusive Agency Listing
    • There is only one authorized broker agent
    • The broker is compensated only if they are the procuring cause
    • The seller retains the right to sell without obligation 

    • Broker found the buyer, broker must be the procuring cause
  8. Open Listing
    • There are multiple agents
    • Only the agent who is procuring cause is compensated
    • The seller retains the right to sell independently without obligation
    • Terms of the listing must be negotiated and they should be in writing to protect the broker's ability to collect an agreed on fee from the seller.
    • Regulations require that any broker taking an oral open listing to give the seller a written memorandum stating all of the terms of the listing agreement.

  9. Multiple Listing
    • Used by brokers who are members of multiple listing services MLS
    • Broker mus have written consent of the seller to include the property in an MLS
  10. Net Listing
    The broker is entitle to any anount exceeding the seller's stated net proceeds
  11. Termination of Listings
    • Listing agreement may be terminated for the following reasons:
    • When the purpose is fulfilled, such as when a ready, willing and able buyer has been found
    • Expiration of terms
    • Property is transferred by operation of law, such as bankruptcy or foreclosure.
    • Broker and seller mutually agree to cancel the listing
    • Broker or seller dies or becomes incapacitated; if the salesperson is incapacitated the listing is still valid
    • The property is destroyed or it's use is changed by some force outside the owner's control, such as change of zoning or condemnation by eminent domain
  12. Expiration of Listing Period
    • All listings must specify a definite period of time which the broker is to be employed
    • In PA, can not be more than 12 months
    • Automatic renewal is prohibited
  13. Information Needed for Listing Agreements
    • Names and relationship, if any, to the owners
    • Street address and legal description of the property
    • Size, type, age and construction of improvements
    • Number of rooms and their sizes
    • Dimensions of the lot
    • Existing loans
    • Possibility of seller financing
    • Amount of  any outstanding special assessments and whether they will be paid by the seller or assumed by the buyer
    • Zoning classification of the property
    • Current property taxes
    • Neighborhood amenities
    • Real property to be removed from the premsis by the seller and any person propery to be incuded in the sale for the buyer
    • Any additional information that would make the property more appealing and marketable and 
    • Required disclosures regarding property conditions
  14. Pricing the Property
    Ultimately the seller determines the listing price for the property

    • COMPARATIVE MARKET ANALYSIS (CMA) or Competitive Market Analysis, compares location, size, age and amenities of properties that are comparable to the seller's property as follows:
    • Recently sold properties
    • Properties currently on the market
    • Properties that were listed, but did not sell

    CMA is NOT an appraisal

    Licensee should help the seller understand the consequences about setting the price that is exaggerated or severely out of line with the CMA
  15. Seller's Return
    Calculations the licensee can use to roughly show how much will be netted from a given sales price or what sales price will produce a certain net amount.

    • Sales price x Commission rate = Commission
    • Commission/Commission rate= Sales Price
    • Commission/Sales price=Commission Rate
    • Sales price (100%-Commission rate)=Net to Seller
  16. Real Estate Disclosure Act
    Requires sellers of residential real properties (an individual, partnership, corporation, trustee or combination) who intend to transfer an interest on a one-to four family residential property to disclose to the buyer all of the defects
  17. Buyer Agency Agreement
    • Broker is employed as the buyer's agent
    • The BUYER is the principal
    • Purpose of the agreement is to find a suitable property that meets the buyer's specification
    • Gives the buyer a degree of representation possible only in a fiduciary relationship.
    • A buyer's broker must protect the buyer's interests at all points in the transaction
  18. Buyer Representation Issues
    • Licensee should make the same disclosures to the buyer that the licensee would make to a seller in a listing agreement.
    • Licensee must provide the buyer with the Consumer Notice.
    • Specific services provided to a buyer-client should be explained
    • Compensation issues need to be addressed--issues of compensation are always negotiable
  19. Types of Buyer Agency Agreements
    • Exclusive Buyer Agency--exclusive agency agreement.  Broker is compensated regardless of whether the property is located by the broker, the buyer or another licensee
    • Exclusive Agency Buyer Agency--the buyer and one broker, however the agreement limits the broker's right to compensation.  Brokers are entitle to payment only if they located the property the buyer ultimately purchases.  The buyers retain the right to locate a suitable property on their own without obligation to compensate the broker
    • Non-Exclusive Buyer Agency--open agency contract between a broker and a buyer.  Buyer can enter into agreements with an unlimited number of brokers.  The buyer is obligated to compensate only the broker who locates  the property the buyer ultimately purchases.
  20. Buyer Repesentation Agreement
    • Contains the following:
    • Type of buyer agency relationship
    • Time period-Term of the contract
    • Property requirements and terms of purchase
    • Brokerage fee and obligation of buyer to compensate broker if that is the case
    • Broker Protection Clause
    • Provision for licensee to act as designated agent, if applicable
    • Provision for dual agency, if applicable
    • Provision for assignment of the contract by the broker
    • Signatures of all parties
    • Disclosures relating to conflict of interest
    • Nondiscrimination wording
    • Disclosures regarding zoning issues, the Real Estate Recovery Fund and my others required by law.;
Card Set
Chapter 18 Listing Agreements and Buyer Representation Contracts
Chapter 18 Listing Agreements and Buyer Representation Contracts