A listing contract (also known as a listing agreement) is a legally binding written agreement between a property owner (the seller) and a licensed real estate broker or brokerage firm, granting the broker the authority to act as the owner's agent in the sale or rental of real property. It establishes the broker's role, defines the terms of the sale, and outlines the responsibilities of both parties.
Legal Definition
In the context of real property law, a listing contract governs the terms of the sale of real property by a third-party real estate agency or broker. According to legal sources, a listing contract means "a written agency agreement authorizing a broker firm to provide brokerage services to the client for the sale or rental of property and providing the terms whereby the broker may earn a commission." (Law Insider)
Required Terms
If the broker is a member of the National Association of Realtors (NAR), the agreement must include all of the following:
- A beginning date and a termination date.
- The list price at which the property will be offered for sale.
- The amount of compensation offered to the broker (flat fee or percentage of the sales price).
- The terms and conditions under which the brokerage fee shall be paid by the seller.
- Authorization for the broker to cooperate with other brokers as sub-agents or buyer's agents, and details of compensation to be offered to those brokers.
- Authorization for the broker to reveal or not to reveal the existence of offers previously received.
Additional Terms
Other terms that may appear in the agreement include:
- Authorization to post a sign, advertise the property, and install a lockbox.
- The seller's obligations to advise the broker on the condition of the property.
- The broker's obligations to advise the seller about regulations and laws affecting the sale.
Commission and Payment
The payment of a commission to the brokerage is typically contingent upon:
- The successful negotiation of a purchase contract between a satisfactory buyer and seller and the subsequent closing of the deal, or
- Finding a satisfactory buyer who is ready, willing, and able to pay the full listing price (or more) without contingencies.
The commission is usually a percentage of the sales price (commonly 3–7% for residential properties) but can also be a flat fee or a combination. Commission rates are negotiable and not regulated.
Types of Listing Contracts
There are three primary types:
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Exclusive Right to Sell: The seller must pay the brokerage a commission if the property is sold by the expiration date, regardless of who locates the buyer — even if the seller finds the buyer themselves. The seller cannot list the property with any other broker during the term.
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Exclusive Agency: The seller can only list with one brokerage. The seller must pay a commission if the broker procures a buyer, but if the seller finds the buyer themselves, no commission is owed. The property is typically not listed in the MLS.
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Open Agency: The seller may list the property with multiple brokerages. A commission is paid only to the brokerage that secures the buyer. If the seller finds the buyer themselves, no commission is owed.
Duration
A typical listing period is three to six months. The contract must have an expiration date. If the property is not sold by that date, the seller may re-list with the same or a different broker, adjust the price, or choose not to list.
Separate Agreements
Separate listing agreements typically exist for residential property, land, and commercial or business property.
