Listings Employment by Public - Part 2 - Chapters 9-10 Flashcards
Enter into a listing agreement with a seller granting the exclusive right to market and negotiate the sale of a property
A broker’s right to collect a fee for representing a client originates with a written employment agreement known as a listing agreement. An exclusive right to sell listing agreement grants the broker sole authority to market the property, locate a buyer and negotiate a sale.
Under an exclusive right to sell listing, a broker is entitled to the agreed-upon fee if the seller:
- accepts an offer submitted to the broker from a buyer
- withdraws the property from the market
- terminates the agency relationship before the expiration of the listing
- acquires replacement real estate in a transaction negotiated by the broker.
Explain the separate purpose for enforcement of each provision in the listing agreement
Formal documentation of an obligation to pay a fee in the form of a written agreement signed by the seller is required for the broker to maintain the right to enforce collection of a broker fee from the seller.
This documentation comes in the form of the LISTING AGREEMENT and it’s addenda which form the contents of a marketing package on the property. The listing agreement typically includes:
- an enumeration of agreed-upon brokerage services
- the broker’s fee and conditions which need to be satisfied for the fee to be earned
- a description of the property and disclosures regarding its condition
- the price and terms sought by the seller for the sale
- the signatures of each involved party
exclusive right to sell listing agreement
AN EXCLUSIVE RIGHT TO SELL LISTING AGREEMENT is a written employment agreement by a broker and a seller of real estate employing and entitling the broker to a fee when the property sells during the listing period. The right to sell listing agreement grants the broker sole authority to:
- market the property
- locate a buyer
- negotiate a sale
It also specifies the:
- the amount the seller agrees the broker is to receive
- conditions to be met by the broker or brought about by the seller for the broker to earn the fee.
listing agreement
A LISTING AGREEMENT is a written employment agreement used by brokers and agents when an owner, buyer, tenant or lender retains a broker to render Real Estate transactional services as the agent of the client. A broker’s right to a fee for representing clients originates with a written employment agreement, commonly called a LISTING AGREEMENT, entered into by the client who employs the broker.
marketing package
A MARKETING PACKAGE is a property information package handed to prospective buyers containing all the disclosures compiled by the seller’s agent on the listed property. Many of these items require the seller to be actively involved in the sale, or incur expenses necessary to a sale. The marketing package is handed to prospective buyers at the earliest opportunity for their review before contracting.
Understand the reciprocal obligations of a seller and broker under an exclusive right to sell listing
An exclusive right to sell listing agreement documents the employment of a broker by an owner of real estate. In its broker fee provision, the owner agrees to pay the broker a fee if a property is sold, exchanged, or optioned during the listing period, regardless of whether the sale resulted from the Brokers or their agents activities.
A broker and the brokers agents employed under an exclusive listing are obligated to exercise due diligence to gather data on the condition of the property, market the property and locate a buyer.
However, the broker puts their right to collect a fee at risk under the exclusive representation clause when:
- the broker and their agents fail to perform their due diligence obligations and
- the owner cancels the listing before a buyer is located.
Appreciate your right on an exclusive listing to collect a fee regardless of how the sale came about by fully performing due dilligence activities
The broker has earned a fee under any type of listing agreement, open or exclusive, when the broker or one of their agents:
- locates a financially qualified ABLE buyer who is also READY and WILLING to purchase the property by making an offer on the terms of the sale slated in the listing and
- bring the buyer and seller together by submitting the buyer’s offer to the seller and handing the seller a copy of the offer.
Apply the ready, willing, and able buyer rules when submitting a full listing offer
For an agent to earn a fee for obtaining and submitting a full listing offer, the prospective buyer, on making the offer, needs to be ready, willing and able to perform.
Thus, to earn a fee the broker needs to demonstrate that the buyer:
- READY - MADE AN OFFER on substantially the same terms as a seller listed terms, called being ready
- WILLING - INTENDED to enter into a binding purchase agreement with the seller, called being willing and
- ABLE - QUALIFIED FINANCIALLY and LEGALLY to perform on the offer, called being able.
Provide further services – for an additional fee – to owners who sell and acquire a replacement property
The seller’s agent who is alert to an opportunity to render further services for an additional fee needs to know about the profit tax exemption on a sale in a 1031 transaction. If the owner of acquires replacement property (like-kind) which has equal or greater equity and equal or greater debt, profit taxes are avoided on the property sold as an exempt (tax-free) 1031 transaction.
The authorization to locate replacement property and receive payment is required to be in writing to enforce collection of any fee that is earned. Here, inclusion of a Replacement Property Provision also entitles the agent to a fee for the agents negotiations to acquire a replacement home for a seller that is relocating.
To fully protect a seller’s broker’s right to a fee when replacement property may be purchased, a buyer’s exclusive right to buy listing is also entered into.
&1031 transaction
A 1031 TRANSACTION is a sales transaction in which sales proceeds are properly reinvested in a replacement property to qualify any profit realized on the sales as tax-exempt.
If the listed price of a property is greater than the owner’s remaining cost basis in the property, the owner is selling the property at a profit, called a capital gain.
A well-informed agent needs to bring to the owner’s attention the advantageous 1031 tax exemption treatment available on the sale of their property. Further the perceptive, well-informed agent will recommend implementation of a 1031 reinvestment plan by the timely acquisition (through the agent) of other like-kind property. Simply put, the net proceeds from the sale of the listed property are transferred to acquire another qualifying property suitable to the owner.
broker fee provision
In the exclusive right to sell listing agreement, a BROKER FEE PROVISION is a provision contained in a listing agreement in which an owner agrees to pay the broker a fee if their property is sold, exchanged or optioned during the listing period, regardless of whether the sale resulted from the brokers or their agents activities.
due diligence
DUE DILIGENCE is the concerted and continuing efforts taken by an agent to meet the objectives of their client. A broker and the brokers agent’s employed under an exclusive listing are obligated to exercise due diligence to gather data on the condition of the property, market the property and locate a buyer.
However, the broker puts their right to collect a fee at risk under the exclusive representation clause when:
- the broker and their agents fail to perform their due diligence obligations and
- the owner cancels the listing before a buyer is located.
exclusive right to buy listing agreement
An EXCLUSIVE RIGHT TO BUY LISTING AGREEMENT is a written employment agreement by a broker and a prospective buyer of real estate employing and entitling the broker to a fee when property is purchased during the listing period.
The Right To Buy Listing supersedes the Replacement Property Provision in the exclusive right to sell listing agreement.
A right-to-buy listing supersedes a replacement property provision in an exclusive right-to-sell listing.
exclusive right to sell listing agreement
An EXCLUSIVE RIGHT TO SELL LISTING AGREEMENT is a written employment agreement by a broker and a seller of real estate employing and entitling the broker to a fee when the property sells during the listing period.
full listing offer
A FULL LISTING OFFER is a buyers or tenants offer to buy or lease on terms substantially identical to the employment terms in the owner’s listing agreement with the broker.
