Section 4 Unit 2 Flashcards
Listing Agreement
document that puts an agent or broker in business, is a legally enforceable real estate agency agreement between a real estate broker and a client, authorizing the broker to perform a stated service for compensation. The unique characteristic of a listing agreement is that it is governed both by agency law and by contract law.
The cornerstones of agency law in the context of a listing agreement are:
definition of the roles of parties involved
fiduciary duties of the agent
agent’s scope of authority
Listing broker and the client
principal parties to the contract. Client is buyer, seller, landlord or tenant. Broker is the client’s agent. A broker may represent any principal party of a transaction: seller, landlord, buyer, tenant.
Prospect
principal party on the other side of the transaction is a customer or a potential customer
Subagent of client
broker or salesperson who assists the listing broker in finding a customer is an agent of the listing broker.
A broker who represents the party on the other side of the transaction is an agent of that party, and not an agent of the listing broker, unless a dual agency arrangement is specifically allowed.
Fiduciary duties.
A listing agreement establishes an agency relationship between agent and client that commits the agent to the full complement of fiduciary duties to the client in fulfilling the agreement.
Scope of authority.
Customarily, a listing is a special agency, or limited agency, agreement. Special agency limits the scope of the broker’s authority to specific activities, generally those which generate customers and catalyze the transaction. A special agency agreement usually does not authorize a broker to obligate the client to a contract as a principal party, unless the agreement expressly grants such authorization or the client has granted power of attorney to the broker. For example, a listing broker may not tell a buyer that the seller will accept an offer regardless of its terms. Telling the offeror that the offer is accepted would be an even more serious breach of the agreement.
Under agency law, a client is liable for actions the broker performs that are within the scope of authority granted by the listing agreement.
A client is not liable for acts of the broker which go beyond the stated or implied scope of authority.
Thus, in the previous example, the seller would not be liable for the broker’s statements that the offer would be accepted or was accepted, since the broker did not have the authority to make such statements. A broker who exceeds the scope of authority in the listing agreement risks forfeiting compensation and perhaps even greater liabilities.
Bilateral or unilateral agreement.
Listings may be bilateral or unilateral, depending on the type of listing and the wording of the agreement. An open listing is a unilateral agreement in that the seller promises to pay a commission to any agent who produces a buyer but no agent promises or is obligated to take any action. On the other hand, most exclusive listings are bilateral agreements because of wording that promises the due diligence of the agent to procure a buyer in return for the seller’s promise to pay a commission if a buyer is produced.
Validity.
A listing agreement must meet the requirements for a valid contract to be enforceable.
Termination.
A listing, like any contract, may terminate for any of the following causes: performance, infeasibility, mutual agreement, rescission, revocation, abandonment, lapse of time, invalidity, and breach.
Legal form.
A valid listing may be oral or written. However, many states consider only a written listing to be enforceable, particularly an exclusive right-to-sell listing. In practice, a broker should get every listing in writing and make sure it clearly states what the broker is authorized to do and how the broker will be paid. An oral listing, even if enforceable, limits a broker’s ability to remedy problems:
a contested oral listing must be supported by considerable evidence to be enforced
a broker may not be able to sue a principal for damages incurred under an oral lease
if the client dies, the broker may not be able to obtain compensation for a successfully performed oral listing
An express listing,
verbal or written, manifestly authorizes the broker to pursue certain actions for the client. Clients and agents may also create an implied agency listing based on substantive actions rather than on an express agreement. For example, if a seller allows a broker to undertake certain activities toward effecting a transaction without a specific authorization, but with full knowledge and consent, an implied agency may have been created. Consequently, if the principal proceeds with a customer procured in this manner, he or she may be liable to the broker for compensation. Conversely, the agent may be held responsible for fulfilling fiduciary duties imposed by the implied agency.
Assignment.
Since a listing agreement is a personal service contract, it is not assignable. In particular, a broker cannot assign a listing to another broker.
owner listing
authorizes a broker to represent an owner or landlord. There are three main types of owner listing agreement: exclusive right-to-sell (or lease); exclusive agency; and open listing. Another type of listing, rarely used today and illegal in many states, is a net listing. The first three forms differ in their statement of conditions under which the broker will be paid. The net listing is a variation on how much the broker will be paid.
