LCAR Unit 17 - Listing Agreements and Buyer Representation Contracts - 14th Edition Revised

1. The Real Estate School U N I T 1 7 LISTING AGREEMENTS AND BUYER REPRESENTATION CONTRACTS 1 Page 297

2. OVERVIEW • Agency contracts are employment contracts for the professional services of the broker and not contracts for the transfer of real estate • Listing and Buyer Representation agreements are the fundamental documents of the real estate profession 2 Page 297-298

3. WRITTEN AGREEMENTS • Pennsylvania licensing law requires a written agreement between a broker and a consumer when the consumer is obligated to compensate the broker • Important if either party decides to take legal action 3 Page 298

4. WRITTEN AGREEMENTS • Licensing law requires written agreements to contain: • Broker’s fee and term of contract • Nature and extent of broker’s services • Broker may provide services to more than one party • Policies regarding cooperation with other brokers • Purpose of the Real Estate Recovery Fund • Statement regarding possible conflicts of interest 4 Page 298

5. LISTING AGREEMENTS • Listing agreement is an employment contract between a broker and a seller where the broker is authorized to represent the principal as an agent • All listing agreements must be in writing to be enforceable in a court of law • Listings are the property of the broker 5 Page 299

6. LISTING AGREEMENTS • Three Types of Listing Agreements (Figure 17.1) 6 Page 299 ABC Realty XYZ Realty For Sale by Owner ABC Realty For Sale by Owner ABC Realty Exclusive Right-to-Sell Exclusive Agency Open Listing

7. LISTING AGREEMENTS • Types of Listing Agreements (cont’d) 1. Exclusive Right-to-Sell – One broker is appointed as the sole agent of the seller • Seller must compensate the broker regardless of who sells the property • Offers the greatest opportunity to receive compensation 7 Page 299 Broker

8. LISTING AGREEMENTS • Types of Listing Agreements (cont’d) 1. Exclusive Right-to-Sell (cont’d) • Real Estate Licensing and Registration Act (RELRA) requires a boldface statement: “The broker earns a commission on the sale (or lease) of the property, regardless of who, including the owner, makes the sale (or lease) during the listing period.” 8 Page 300

9. LISTING AGREEMENTS • Types of Listing Agreements (cont’d) 1. Exclusive Right-to-Sell (cont’d) • Agreement must also contain the following: • Seller’s asking price • Broker’s expected commission on the sales price • Payments held in a broker’s escrow account • Duration of agreement 9 Page 300

10. LISTING AGREEMENTS • Types of Listing Agreements (cont’d) 2. Exclusive Agency – One broker is authorized to act as exclusive agent; however, the seller retains the right to sell the property without obligation to the broker 10 Page 300 Broker Owner

11. LISTING AGREEMENTS • Types of Listing Agreements (cont’d) 2. Exclusive Agency (cont’d) • Broker compensated only if the procuring cause • Agreement must contain the same provisions as the Exclusive Right-to-Sell agreement regarding list price, broker’s commission, escrow account disclosure, and duration 11 Page 300

12. LISTING AGREEMENTS • Types of Listing Agreements (cont’d) 3. Open Listing (Nonexclusive) – The seller retains the right to contract with multiple brokers and is only obligated to compensate the broker who produces a buyer • Seller is not obligated to pay a commission if they sell the property 12 Page 300 Owner Multiple Brokers

13. LISTING AGREEMENTS • Multiple Listing Service – Clause inserted in an Exclusive Right- to-Sell listing to make if available to other broker members • Most MLS’s require brokers to turn over new listings within a specific period • Broker makes a unilateral offer of compensation 13 Page 300

14. LISTING AGREEMENTS • Coming Soon Listings • House needs some sprucing up • Agent wants to create increased demand for property • Property may not be shown while in this status 14

15. LISTING AGREEMENTS • Office Exclusive Listings • May be withheld from the MLS • May only be advertised within the brokerage • May not be advertised to the public 15

16. LISTING AGREEMENTS • Net Listing – Seller receives a net amount of money from a sale with the excess going to the listing broker as commission • Illegal in many states including Pennsylvania 16 Page 301

17. LISTING AGREEMENTS • Listings may be terminated for the following reasons: • Agreement’s purpose is fulfilled • Agreement’s term expires • Bankruptcy or foreclosure • Mutual agreement • Death of broker or seller • Destruction of property 17 Page 301-302

18. LISTING AGREEMENTS • Expiration of Listing Period – All listings must specify a definite period of time during which broker is employed • Pennsylvania Real Estate Commission prohibits: • Listings exceeding 12 months • Automatic renewal provision • Cancellation notice to terminate 18 Page 302

19. LISTING AGREEMENTS • Broker Protection Clause – Provides that the property owner will pay the listing broker if the owner transfers the property, within a specified period after the listing expires, to someone with whom the broker negotiated during the term of the listing 19 Page 302

20. THE LISTING PROCESS • Information Needed for Listing Agreements 20 Page 302-303 • Names of owners • Street address/Legal description • Improvements • Room sizes • Lot dimensions • Financing in place • Seller financing offered • Pending assessments • Zoning classification • Property taxes • Neighborhood amenities • Inclusions/Exclusions of personal property • Property features • Required disclosures

21. THE LISTING PROCESS • Pricing the Property – Licensees should offer their knowledge, information, and expertise to assist seller in setting a reasonable listing price 21 Page 303

22. THE LISTING PROCESS • Pricing the Property (cont’d) • Comparative Market Analysis (CMA) is prepared by licensees and compares location, size, age, style, and amenities of properties that are comparable to the seller’s property • Recently SOLD properties • Properties currently on the market • Properties that were listed but did not sell 22 Page 303

23. THE LISTING PROCESS • Comparative Market Analysis (CMA) 23 Page 303 ABC Realty

24. THE LISTING PROCESS • Pricing the Property (cont’d) • Pennsylvania licensing law requires that the following statement be printed on the 1st page of the CMA: “This analysis has not been performed in accordance with the Uniform Standards of Professional Appraisal Practice which require valuers to act as unbiased, disinterested third parties with impartiality, objectivity, and independence and without accommodation of personal interest. It is not to be construed as an appraisal and may not be used as such for any purpose.” 24 Page 304

25. THE LISTING PROCESS • Seller’s Return – Licensee should show the seller roughly how much will be netted from a given sales price 25 Page 304

26. THE LISTING PROCESS • Calculating Sales Prices, Commissions, and Seller Nets • Commission = Sales Price x Commission Rate • Sales Price = Commission ÷ Commission Rate • Commission Rate = Commission ÷ Sales Price 26 Page 305

27. THE LISTING PROCESS • Real Estate Seller Disclosure Act – Requires sellers of residential real properties (1-4 units) who intend to transfer an interest in a residential property to disclose material defects 27 Page 305 Figure 17.2

28. THE LISTING PROCESS • Material defect is a problem with the property that would have a significant adverse impact on the value of the property or involves an unreasonable risk to people on the land 28 Page 316

29. THE LISTING PROCESS • Both the listing agent and buyer agent should review the Seller’s Property Disclosure before providing it to a buyer • Any missing or vague info should be clarified 29 Page 316

30. THE LISTING PROCESS • Marketing the Property • Virtual Staging – Places Photoshop furnishings in a vacant home in the hopes the home buyer will be better able to picture their own furniture in the home • May not remove problematic flaws 30 Page 316

31. THE LISTING PROCESS • Marketing the Property • MLS – Once a broker enters a property into the MLS, property info may feed out to various other online platforms Syndication – Property info that is fed out to other online platforms 31 Page 316

32. THE LISTING PROCESS • Marketing the Property • Technology & Social Media – Must comply with federal, state, and local rules and regulations • Agents must also follow the Realtor® Code of Ethics and Practice regarding use of other broker’s listings and interacting with other brokers 32 Page 316

33. THE LISTING CONTRACT FORM 33 Page 318 • A variety of listing contract forms are available • The same considerations arise in most real estate transactions which means that most listing contracts require similar information • Most Brokers use an Exclusive Right to Sell Listing Agreement Figure 17.3

34. THE LISTING CONTRACT FORM • Broker’s Authority and Responsibilities – Lists what marketing activities can be performed and discloses responsibility for accepting and holding funds 34 Page 318

35. THE LISTING CONTRACT FORM • Names of Parties to the Contract – Lists anyone who has an ownership interest in the property • Brokerage Firm – The brokerage company and salesperson’s name must be identified 35 Page 318

36. THE LISTING CONTRACT FORM • Listing Price – The proposed sales price • Seller proceeds will be reduced by outstanding obligations 36 Page 325

37. THE LISTING CONTRACT FORM • Description of the Premises – Street address or other defining description • Real Property vs. Personal Property – Defines what is included and excluded in the listing 37 Page 325

38. THE LISTING CONTRACT FORM • Evidence of Ownership – Owner should provide proof • Encumbrances – Affecting the use or transfer of property; could be physical or financial 38 Page 325

39. THE LISTING CONTRACT FORM • Broker Compensation – Specifically stated • Fee can be a percentage of sales price or flat fee 39 Page 325 ABC Realty Commission Ten Thousand & - - - - - - - 00/100 01/01/2021 $10,000

40. THE LISTING CONTRACT FORM • Indemnification (Hold Harmless) – For any incorrect information provided by either party • Leased Equipment – Seller is responsible for notifying lessor of the change of property ownership 40 Page 325

41. THE LISTING CONTRACT FORM • Closing and Buyer’s Possession Dates – Based on seller preferences • Closing – Identifies who will be handling the closing and paperwork 41 Page 325-326

42. THE LISTING CONTRACT FORM • Home Warranty – Option for the seller to obtain one to make their listing more attractive 42 Page 326

43. THE LISTING CONTRACT FORM • Termination of Contract – Provides and specifies ways for the agreement to be terminated • Broker Protection Clause – Broker may be entitled to a commission after the listing expires 43 Page 326

44. THE LISTING CONTRACT FORM • Owner Warranties – Owner is responsible for certain assurances and disclosures about the real estate 44 Page 326

45. THE LISTING CONTRACT FORM • Nondiscrimination – Property will be shown and offered to any person according to the law • Antitrust Wording – States that commissions were negotiated 45 Page 326

46. THE LISTING CONTRACT FORM • Signatures and Dates – Owners authorization and starting date of agreement 46 Page 327

47. THE LISTING CONTRACT FORM • Real Estate Recovery Fund – Required statement that briefly explains the purpose and intent of fund 47 Page 327

48. THE LISTING CONTRACT FORM • Lead-Based Paint Disclosure – If property was built before 1978 • Other Disclosures Required by Law – Short sales, historic districts, trust or preserves, etc. 48 Page 327

49. BUYER AGENCY AGREEMENTS • An employment contract between a buyer and broker • Purpose is to find a suitable property that meets the buyer’s needs • Buyer agency agreements belong to the broker not the salesperson 49 Page 327 Figure 17.4

50. BUYER AGENCY AGREEMENTS • Buyer Representation Issues • Before any substantive issues can be discussed with the buyer, the licensee must provide the Consumer Notice 50 Page 331

51. BUYER AGENCY AGREEMENTS • Buyer Representation Issues (cont’d) • Compensation can be paid in a variety of ways: • Flat Fee for Service • Hourly Rate • Percentage of Purchase Price • Retainer Fee – Charged at time of agreement to cover initial expenses 51 Page 331

52. BUYER AGENCY AGREEMENTS • Buyer Representation Issues (cont’d) • Buyer’s Agents are usually compensated by sharing the commission paid by the seller • The source of compensation does not determine who the agent represents 52 Page 331

53. BUYER AGENCY AGREEMENTS • Pricing the Property • Buyer’s agents should prepare a Comparative Market Analysis (CMA) to assist buyer in making an offer 53 Page 331

54. BUYER AGENCY AGREEMENTS • Types of Buyer Agency Agreements 54 Page 331-332 Exclusive Buyer Agency Exclusive Agency Buyer Agency Nonexclusive Buyer Agency Owner Agent Agent Owner Agent Agent

55. BUYER AGENCY AGREEMENTS • Types of Buyer Agency Agreements 1. Exclusive Buyer Agency – The buyer is legally bound to compensate the broker if the buyer purchases a property • Agent gets paid regardless of whether the broker, buyer, or another licensee locates the property 55 Page 331 Broker

56. • Types of Buyer Agency Agreements (cont’d) 2. Exclusive Agency Buyer Agency – Broker is entitled to compensation only if they locate the property the buyer purchases • Buyer retains right to find property and withhold compensation from broker Broker Buyer BUYER AGENCY AGREEMENTS 56 Page 331-332 56

57. BUYER AGENCY AGREEMENTS • Types of Buyer Agency Agreements (cont’d) 3. Nonexclusive Buyer Agency – Contract that permits the buyer to enter into similar agreements with an unlimited number of brokers • Buyer is only obligated to compensate the broker who locates the property 57 Page 332 Multiple Brokers Buyer

58. BUYER AGENCY AGREEMENTS • Gathering Information 58 Page 332 • Names of buyers • Type of property desired • Geographic areas • Price range • Term of contract • Scope of work • Exclusive or Nonexclusive • Source of compensation • Dual agency • Financial terms • Sales agreement terms

59. BUYER AGENCY AGREEMENTS • Exclusive Buyer Agency agreements contain the following terms: 59 Page 332-333 • Type of agency relationship • Term of the contract • Brokerage fee • Property requirements • Broker protection clause • Provision for Designated Agency • Provision for assignment of contract by broker • Signatures of parties • Disclosures relating to conflict of interest • Nondiscrimination • Other required disclosures

LCAR Unit 17 - Listing Agreements and Buyer Representation Contracts - 14th Edition Revised

LCAR Unit 17 - Listing Agreements and Buyer Representation Contracts - 14th Edition Revised

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LCAR Unit 17 - Listing Agreements and Buyer Representation Contracts - 14th Edition Revised