Time to sell? Listing agreements should not be taken lightly

When you “hire” a real-estate broker to help sell your home, you are promising to pay a commission for services rendered if the broker finds a person ready, willing and able to buy your home.

A woman called our radio program recently about the consequences of canceling her listing agreement. She was unhappy with the way her home was being marketed. She felt online ads describing her home were poorly written, photos did not accurately show the home’s amenities, for-sale fliers were not properly refilled and that her agent was not doing enough to get other agents to preview the home.

The topper came when a potential buyer was given incorrect information about the house from another agent in the listing office.

The seller, who specializes in marketing and promoting small businesses, said she could do better herself. She also said there were more aggressive, creative agents specializing in her neighborhood than the one she hired.

What, she asked, could she do? Could she rescind the listing agreement without the broker’s consent? And if the seller elects to cancel, is the broker entitled to a commission? While listing agreements differ, here’s a quick review of the options:

The seller can cancel the listing agreement at any time, whether or not the seller has legal grounds to do so. A listing agreement creates what is known as an “agency agreement” with the broker, and it can be canceled by the principal (seller). It’s always best to cancel in writing.

“If a seller no longer wants to be part of working relationship, it’s best to put an end to the relationship,” said Jay West, an agent who has worked for more than 30 years in the United States and Mexico. “Most agents that I know would honor a verbal notification. However, it depends on the state and each contract. That said, if there are active buyers still showing interest in the listed property, those candidates need to be identified as being part of our agreement, even if they return at a later time.”

If the seller cancels the agreement without having legal grounds, the broker could be entitled to a commission. Legal grounds for cancellation include broker malpractice, violation of the broker/agent fiduciary duty or breach of contract by the broker.

If the broker is not at fault, the broker could be entitled to “damages” even if the house does not sell during the unexpired term of the listing. Damages could mean advertising costs and other out-of-pocket expenses in servicing the listing. Again, it all depends upon state laws and what is contained in the listing agreement.

If the house sells during the unexpired term of the canceled listing, the law presumes that the terminated broker would have made the sale, thus entitling the broker to a commission. However, if the seller can prove the broker would not have made the sale, the seller can avoid payment of the commission.

A seller can cancel a listing with one agency and move it to another agency in the same multiple-listing association and be liable for only one commission.

For example, if you cancel your listing with Kelly Real Estate and move it to West Real Estate and both are members of the same multiple-listing association, you usually are relieved of your obligations to Kelly by paying West a commission when the house is sold.

Despite what you may hear, all commissions are negotiable. Some agents are very open to negotiating or deferring the amount of the commission while others are insulted at the thought of bargaining. Agents involved in the conventional house sale generally receive a 6 percent commission. Many brokerages now charge less.

If the house was listed with a member of the multiple-listing agency, the commission usually is split evenly between the listing agency and the selling agency. However, buyers may have a different arrangement with their representatives.

When you sign a listing agreement, you are actually agreeing to work with the agency and its boss, or managing broker. Many agents also hold the “broker” designation, which means they have undertaken additional classroom instruction and testing. A managing broker usually will assign, or permit the seller to choose, another agent in the office if the seller is unhappy with the first agent.

Be realistic when you sign a listing. Demand the services promised, but don’t expect miracles. Interview more than one agent, check references and then choose the one you think will do the best job.

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