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The listing contract: What's it all about?

You've decided to sell your house, you've painted and polished, you've interviewed listing agents, and settled on an asking price. Now it's time to sign a listing contract.

"A listing agreement is really an employment contract between you and the person you're hiring," says Diane Saatchi, senior vice president of The Corcoran Group in East Hampton, N.Y. "You want to be clear what everyone's job will be; they want to be clear what they'll be earning for the effort."

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While the contracts vary from state to state, some things are fairly standard. You should expect to see the following:

A description of the agreement. There are three basic types of listing agreements, says real estate attorney Neil Garfinkel, a partner in the New York-based based firm of Abrams Garfinkel Margolis Bergson, LLP. The most common is called an exclusive right to sell, or an exclusive listing agreement. This means that you give just one company the right to sell your house, as opposed to having signs from four different real estate agents in your front yard. In an exclusive listing, the broker gets the commission no matter who brings the buyer to the closing table. In an exclusive agency listing, you list the house with just one agency. If they sell it, they get the commission. If you wind up selling it on your own, you don't pay a commission. The final variation is an open listen, which means you can sign up with as many real estate agents as you want to sell the house. It doesn't happen very often and most Multiple Listing Services generally don't allow it.

What's included or excluded in the sale. It sounds simple, but it can get technical, says Elizabeth Marquart, a Realtor with Sotheby's International Realty in Beverly Hills, Calif. Generally, furniture is excluded and fixtures are included in a sale. A fixture is anything that's attached to the walls, including curtain rods and window coverings, light fixtures, chandeliers, cabinetry, built-in desks and bookcases, and built-in appliances. But these days, lots of stuff is attached to the walls, including things you might like to take with you, such as your to-die-for plasma screen TV. Spell out what stays and what goes.

The listing price and terms. This is your initial asking price, the starting point of all negotiations with buyers. You'll also include here any incentives you might offer, such as offering financing to a buyer, paying closing costs, offering a home buyer's warranty, or giving a bonus to an agent. Keep in mind: You are signing a contract that says you will sell -- and pay the brokerage commission -- at the price and terms stated. In other words, if the agent brings a buyer who agrees to the exact terms spelled out in the listing agreement refusing to do so will likely land you in legal hot water and liable to pay the commission anyway.

Services to be performed. This says what the agent will be expected to do for you, says Sharon Kirkland, broker manager of the Delray Beach, Fla., office of Illustrated Properties Real Estate Inc. Those services include advertising the property, listing it with the Multiple Listing Service, showing the house, presenting all offers and counter-offers in a timely manner, and assuring that information you give the agent will be kept confidential unless you waive that confidentiality. It also will list other services to be performed, such as having the yard mowed until it sells.

Compensation. In all states, the commission is negotiable. In California, contracts state in big, bold print that the commission isn't fixed by law, Marquart says. That means the 6 percent the agent often seeks isn't carved in stone. This section also says you agree to pay commission to both your agent and the buyer's agent, and you authorize your agent to cooperate with other agents for a specific percentage. In plain English, if you're paying your agent a 6 percent commission, he'll split that with the buyer's agent. There's often a provision for a reduced commission for a seller who finds a buyer on his own.

-- Posted: May 16, 2005

'05 Real Estate Guide
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