What Is a Listing Agreement?

Several forms of listing agreements exist, with great variation in terms, liability, duties and services rendered. As with any legal document, the terms and consequences should be fully understood before it is signed. Listing agreements are generally terminated only by mutual consent, fulfillment of the objectives, or upon a specified expiration date. Most brokers request an exclusive listing (or "exclusive right to sell"), which is a written agreement entitling the listing agent to a commission regardless of who sells the property. The agreement may also provide that a commission is due the broker even after the listing agreement has expired if the property is sold to a prospect produced by the broker during the term of the contract.

A seller and broker should also reach agreement concerning the inclusion of the property in a multiple listing association, which enables participating brokers to pool listings and share commissions in order to give maximum exposure to the property. The Northwest Multiple Listing Association (NWMLA) is one of the largest and most sophisticated in the country. It extends from Tacoma north to Camano Island, encompassing all of metropolitan Seattle and Seattle's major suburban communities, and is currently expanding to cover most of western Washington.

A listing agreement usually provides for payment of a brokerage fee or commission. The fee (typically a negotiated percentage of the selling price) should be stipulated in the agreement. A broker who produces a purchaser who is "ready, willing and able" to buy the property on the terms specified in the listing agreement (or otherwise acceptable to the seller) is normally entitled to a commission. Although contracts may sometimes provide for payment of a commission only if a sale is completed (or "closes"), the seller usually has an obligation to pay a broker who performs according to an agreement and regardless of whether the sale was ever consummated. In other words, if a transaction fails to close because a seller reneges (or refuses to perform "without cause" ), the seller will generally be liable for payment of the commission.

A broker's functions and authority may be negotiated by the parties to the agreement, but it should be remembered that the broker is usually the seller's agent. In representing the seller's interests, a broker is obligated to report all offers and proposals. Negotiations between the seller and purchaser usually begin after a broker finds a potential buyer.