A real estate listing agreement is a legally binding contract between you and the listing broker. It establishes a “principal - agent” relationship that conveys legal authority from you (the “principal") to the broker (the “agent”).
There are several types of listing agreements, but whatever type of agreement you sign, it should not exceed 90 or 120 days. Furthermore, if the agent fails to perform, such as a broken promise to hold open houses, you should be able to immediately cancel the agreement. Note that the terms “broker” and “agent” are used interchangeably.
Here are the three basic types of listing agreements:
Exclusive Right to Sell – Your agent receives a commission upon sale whether or not he or his firm actually makes the sale. In fact, even if you sell the house yourself, you still must pay the commission. This type of popular listing protects the listing broker’s commission, thus encouraging her to invest a significant amount of time and money, and also to cooperate with MLS (“Multiple Listing Service”).
Steve’s Divorce Tip: Given the importance of a broker to the divorce process, this common type of agreement will probably serve you best.
Exclusive Agency Agreement – This is similar to an exclusive right to sell, except that it allows you to sell the property yourself without having to pay a commission. While this might sound attractive, brokers are less likely to make a significant investment of time and money if they have to compete against you to sell the house.
Steve’s Divorce Tip: Use this type of agreement only if you are convinced that the broker will make a 100% effort despite the risk of losing the commission.
Open Listing – This is somewhat of a free-for-all in which the first broker that makes the sale gets the commission unless you sell the house first. Agents are even less likely to invest any time and money.
Steve’s Divorce Tip: High quality brokers experienced in divorce situations are not likely to enter the fray. They will invest no money and little time in these situations.
