Real Estate Practice 051623

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
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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
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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
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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
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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.
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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
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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
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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:
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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