When an individual hires a real estate agent to sell his or her house, they enter into a written contract called a Listing Agreement. This agreement spells out the agent's duties and responsibilities, and gives him or her the right to sell the property. Listing agreements vary from state to state, and like most things, they are subject to change.
Case Study: Jane Doe wants to hire a real estate agent in Minneapolis to sell her house. Before she can get started, she must sign a Listing Agreement. She has never signed a contract like this before, and she has some questions. What terms must be in the agreement? What things are prohibited?
In Minnesota , we must to Minnesota Statute Section 82.21 subdivision 2 to help her find the answers. As of this writing (June 12, 2008) the following rules are in place in Minnesota :
(a) Requirement. Licensees shall obtain a signed listing agreement or other signed written authorization from the owner of real property or from another person authorized to offer the property for sale or lease before advertising to the general public that the real property is available for sale or lease. For the purposes of this section "advertising" includes placing a sign on the owner's property that indicates that the property is being offered for sale or lease.
(b) Contents. All listing agreements must be in writing and must include:
(1) a definite expiration date;
(2) a description of the real property involved;
(3) the list price and any terms required by the seller;
(4) the amount of any compensation or commission or the basis for computing the
commission;
(5) a clear statement explaining the events or conditions that will entitle a broker to a
commission;
(6) information regarding an override clause, if applicable, including a statement to the
effect that the override clause will not be effective unless the licensee supplies the seller with a protective list within 72 hours after the expiration of the listing agreement;
(7) the following notice in not less than ten point boldface type immediately preceding any provision of the listing agreement relating to compensation of the licensee:
"NOTICE: THE COMPENSATION FOR THE SALE , LEASE, RENTAL, OR
MANAGEMENT OF REAL PROPERTY SHALL BE DETERMINED BETWEEN EACH INDIVIDUAL BROKER AND THE BROKER'S CLIENT.";
(8) for residential property listings, the following "dual agency" disclosure statement:
If a buyer represented by broker wishes to buy the seller's property, a dual agency will be
created. This means that broker will represent both the seller(s) and the buyer(s), and owe the same duties to the buyer(s) that broker owes to the seller(s). This conflict of interest will prohibit broker from advocating exclusively on the seller's behalf. Dual agency will limit the level of representation broker can provide. If a dual agency should arise, the seller(s) will need to agree that confidential information about price, terms, and motivation will still be kept confidential unless the seller(s) instruct broker in writing to disclose specific information about the seller(s). All other information will be shared. Broker cannot act as a dual agent unless both the seller(s) and the buyer(s) agree to it. By agreeing to a possible dual agency, the seller(s) will be giving up the right to exclusive representation in an in-house transaction. However, if the seller(s) should decide not to agree to a possible dual agency, and the seller(s) want broker to represent the seller(s), the seller(s) may give up the opportunity to sell the property to buyers represented by broker.
Seller's Instructions to Broker
Having read and understood this information about dual agency, seller(s) now instructs
broker as follows:
..... Seller(s) will agree to a dual agency representation
and will consider offers made by buyers
represented by broker.
..... Seller(s) will not agree to a dual agency
representation and will not consider offers made
by buyers represented by broker.
.......... .....................................
Seller Real Estate Company Name
.....
Seller By:.
Salesperson
Date : ......... ;
(9) a notice requiring the seller to indicate in writing whether it is acceptable to the seller to have the licensee arrange for closing services or whether the seller wishes to arrange for others to conduct the closing; and
(10) for residential listings, a notice stating that after the expiration of the listing agreement, the seller will not be obligated to pay the licensee a fee or commission if the seller has executed another valid listing agreement pursuant to which the seller is obligated to pay a fee or commission to another licensee for the sale, lease, or exchange of the real property in question. This notice may be used in the listing agreement for any other type of real estate.
Prohibitions
(c) Prohibited provisions. Except as otherwise provided in paragraph (d), clause (2),
licensees shall not include in a listing agreement a holdover clause, automatic extension, or any similar provision, or an override clause the length of which is more than six months after the expiration of the listing agreement.
(d) Override clauses.
(1) Licensees shall not seek to enforce an override clause unless a protective list has been furnished to the seller within 72 hours after the expiration of the listing agreement.
(2) A listing agreement may contain an override clause of up to two years in length when
used in conjunction with the purchase or sale of a business. The length of the override clause must be negotiable between the licensee and the seller of the business. The protective list provided in connection with the override clause must include the written acknowledgment of each party named on the protective list, that the business which is the subject of the listing agreement was presented to that party by the licensee.
(e) Protective lists. A broker or salesperson has the burden of demonstrating that each
person on the protective list has, during the period of the listing agreement, either made an affirmative showing of interest in the property by responding to an advertisement or by contacting the broker or salesperson involved or has been physically shown the property by the broker or salesperson. For the purpose of this section, the mere mailing or other distribution by a licensee of literature setting forth information about the property in question does not, of itself, constitute an affirmative showing of interest in the property on the part of a subsequent purchaser. For listings of nonresidential real property which do not contain the notice described in paragraph (b), clause (10), the protective list must contain the following notice in boldface type:
"IF YOU RELIST WITH ANOTHER BROKER WITHIN THE OVERRIDE PERIOD AND THEN SELL YOUR PROPERTY TO ANYONE WHOSE NAME APPEARS ON THIS LIST, YOU COULD BE LIABLE FOR FULL COMMISSIONS TO BOTH BROKERS. IF THIS NOTICE IS NOT FULLY UNDERSTOOD, SEEK COMPETENT ADVICE."
You should check to see if there have been any subsequent changes made to the above-mentioned. Also keep in mind that every state has different rules and regulations that govern these agreements. You should always consult a professional in your location. This article should not be considered legal advice. This information is provided as a public service.
