Preparing your house for the market can be stressful when it’s time to move on to your next step in life. Still, there is a certain intrigue to watching your space transform before your eyes. The painting, the deep clean from top to bottom, the staging; is this really the home you have lived in for so many years?
Perhaps the only thing more exciting is hunting for your new place, visiting open houses and looking out for new possibilities to make your own. As strenuous as the process may sometimes be, there is often an underlying sense of adventure and feeling of accomplishment once it’s all over with. At the very least, you’ll never find yourself without something to say when someone asks, “What’s new?”
On the other hand, the legalities and the paperwork are typically the least glamorous and engaging aspects of a transaction. And yet, they are the foundation that your whole transition rests on. That’s why understanding the documents you will be reviewing and signing is always beneficial. In this post, we’ll talk about what you need to know about listing agreements to experience a seamless transition.
Listing Agreement Defined
In the simplest terms, a listing agreement is a legal document between you and your real estate brokerage. By signing, you are giving your agent permission to find a buyer for your home. Since it is a binding contract, you’ll want to read and understand the terms carefully before committing to anything. Though there are different types of agreements, they cover the same basic clauses:
- Type of property
- The listing price
- Effective date and expiry date
- A description of the services provided
- The commission amount
Understanding the factors that affect the current market will help you when buying or selling. A few of our recent posts will bring you up to speed:
- Can You Buy or Sell a Home Using an App?
- From Buyers to Sellers: The Intricate Dance of Inflation, Interest Rates, and Real Estate
- Tough Questions to Ask Your Realtor® When Selling Your House
Types of Listing Agreements
The type of listing agreement depends on the market, your property, and the real estate brokerage itself. Although it’s never good practice to sign something without understanding it, Canadian law does provide you with a substantial level of protection.
Once you both sign the document, the real estate broker and the agent now have a fiduciary duty towards you. This means they are under legal obligation to represent your best interests at all times.
Nevertheless, it always pays to know what you are getting into, especially when it involves a significant and life-changing transaction like selling your house. Here are the types of listing agreements you may encounter:
Exclusive Listing Agreement
In this contract, your brokerage has the exclusive right to show your property and find a buyer for a predetermined amount of time. For the brokerage, the benefit of this arrangement is obvious; they don’t have to share the commission with the buyer agent if they sell your home within that time frame. How does this benefit you as the seller?
It means that you can expect to receive the highest level of service possible from your agent and the brokerage. It also provides you with more privacy during the sales process, as your home will not be listed on the open market. Any home can be exclusive, but they are often reserved for more luxurious listings.
Open Listing
With an open listing, any real estate agent can show your home, which will be shown and promoted on the MLS®. The downside of an open listing is decreased privacy. The advantage of a non-exclusive listing is that your house gets more exposure, as all licensed real estate agents can bring buyers through.
Your Rights and Responsibilities
A listing agreement is designed to protect the interests of both you, the seller, your real estate agent, and the brokerage. As such, it outlines the rights and responsibilities of each party. The brokerage and Realtor® may have a fiduciary duty towards you, but you will also have terms to live up to.
Your first responsibility is to read the agreement carefully to ensure you know what it entails. You must also be honest and upfront about any potential issues the home has so that your agent can represent your listing accurately.
If your agent brings a buyer, the brokerage has the right to compensation in the amount detailed by the listing agreement. This commission is then shared with the buyer’s agent.
What Happens After the Agreement Expires
Once a listing agreement expires, there may be a holdover clause that entitles the brokerage to a commission, usually a period of 90 days. What is the purpose of this? Many real estate agents invest significant amounts of time and often their own money into preparing and marketing a listing. If you sell the home yourself under an open listing, the brokerage loses out on the commission. However, if the agent brings a buyer who intends to purchase but whose research extends past the expiry date, they may still be entitled to the commission from the sale.
Are you looking for ways to maximize your results when selling your home? A few of our related reads can help:
- Best Practices for Selling a Home in Today’s Market
- Renovating Vs. Selling Your Home As-Is
- How to Sell Your Parents’ Home
Should You Sign?
If you plan to sell your house with the help of a real estate agent, you will need to sign a listing agreement sooner or later. However, this is only done after careful consideration and asking a lot of questions.
A good agent will understand and be empathetic to your concerns and will answer all of your questions patiently. They will never rush the process or pressure you to sign before you’re ready. Instead, they will take the time to listen and be sure that your goals are aligned so that your transition becomes a positive experience.
Do you have real estate questions in the Guelph or Tri-Cities? We are here to help with anything you need. Reach out at 519-826-7109 or info@gowylde.ca to start the conversation today.
