You've decided to sell your current home, making you a first-time home seller.
After researching your options, you've decided that working with a real estate agent is the best way to sell your home quickly and for the most money.
You've spoken to friends, read reviews online, and have the perfect agent in mind that you want to work with.
You know from doing some light research that this "seller's market" won't last forever, so you'll need to make your next move quickly to get the maximum dollar out of your investment.
Sitting across from you in a coffee shop is your agent of choice. He's agreed that this is a great time to sell and he believes he's got potential buyer's already lined up, but first you must make your intentions official by signing a Listing Agreement, and retaining the agents services.
You've never seen a listing agreement, and you don't want to make any wrong moves that could hurt your chances of capitalizing on this great opportunity.
That's why we're telling you exactly what you need to know to understand a listing agreement.
The Purpose of A Listing Agreement
In Ontario, if you decide to list your home using a realtor or brokerage you must enter into a Listing Agreement, which is a legal and binding contract enforced by the Ontario Real Estate Association.
Although you can legally sell your home yourself (FSBO), should you choose to work with a realtor a Listing Agreement protects them in the case that you should find a buyer after they've invested their time and money into marketing your home to potential interested parties.
As outlined below, a Listing Agreement also states realtor commissions, finders fees, disclosure details, marketing terms and time limits.
Understanding the purpose of this agreement will put your mind at ease knowing that the realtor you've enlisted will do their best to sell your home quickly, and for as close to your asking price as possible, for their sake as much as yours.
What you need to know before signing a listing agreement
A listing agreement is a binding contract between you and the Real Estate Company that the agent is represented by.
The agreement is put in place by the Ontario Real Estate Association in order to ensure that all parties involved in the transaction are protected and compensated as planned.
A typical listing agreement will last 6 months, but they can be as long or as short as you like, without affecting the rules layed out within.
In a nutshell, the agreement states that you have agreed to enlist the help of an agent to help sell your home. In return they will recieve a set amount of money once the house is sold, whether it's sold by them or by you (we recommend letting them do the selling), and that all the information provided by you is correct and can be used to help market and sell the home. Should there be additional parties needed to legally sell the property, they are present and have also agreed to this partnership. Should anything happen to the home while prospective buyers are viewing it, the Real Estate Company is not liable for damages.
If you'd like a more detailed explanation of the various sections, read on.
Download a copy here
1. Basic Information
This might seem straight-forward, but an error here could disrupt the process down the line, so pay attention!
At the beginning of your agreement, you will see basic information like your name, the name of the agent and brokerage, and the date you entered the contract.
The most important part?
The address of the property you're selling. This needs to be absolutely correct so you can enter into a legal contract. One wrong digit and this contract is all but paper.
2. Realtor Compensation
The Realtor's compensation will be outlined in the "Commission" portion of your listing agreement. Ensure you review and approve the compensation outlined.
This section will also indicate for what length of time after the agreement expires that the real estate company is entitled to their fee.
That's right. Lets say that a week after the agreement ends, a buyer comes around and wants to purchase your property. This section of the listing agreement entitles the real estate company to their fee upon the assumption that their efforts were the reason for the sale. This is known as the "holdover period".
3. Finder's Fees
In the world of sales everyone appreciates a referral, and real estate is no different.
In this case, a finders fee is usually in the form of a payment from a mortgage broker to a real estate agent for the successful referral of a client. This section of the listing agreement ensures that you're aware that finder's fees are accepted over and above the agreed compensation outlined above.
The representation portion of your listing agreement outlines the various agency relationships that could materialize during the sale of your property.
Ensure that your realtor explains these relationships to you clearly so that there is no confusion down the line.
The most common relationships include:
- Seller Representation
- Buyer Representation
- Multiple Representation
- Customer Service
5. Referral of Enquiries
Simply put: For the entire length of the contract, you MUST Inform your agent of any and all enquiries on the property.
Even if your best friend or sister decides to buy your home, and you don't involve your realtor you sitll have to pay them their commission, so just let them do their job!
As part of a listing agreement, you also enter an agreement with your realtor to market your property. That is, Seller gives the Listing Brokerage the sole and exclusive right to place "For Sale" and "Sold" sign(s) upon the Property. By signing this, know that your Realtor has the ability to market your home in the suitable way they find necessary.
This section confirms that the people signing the document are all the people necessary to sell the property (all names on the title).
8. Indemnification and Insurance
This section of the listing agreement states that the real estate agent cannot be held liable for any damages that may occur while prospective buyers are viewing the property.
9. Family Law Act
The Family Law Act (Section 9) ensures that if spousal consent was required, then the spouse has signed.
10. Verification of Information
By initialing this section you are granting the Salesperson permission to use any reasonable information regarding the property to help market and sell the property (i.e. mortgage details, tax information, etc.)
11. Use and Distribution of Information
This gives the Salesperson the right to use any personal information you privode them in order to make the transaction happen. For instance, they might tell the interested buyers why you decided to sell or how long you lived in the home.
12. Successors and Assigns
This section states the heirs, estate trustees or any other party legally acting on behalf of the Seller must also abide by the terms of this agreement.
13. Conflict or Discrepency
Should any additional information be added to the agreement once it is signed, that information will supersede what is on the form.
14. Electronic Communication
Yes, electronic copies of this document are official.
This is where any additional information will be added that isn't outlined in the agreement.