In 2017, only 8 percent of homes in the United States were sold by owner. If you, like most sellers, will be selling with an agent, you will be provided with a listing agreement. At this point, in all likelihood, you will not have selected a closing attorney, so you may end up reviewing this listing agreement on your own. If you are reviewing the agreement on your own, keep the following questions in mind: If you list your home with an agent, but end up finding a buyer on your own, do you have to pay a commission anyway? How will the agent market your home? If you are unsatisfied with your agent, can you terminate the agreement?
In New Jersey, there are two primary types of listing agreements: “exclusive listing agreements” and “exclusive right to sell agreements.” With an exclusive listing agreement, you as the homeowner have given one particular agent the right to list your home; however, if you procure a buyer on your own, you are not obligated to pay a commission to your agent. On the other hand, with an exclusive right to sell agreement, even if you find your own buyer, you must pay your agent the full commission.
Keep in mind that once you’ve given an agent exclusivity, it’s very hard to switch agents before the expiration of the listing agreement. When you set the term of the agreement, set a reasonable expiration of the listing so you’re not locked in. While most agents ask you to sign for a year, a typical timeframe is three to six months. That provides the agent with enough time to appropriately market the property, but the upcoming expiration provides the agent an incentive for them to prioritize your property.
Similarly, you will want to ensure that your agent markets your home to the broadest possible audience. The best way to do this is by listing your home with the local multiple listing service. That service allows agents to see each other’s inventories, and helps match buyers and sellers across various agencies.
Since you want as many people as possible looking at your home, you may also want to avoid signing a waiver of broker cooperation. Signing such a waiver would allow your agent to refuse to accept offers from other agents, and will severely limit your potential audience.
And what should you be paying as a commission? Over the past decade, average commission rates have trended downward and are hovering around 5.25 percent, according to the National Association of Realtors. Typically, the higher the listing price, the lower the commission rate. Remember that there is no set rate, and a small discount can save you thousands of dollars.
The bottom line is that a bad listing agreement may cause your sale to be delayed, or may even negatively impact your sale price. Like any other legal document, it is prudent to have an attorney review your listing agreement before you sign it. At our firm we are always happy to review listing agreements for our clients at no additional costs.
By Michelle Rosen, Esq.
Michelle Rosen, Esq., practices real estate law in New Jersey. She specializes in transactional law including purchases, sales, refinances and in property tax appeals. She can be reached at [email protected]