A listing contract is a legally binding written agreement between a real estate agent and the home seller. Like any contract, it is important for you to know exactly what you are making yourself liable for by signing. Real estate agents who are members of the National Association of Realtors use listing agreement forms that are the de facto (i.e. well established) industry standard in their area.
Terms of the Agreement
Each listing contract must have an expiration date. If your home is not sold or under a purchase contract with a buyer by the expiration date, then you, as the seller, have a right to terminate the contract. You don't want to be bound by the contract for more than a few months. The written agreement should also contain the terms for canceling/terminating the contract.
Also, a listing price is generally agreed upon while drafting the listing contract with the advice and expertise of a realtor you can trust. Your realtor should have a good understanding of your neighborhood's housing market in order to assist you in determining a fitting listing price for your home. In the case that you may receive multiple offers for your home, the seller usually is given the right to choose to accept whichever offer he/she pleases, and the commission is made proportional to the sales price. Carefully review the listing contract that is presented to you by your realtor regarding this matter because not every contract is the same.
Commissions are negotiable. The standard commission rate is 6% of the sales price. The less commission you pay, the more money you can save. However, the more commission you pay, the more motivated the realtor will be to invest his or her time and effort to market and sell your home. The payment of commission to the broker should be contingent (i.e. determined) by his ability to successfully negotiate a purchase contract between you and a buyer who is ready, willing and able to pay the full amount of the listing price or more. Remember that if you refuse to sell your home when the realtor has accomplished this portion of the contract, you will still be required to pay the commission amount declared in the listing contract (i.e. 6% or the listing price).
Duties of a listing agent
The listing contract should also state the agent's duties. Real estate agents are not simply salespersons who market your property. They are your representatives, and have a fiduciary duty. A fiduciary duty forms a legal relationship between you and your real estate agent in regards to the entrustment of selling your property. In a fiduciary relation, one of the parties (i.e. the principal) is forced to trust that the other party (i.e. fiduciary) acts in good faith when carrying out his duties such as giving you advice on a listing price. Ideally, the fiduciary is supposed to act in the best interest of his principal without putting his personal interests before his duties under the contract.
MLS is basically a set of services that help facilitate an organized method of interactions among brokers. A MLS database and software is a way in which a real estate broker can share information regarding the seller's property to a wider range of brokers who may be representing potential home buyers.
A listing contract gives your agent the right to post your home in the Multiple Listing Service database. However, there are circumstances where you can choose to opt out of having your property posted in the MLS database. For example, if you have significant privacy concerns or are selling an exceptionally exclusive estate, you and your realtor can make an agreement while forming your contract to keep your property off of the Multiple Listing Service database.
While drafting your listing contract, you and your realtor may agree to have a lockbox in place. A lockbox is a padlock containing the key to your home. This lock will be hanging on your doorknob so that only those with the lock's combination will have access to the key. The lockbox is put in place so that it may be more convenient for the agent representing the buyers to view your home. It will make it much easier for potential buyers to view your home. Most seller's allow the use of a lockbox. It is possible for you to opt out of using a lockbox; however, buyer's agents may choose not to show your property in order to avoid the hassle of reaching you to schedule an appointment that works for you as well as themselves and the buyer.