Understanding the Real Estate Listing Contract Part 1 ~ Representation

Understanding the Real Estate Listing Contract Part 1 ~ Representation
Posted By Jeffrey Hogue @ Mar 17th 2016 10:35am In: Real Estate

The real estate Listing Contract is one of the most fundamental documents used by Realtors®. The document is also one of the most misunderstood. In this 5 part series, I hope to shed some light on parts of the contract that have invoked the most questions from customers I have represented over the years.

If you have ever listed a home or property for sale with a real estate agency, it is likely you signed a Listing Contract. Like most contracts it works very well until it doesn’t. Only when things do not go as planned does the contract get pulled out of the drawer and ripped apart word by word.


The real estate Listing Contract attempts to address the “who” as it relates to representation. Obviously, the seller is represented by the real estate brokerage whom they have chosen. The question often posed is, “Will you be representing the buyer of my home or just me?” This question is addressed in paragraphs 3 and 4 of the contract. The simple answer is “Yes” but as you can guess, there is more to it.


Paragraph 3 explicitly states that the Broker can act as a Dual Agent representing both parties in the transaction. Paragraph 4 allows the seller to exclude their Designated Agent from acting as a Dual Agent. In this case, the Broker would appoint another agent from the firm to act as the Buyer’s Agent. The Brokerage would still be acting as a Dual Agent.


Confused yet? Here is what to consider ~ Representation can be a personal matter to many home sellers and buyers. There are times when both parties would like personal representation and request it. Often these customers are told “This is just how we do things in the industry” and they just move on. Alas, there are good reasons to consider allowing your Brokerage and Agent to act as a Dual or Designated agent.


Real estate brokerages consist of a multitude of agents. Most of these agents are independent of one another. By not allowing the brokerage to act as a dual agent, all of the independent agents in that firm could not sell the home to their buyers without annulling their buyer representation relationship. In the case of a very large brokerage, that could be a lot of agents. The second reason is variable commissioning. Many agents are willing to reduce the sales commission if they acquire the buyer for the seller of their listing. Variable commissioning is something I have vigorously practiced for over 15 years. The variable commission can benefit the buyer and seller in a real estate transaction. Without dual agency, this activity would not be possible.


There are good reasons on both sides of the issue but if you truly want your Brokerage and agent to act solely as your representative let them know. If it is agreeable to you and the Brokerage a change to the real estate Listing Contract must be crafted to supersede paragraph 3.


Stay tuned for part 2 of this series and have a great spring!


Knowledge is Power!

Jeffrey C. Hogue

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