Total existing-home sales—completed transactions that include single-family homes, townhomes, condominiums and co-ops—rose 3.1% from December to a seasonally adjusted annual rate of 4.00 million in January.
Barrister’s Briefing: Listing Agreements: Making Sure it’s Valid and Correct
Preparing and executing a listing agreement is common for many agents; almost too common. Because agents are used to the process, because they are excited to get a listing, and because they are anxious to get the property on the market, sometimes things are overlooked. It’s important that you take your time to ensure that a listing agreement is property filled out and executed. Here are some tips for your review.
All Owners to Sign Listing Agreement
Based on DOS opinion, in executing a listing agreement, an agent should verify ownership of a property and ensure that all parties needed to transfer title sign the listing agreement. Without approval of all parties to list the property, you cannot sell/transfer title. This becomes critical in the situation of a divorce and/or after the death of an owner. If both married parties own the property and only one party signs the listing agreement, the other can refuse to sell. Similarly, in the situation where a homeowner passes away, you need to ensure that the person listing the property is authorized to sell/transfer title. This person will be designated in a will and/or by the court (an executor/executrix or administrator), so ensure that the party listing the property has all the correct and authorizing paperwork before listing the property.
In general, it is assumed by cooperating brokers and the public that the agent has full authority, permission, and cooperation of all owners in the sale of the entire property. If you fail to get all the owners to agree to list the property, technically an agent can only market and sell the share of the property the signer of the listing agreement owns; meaning that if the agent is marketing that they are selling the entire property and they cannot, this could expose the agent to civil and criminal liability, violation of DOS regulations (incompetence and misleading advertising), and the Code of Ethics. Additionally, there may also be a claim by the buyer/tenant’s agent for the cooperating commission against the listing broker. In short, all the parties who are required to transfer the property must sign the listing agreement.
The DOS provided an opinion regarding Standard of Practice 16-16, stating: “…it is the seller, not the real estate broker, who has the right to establish the amount and terms of compensation offered to cobrokers, subagents or buyer’s agents.” Further, NYSAR has indicated that brokers should not have their own policies as to compensation and they should not implement an “office policy” as to compensation being offered to cooperating brokers.
All compensation must be consented upon by the seller. Such compensation, whether to the listing broker or to the cooperating agent, must be clearly stated, in writing and should set forth who from the cooperating side will be compensated (buyer’s agent, broker’s agent, seller’s agent, etc.).
Terms of Showings
Similar to compensation, it is only the homeowner that establishes the terms of showings. Showing requirements can be wide open or very restrictive; however, those requirements can only be established by the homeowner and they must be in writing, so it is wise to obtain them when the listing agreement is executed (they can even be included in the listing agreement). These requirements can only be modified by the homeowner. Such requirements can include:
- Requiring the listing broker to be present at all showings.
- Requiring the showing of identification of all individuals entering the home.
- Requiring prequalification (Note: while a homeowner can request preapproval by a specific lender of their choosing, they cannot require that this specific lender be used in the transaction).
- The refusal to permit specific buyers from viewing the property (so long as its non-discriminatory).
It is important to note that, per a DOS opinion, a homeowner cannot refuse access to a specific buyer’s agent unless there is a documented history of problems with that agent (i.e., police report, DOS complaint, ethics complaint, etc.). Further, while collecting the names of prospective buyers may assist the listing agent, the request to collect the names must come from the homeowner, not the agent, as collection of such names are based upon the homeowner’s interests only. Lastly, be reminded that state-required Standard Operating Procedures are not applicable to listing agreements.
Office Exclusives and ‘Coming Soon’
Listing Agreement should include written approvals/waivers relating to MLS exposure. Such approval and/or waivers pertain to Office Exclusives and “Coming Soon” situations. For Office Exclusives, all listing agreements must be accompanied with a waiver from the homeowner that the property will not be placed on the MLS. For “Coming Soon” listings, the homeowner must affirm that the listing will go active on a date certain, but prior to that date it will receive limited marketing and no showing will be permitted. Once the listing goes live, the property will be widely marketed and will be fully available for showings.
Conditions/Limitations of Offers
Homeowners can establish how offers are presented. This could mean how the offers are physically presented (i.e., in person, once a week, all at once, etc.) and whether they will permit the buyer’s agent to be present at that time. Again, such conditions must be in writing. Best practice is to establish these conditions at the time of the listing agreement being executed. Limits, such as minimum price for offers to be presented, certain unacceptable terms, and certain qualifying terms must all be in writing.
Remember to completely fill in all areas on a “fill-in-the-blank” listing agreement. If something is left blank, draw a line or an “X” through that section and have your homeowner initial it. Keep in mind that unless you are an attorney, you should not be modifying prepared contracts beyond filling in necessary information.
Additionally, be reminded that certain conditions/language must be included or cannot be included in NY listing agreements. For instance, 19 NYCRR§175.15 requires that no listing agreement can be automatically renewed. Also, the Commission Escrow Act requires that specific language be included in all listing agreements relating to how commission deposits and disputes are to be handled. OneKey MLS listing agreements contain language, among other things, that refer to the Home Equity Theft Protection Act, Equal Opportunity in Housing (19 NYCRR§175.24—relating to the prohibition on discrimination in real estate), as well as information relating to the Property Condition Disclosure Form and the inclusion of definitions for “exclusive right to sell” and “exclusive agency.”
Lastly, if you are listing a property on OneKey MLS, be reminded that as a Participant/Subscriber, you affirm that the materials you upload onto the MLS are not protected by any copyright and you are giving certain rights to the MLS. Make certain that this information is in the listing agreement. If the homeowner is not aware or does not agree to such rights being provided, the broker/agent may be held liable.
Listing agreements are binding contracts and should be meticulously prepared. Make sure that you understand all parts and what they mean. Do not rush through them and make sure that you explain all the provisions to your client. If done properly, they are the foundation of a strong relationship.