What is a Listing Agreement?

June 23, 2023   |   Brokerage
signing a listing agreement

Signing a listing agreement is an important contract between a seller and a real estate broker. This contract protects both parties when listing commercial property for sale.

You plan to sell your commercial real estate property and want to hire an experienced brokerage firm that can help you get top dollar. They’ve asked you to sign a listing agreement. Is this normal?

In short, yes.

A legally-binding document, listing agreements protect sellers and brokers and are crucial for a successful property sale.

Listing agreements are a contract between a seller and a broker that protects both parties by outlining the scope of work to be performed, what happens if that work is not performed, and the amount of commission that will be paid after a successful sale, among many other things.    

In this blog post, we’ll cover the key components of a listing agreement, the different types, and what the options are once the contract expires.

Understanding the Key Components of a Listing Agreement

A listing agreement is a comprehensive document designed to address the specific needs and expectations of both the property owner and the broker. It is not a generic contract but rather one that is carefully crafted to ensure all relevant aspects are covered.

Some of the major components typically found in a listing agreement include:

  • Broker Responsibilities: This section should provide a detailed account of the tasks and activities the broker is expected to perform to sell the property. Examples include taking aerial photos of the commercial property and land or marketing the property on a commercial real estate marketplace, such as LoopNet.
  • List Price: This is the initial asking price for the property or land.
  • Commission Structure: This section details how the broker will receive compensation once the property sells.
  • Duration: The contract should clearly outline the timeframe and expiration date of the agreement. This is the period when the broker is authorized to represent the owner and sell the commercial property or land.
  • Disputes: A listing agreement should also cover what will happen in case of a conflict between a seller and broker.

These are just a few sections that should be included in your listing agreement. Other important details may also need to be included, depending on the type of listing agreement and your specific needs.

Types of Listing Agreements

Listing agreements are not all the same and come in various forms, each carrying its own set of terms and conditions.

Some common types of listing agreements include:

  1. Exclusive Right to Sell Listing: In this type of listing agreement, the broker secures the exclusive right to earn a commission by representing the owner and securing a buyer.
  2. Exclusive Agency Listing: This agreement type gives the broker exclusive rights to represent the owner, but the owner still retains the right to sell the property. Any agent who works for that broker may be enlisted to sell the home and collect the commission.
  3. Open Listing: This non-exclusive agreement allows the owner to engage multiple real estate brokers. The broker or agent only earns a commission if they are directly responsible for the sale.

Out of these three types of listing agreements, “Exclusive Right to Sell” is the most common.

What happens when a listing agreement expires?

Once the contract reaches its full term, it is no longer valid. However, if the commercial property still hasn’t closed, you have several options as the seller.

You might consider:

  • Extending the contract with the existing broker so they have more time to narrow in on the right buyer
  • Find a new broker or real estate agent to take over the listing
  • Sell the commercial property yourself (“For Sale By Owner” or FSBO property listing)
  • Take the property off of the market until conditions improve

The last option is especially applicable during times of recession.

Navigating the Nuances of a Listing Agreement

Your listing agreement should set clear expectations, define roles, and ensure all parties involved are protected. When reviewing a listing agreement, carefully read and understand every detail. The broker's responsibilities should be clearly defined and aligned with your expectations to ensure clarity. Pay close attention to the duration of the contract and the stipulations regarding the commission structure.

If you need help listing your own commercial property, contact SVN | Saunders Ralston Dantzler. For more than 25 years, SVN | SRD has provided commercial real estate clients with unparalleled service and results. Our personalized approach, industry-leading marketing and advertising, innovative technology solutions, and professionalism mean an efficient and hassle-free sales process for our valued clients.

Call us to learn how we can help your commercial property or land stand out in the marketplace: 877.518.5263.

Disclaimer: This article is only intended for informational purposes. SVN | Saunders Ralston Dantzler does not guarantee the sufficiency of the content in or linked to from this article or that it complies with current law. The content within this article is not a substitute for legal advice or legal services. You should not rely on this information for any legal purpose without consulting a licensed lawyer.