Agency Agreements You Should Know for the Real Estate License Exam
You need to know a few specific details about agency agreements for the Real Estate License Exam. Just remember that an agency agreement, signed by a real estate agent and a client, establishes the agent as the representative of the client.
A listing agreement is between an agent and a property seller. Here, the word agent refers to the person whose listing it is, and in all cases that is the principal broker. A salesperson working for that broker may be responsible for the listing, and it may be referred to as the salesperson’s listing but in fact the agent the seller is hiring is the principle broker.
The following are a few common listing agreements:
The exclusive right to sell listing agreement requires that compensation be paid to the broker regardless of who sells the property, the broker or the property owner. This agreement is a bilateral contract because both parties exchanged promises and can be forced to act — the agent can be forced to do his duty and the seller can be forced to pay a commission.
This type of listing agreement generally requires specific promises from both parties, it is also considered an express contract, which means that the promises have been spoken and agreed to (or more likely have been put in writing).
The exclusive agency agreement is one in which a fee is owed to the broker only if the broker sells the property. If the owner sells the property, the broker is owed nothing. This contract is unilateral because nothing is owed unless the broker produces a buyer.
This type of listing agreement becomes a bilateral agreement when and if the broker produces a buyer because at that point both parties have obligations that must be fulfilled and can be enforced. This type of agreement is usually express because the listing agreement contains the details to which both parties agree.
In an open listing agreement, an owner agrees to pay a fee to any broker producing a successful buyer. An open listing is a unilateral contract because only one party (the seller) is obligated to act if and when an agent produces a buyer. Open listings can be express if, for example, a seller advertises his home for sale and the advertisement states that he will work with brokers.
Buyer agency agreements
Buyer agency agreements are formed between an agent and someone who wants to purchase a property.
An exclusive buyer agency agreement requires that the buyer pay the agent whether or not the agent finds the buyer the house that the purchaser buys. If the buyer locates a property and buys directly from a seller using no agent, the buyer still owes his agent a fee. This agreement is bilateral in that two parties exchange promises, and it’s express because the promises are stated.
With an exclusive agency buyer agency agreement, the buyer is obligated to pay the agent only if the agent produces a property that the buyer buys. It’s a unilateral agreement because nothing is owed unless the buyer’s agent produces a property for the buyer. It is usually express because the promises made are stated, usually in writing.
In an open buyer agency agreement, a buyer essentially says he will pay any agent who finds him a property. It’s a unilateral agreement because only one party is obligated to act, and it may be express if agents are notified in some way that the buyer is looking for a property and is willing to pay an agent who finds him one.