Listing Agreements on the Real Estate License Exam - dummies

Listing Agreements on the Real Estate License Exam

By John A. Yoegel

Listing agreements will be covered on the Real Estate License Exam. A listing agreement establishes an agency relationship between an agent and a property seller. The agent agrees to represent the seller in marketing the property. Here are the names and descriptions of the four types of listing agreements in the order that they are more commonly used:

  • Exclusive right to sell listing: In this type of listing agreement, a broker is given the exclusive right to market a property on behalf of the seller. The broker is paid regardless of who sells the property, an especially important point because it distinguishes this type of listing agreement from the others.

    The owner always retains the right to sell his or her own real estate, even so, while the listing agreement is in effect, if the owner sells the property without any help from the broker, the owner still has to pay the agreed-upon fee to the broker.

  • Exclusive agency listing: In this type of listing agreement, a broker is hired to act as an exclusive agent, representing the owner in the marketing of the property. The broker, of course, earns a fee if the property sells. However, if the owner of the property sells the property without any help from the broker, the property owner won’t have to pay the broker a fee.

  • Open listing: Notice anything missing from the name of this type of listing? The word “exclusive” is taken out because the property owner has the right to use as many brokers as are needed to sell the property. No broker has the exclusive right to represent the owner. This type of listing sometimes is called a nonexclusive or general listing.

    The owner who sells an open-listed property without any help from a broker is under no obligation to pay a fee to any broker. If a broker does bring a successful buyer to the property, the owner must pay the broker a pre-agreed to commission.

  • Net listing: A net listing is a listing for which a broker is hired to sell the property for a certain amount of money called the net amount or net price. The broker keeps any amount in excess of the net price. If you take a net listing on a house for which the owner wants to net $200,000, and you sell it for $225,000, you keep $25,000.

    Note: Net listings are illegal in some states and discouraged in others. Some states allow it only if the maximum commission to be earned by the agent is made clear to the seller in writing in the original listing agreement. Check out your state law about this kind of listing. Questions about net listings tend to be favorites among test writers, especially if it’s illegal in your state.

In addition to these four types of listings, you may encounter something called an option listing. An option listing is not as much a listing as it is a clause in any listing agreement that gives the broker the right to buy the property.

Check out your local state law to find out whether option listings are allowed and what conditions or requirements may be imposed when using an option listing. You can see the danger of a conflict of interest here so states that do permit them tend to regulate them.

A multiple listing service or multiple listing system (MLS) isn’t really a type of listing as much as it is a marketing service that permits brokers to share listings with other brokers. A broker gets a listing to sell a house and then puts it on the local MLS. Tens, if not hundreds, of brokers look at that listing, and one of them may have a buyer for the property.

In an MLS arrangement, the broker who has the agreement with the principal is the one who earns a commission on the sale, although he often may split that commission with other brokers who helped bring about the sale.

Because multiple listing systems have more to do with marketing than anything else, rarely are there any questions about them on state exams. Multiple listing systems are mentioned here just in case it happens to be used as an incorrect choice on a question or possibly as a correct choice for a question that has to do with which choice is not a type of listing agreement.