Modern Real Estate Practice in Illinois Eighth Edition Chapter 6: Brokerage Agreements ©2014 Kaplan, Inc.

Listing Agreements with Sellers Types of listing agreements –Exclusive right-to-sell listing –Exclusive-agency listing –Open listing –Net listing –Option listing

Termination of Listing Agreements Reasons for Terminating an Agreement the agreement’s purpose is fulfilled the agreement’s term expires the property is destroyed or its use is changed by some force outside the owner’s control title to the property is transferred by operation of law, as in the case of the owner’s bankruptcy or foreclosure

Termination of Listing Agreements Reasons for Terminating an Agreement the broker and the seller mutually agree to cancel the brokerage agreement either the broker or the seller dies or becomes incapacitated. If the sponsored licensee dies or becomes incapacitated, the brokerage agreement is still valid.

Listing Agreements with Sellers - Expiration of listing period Definite period during which the listing broker is to be employed Automatic extension clause – not allowed Broker Protection clause –property owner will pay the listing broker a commission if, within a specified time after the listing expires, the owner transfers the property to someone the broker originally introduced to the owner

The Listing Process Pricing the Property –Competitive market analysis (CMA) –Based on solds, currently on the market, expired Calculating sales price, commission and net to seller

Information Needed for Listing Agreements Names and relationship, if any, of owners Street address and legal description of property Size, type, age, and construction of improvements Number of rooms and their sizes Dimensions of the lot

Information Needed for Listing Agreements Details about any existing loans and the possibility of seller financing Amount of outstanding special assessments Zoning classification of property Current property taxes Neighborhood amenities

Information Needed for Listing Agreements Any real property to be removed from the premises Any additional information that would make the property more appealing and marketable Any required disclosures concerning agency representation and property conditions

The Listing Agreement Illinois law requires that the following disclosures be included with listing contracts –Disclosure of material facts –Disclosure of interest –Disclosure of any special compensation –Disclosure of property condition

The Listing Agreement Listing Agreement Issues –Type of listing agreement –Broker’s authority and responsibilities –Names of all parties to the contract –Brokerage firm –Listing price –Real property and personal property

The Listing Agreement Listing Agreement Issues –Leased equipment –Specific identification of the property –Proposed dates for closing and buyer’s possession –Closing issues –Evidence of ownership

The Listing Agreement Listing Agreement Issues –Encumbrances & Zoning –Homeowner warranty program –Commission –Antitrust wording –Termination –Broker protection clause –Warranties by the owner with reference to type of deed that will be used

The Listing Agreement Listing Agreement Issues –Indemnification (“hold harmless”) wording –Nondiscrimination –The signatures of the parties –The date the contract is signed

Minimum Services All exclusive brokerage agreements Services –Accept delivery and present to client all offers and counteroffers –Assist client in developing, communicating, negotiating, and presenting offers and counteroffers –Answer client’s questions relating to the offers, counteroffers, notices, and contingencies

Buyer Agency Agreements A buyer agency agreement is an employment contract under which –the broker is employed as the buyer’s agent –the buyer is the principal –the purpose is to find a suitable property for the buyer

Buyer Agency Agreements Types of Buyer Agency Agreements –Exclusive buyer agency agreement –Exclusive-agency buyer agency agreement –Open buyer agency agreement

Buyer Agency Agreements Buyer Representation Issues –The licensee should make the same disclosures to the buyer that the licensee would make in a listing agreement –The licensee should explain the forms of agency available and the parties’ rights and responsibilities and services provided under each type

Buyer Agency Agreements Compensation Issues –Buyer’s agents may be compensated in the form of a flat fee for services, an hourly rate, or a percentage of the purchase price

Qualifying Buyer Services Needs Assessment Property Selection Viewing Properties Negotiate Follow-Up

THE BUYING PROCESS Prepare CMA based on –Property condition –Length of time on the market –Supply and demand –Seller’s motivation –Terms and contingencies

Contemporaneous Offers when buyer agents are working with two or more clients no breach of duty to the client by showing alternative properties to prospective buyers no breach of duty for preparing contemporaneous offers licensees must provide written disclosure when making contemporaneous offers

Termination of Broker Employment Agreements An employment contract may be cancelled –when the agreement’s purpose is fulfilled –when the agreement’s term expires without a successful transfer –if the property is destroyed or its use is changed by some force outside the owner’s control, such as zoning change or condemnation by eminent domain

Termination of Broker Employment Agreements An employment contract may be cancelled –if either party dies or becomes incapacitated –if either the buyer’s broker or client breaches the contract, the agreement is terminated and the breaching or canceling party may be liable to the other for damages