Chapter 19

Georgia Real Estate An Introduction to the Profession Eighth Edition Chapter 19 The Principal-Broker Relationship: Employment

Key Terms advance fee listing broker exclusive authority to purchase exclusive right-to-sell multiple listing service (MLS) net listing ready, willing and able buyer real estate listing © 2015 OnCourse Learning

Listing Agreement A real estate listing is an employment contract between a property owner and a real estate broker. The property owner appoints the broker as the owner's agent for the specific purpose of finding a buyer or tenant who is willing to meet the conditions set forth in the listing. © 2015 OnCourse Learning

Listing Agreement A listing agreement does not authorize the broker to sell or convey title to the property or to sign contracts. © 2015 OnCourse Learning

Listing Agreement Salespeople are extensions of the broker. It is the broker behind the salesperson with whom the seller has the listing contract and who is legally liable for its proper execution. © 2015 OnCourse Learning

Listing Agreement When a property owner signs a listing, all the essential elements of a valid contract must be present: The owner and broker must be legally capable of contracting there must be mutual assent the agreement must be for a lawful purpose © 2015 OnCourse Learning

Listing Agreement Georgia requires that a brokerage engagement agreement be in writing and be signed by the parties. © 2015 OnCourse Learning

Exclusive Seller Listing Agreement A description and identification of the property The term of the agreement with the beginning date and ending date. Put N/A in any unused areas. © 2015 OnCourse Learning

Exclusive Seller Listing Agreement Duties and responsibilities of the parties State the duties of the broker to the seller and the seller to the broker. A broker does not have the duty to sell the property, but to use best efforts to procure a buyer for the property. © 2015 OnCourse Learning

Exclusive Seller Listing Agreement Duties and responsibilities of the parties. The seller is required to cooperate with the broker in the marketing of the property, provide accurate information on the property, and comply with state and federal laws. © 2015 OnCourse Learning

Exclusive Seller Listing Agreement Marketing The listing agreement provides the broker with permission to advertise, put a “For Sale” sign on the property and install a lock box. It also states what multiple-listing services the broker is a member of. © 2015 OnCourse Learning

Exclusive Seller Listing Agreement Compensation This obligates the seller to pay a commission if the property sells during the listing period. You will also find a “safety cause” that protects the broker under certain circumstances if the property sells after the expiration of the listing to a buyer introduced to the property during the listing period. © 2015 OnCourse Learning

Exclusive Seller Listing Agreement Legal boilerplate The seller must provide a seller disclosure statement. The brokers duties of confidentiality and a general statement of what the broker is not responsible for are also included. © 2015 OnCourse Learning

Exclusive Seller Listing Agreement Agency Disclosure Georgia law requires specific disclosure as to the agency relationship of the brokerage firm. © 2015 OnCourse Learning

Exclusive Seller Listing Agreement Agency Disclosure Dual agency and designated agency are allowed by Georgia law but require written disclosure and informed consent. © 2015 OnCourse Learning

Exclusive Seller Listing Agreement Methods of Communication It is important that the listing agreement stipulates exactly how information may be communicated. © 2015 OnCourse Learning

Exclusive Right-to-Sell Listing An exclusive right-to-sell means that no matter who sells the property during the listing period, the listing broker is entitled to a commission. © 2015 OnCourse Learning

Exclusive Agency Listing With an exclusive agency listing, the owner may personally sell the property during the listing, and not owe a commission to the broker. The broker, however, is the only broker who can act as an agent during the listing period. © 2015 OnCourse Learning

Open Listing Open listings carry no exclusive rights. An owner can give an open listing to any number of brokers at the same time and the owner can still find a buyer and avoid a commission. © 2015 OnCourse Learning

Open Listing There is little incentive for the broker to spend time and money showing the property. If the broker does find a buyer, the broker is entitled to a commission. © 2015 OnCourse Learning

Net Listing A net listing states the price the owner wants for the property and then agrees to pay the broker anything above that price as the commission. © 2015 OnCourse Learning

Net Listing The broker may not want to disclose the true value of the property to the seller if the seller has an understated opinion of value. Georgia law prohibits net listings. © 2015 OnCourse Learning

Net Listing There is no law that says a broker must except the listing. A Broker is free to except only those listings from which the broker can perform a viable service and earn an honest profit. © 2015 OnCourse Learning

Advance Fee and Advance Cost Listings An advance fee listing is in agreement where the client pays a fee upfront when signing the brokerage engagement agreement. The brokerage company is guaranteed to be paid for it services regardless of whether the property sells or the buyer finds the right property. © 2015 OnCourse Learning

Advance Fee and Advance Cost Listings With flat fee listing the commission will be an agreed-upon amount and not a percentage of the sales price. The fee may be paid upfront at the time of listing or may be paid as a contingency only if the property sells. © 2015 OnCourse Learning

Exclusive Authority to Purchase Historically, it is been the seller who has hired brokers to assist in marketing property. Many homebuyers retain the services of an agent to help them locate property. © 2015 OnCourse Learning

Exclusive Authority to Purchase The broker’s primary responsibility is to the purchaser rather than to the seller. The purchaser can reveal confidential information to the broker and rely on the broker’s expertise and competence. © 2015 OnCourse Learning

Exclusive Buyer Brokerage An Exclusive Buyer Brokerage Agreement is the contract between the buyer and the broker when the buyer wants to be represented as a client. © 2015 OnCourse Learning

Multiple Listing Service Multiple listing service (MLS) organizations broaden the market exposure for listed properties. Member brokers are authorized to show each other's properties to their prospects. The commission is divided between the broker who found the buyer and the broker who obtained the listing. © 2015 OnCourse Learning

Market Exposure A property listed with a broker who is a multiple listing service member receives the advantage of greater sales exposure. Most multiple-listing organizations obligate each member broker to provide information to the organization on each new listing within three to seven days after the listing is taken. © 2015 OnCourse Learning

Computerized MLS MLS information is available on the Internet. All you need is access, provided by membership and a computer. © 2015 OnCourse Learning

Visual Tours Virtual tours are available on most MLS systems. Multiple photographs and virtual tours are very effective marketing devices. © 2015 OnCourse Learning

Broker Compensation The listing broker earns a commission in nearly all listing contracts when the broker produces a ready, willing and able buyer at a price and terms acceptable to the owner. “Able” means financially capable of completing the transaction. © 2015 OnCourse Learning

Broker Compensation A ready, willing and able contract provides more protection for the broker since the commission does not depend on the deal reaching settlement. © 2015 OnCourse Learning

Procuring Cause A broker may have to prove that a sale of property is primarily due to his efforts. That is, he may have to be the procuring cause, the one whose efforts began an unbroken chain of events that ultimately led to the property being sold. © 2015 OnCourse Learning

Procuring Cause The law protects a broker who has, in good faith, produced a buyer at the request of an owner. Once a consumer has sought and obtained a buyer's broker's advice, technically the buyer's broker may become the procuring cause when the contract is signed and presented to the listing broker. © 2015 OnCourse Learning

Procuring Cause Educate buyers not to see property or contact other agents. Tell them that if they see a property they want information on, they should contact you. Explain to them that failure to do so may create a situation where they will have to pay a commission they were not planning on. © 2015 OnCourse Learning

Terminating the Employment Contract In the bulk of the transactions in which a buyer is not produced, the listing is terminated because the employment period expires. © 2015 OnCourse Learning

Terminating the Employment Contract It is possible for the owner to revoke the agency. The broker can demand compensation for effort expended on behalf of the owner to that point. If a buyer’s agent finds a property that meets the buyer’s criteria and the buyer refuses to purchase, the broker is entitled to be compensated. © 2015 OnCourse Learning

Mutual Agreement An employment agreement can be terminated by mutual agreement of both the principal and broker without money damages. © 2015 OnCourse Learning

Abandonment A listing can be terminated by improper performance or abandonment by the broker. If a broker acts counter to the principal’s best financial interests, the employment is terminated, no commission is payable, and the broker may be subject to a lawsuit for any damages suffered by the principal. © 2015 OnCourse Learning

Abandonment The agency is automatically terminated by the death of either the principal or the broker, or if either is judged legally incompetent. It might also be terminated if the principal becomes bankrupt. © 2015 OnCourse Learning

Abandonment A seller may terminate the agency without cause. That does not necessarily terminate the obligations created under the listing agreement. © 2015 OnCourse Learning

Alternative Business Models The full-service real estate broker takes a listing and places in the multiple listing service. © 2015 OnCourse Learning

Alternative Business Models The broker pays for advertising, holds open houses, qualifies prospects, shows property, obtains offers, negotiates and follows through until closing. Payment is typically a percentage of the selling price and is collected only if and when the sale closes. © 2015 OnCourse Learning

Alternative Business Models Flat fee brokerages charge a flat fee as a commission rather than a percentage of the sales price. © 2015 OnCourse Learning

Alternative Business Models Limited service brokerages are when a consumer wants assistance but doesn't believe they need the whole package. They offer fewer services typically at a lower price. © 2015 OnCourse Learning

Alternative Business Models Upfront fee would be paid to the brokerage at when the contract is signed. It is paid regardless of whether the property sells or not. This may appeal to a seller who feels confident the property will sell but needs some assistance in marketing. © 2015 OnCourse Learning

Alternative Business Models With a menu of services, this business model allows the full-service brokerage to offer a product to compete with the limited service brokerage. © 2015 OnCourse Learning