1. © OnCourse Learning

2. Agency Contracts (Sales) and Related Practices
Chapter 8
Agency Contracts (Sales) and Related Practices
Learning Objectives
Define types and characteristics of a listing contract
Describe function and agency characteristics of the multiple listing service
Define the essential and common provisions of the listing contract
Define the broker’s entitlement to commission
Describe the various commission arrangements
Describe the termination of listing contracts
Describe the property data sheet
Describe the North Carolina Residential Property and Owner’s Association Act and related forms
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3. Agency Contracts (Sales) and Related Practices
Chapter 8
Agency Contracts (Sales) and Related Practices
Broker’s Entitlement to a Commission
Three elements govern a broker’s right to claim a commission:
broker must have a valid real estate license
there must be a valid written contract for employment
procurement of “ready, willing, and able buyer”
In-House Sales:
Listing broker receives share of listing commission.
Selling broker receives share of selling commission.
Brokerage company keeps its share of commission.
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4. Agency Contracts (Sales) and Related Practices
Chapter 8
Agency Contracts (Sales) and Related Practices
Broker’s Entitlement to a Commission
Co-Brokered sales:
Listing broker shares the commission with the selling broker.
Reached by agreement between the two cooperating brokers prior to the selling broker’s participation in the transaction.
Selling broker must disclose his agency relationships at the outset.
Co-Brokerage with an Out-of-State Broker:
A North Carolina broker may share a commission with an out-of-state broker.
Out-of-State broker may not engage in activities in North Carolina which require a real estate license.
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5. Agency Contracts (Sales) and Related Practices
Chapter 8
Agency Contracts (Sales) and Related Practices
Broker’s Entitlement to a Commission
Earning Commission as a Buyer’s Broker:
Buyer’s “Agency Agreement” controls how the buyer’s agent is compensated.
Agent is allowed to receive a retainer fee up front from the buyer.
Agent is allowed to receive a success fee from the buyer or seller at closing per terms of the contract.
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6. Agency Contracts (Sales) and Related Practices
Chapter 8
Agency Contracts (Sales) and Related Practices
Broker’s Entitlement to a Commission
Legal Payment to Expired or Inactive Broker:
Compensation may be paid to a broker whose license is on inactive or expired status (or a broker who is now deceased) ONLY IF the compensation is for work the broker licensee completed while the license was on active status AND the broker ceased brokerage activity when the license status changed to expired or inactive.
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7. Agency Contracts (Sales) and Related Practices
Chapter 8
Agency Contracts (Sales) and Related Practices
Broker’s Entitlement to a Commission
General Requirements for Agency Contracts (Sales and Rental Transactions):
Must be in writing from the inception:
possible exception for some non-exclusive buyer agency agreements
Agency agreements must be for a specified period of time:
not allowed to have any renewal or extension clauses
possible exception for property management agreements
Having one type of agency agreement does not protect in cases where an additional agency agreement is required.
All agency agreements shall contain Commission prescribed discrimination clause.
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8. Agency Contracts (Sales) and Related Practices
Chapter 8
Agency Contracts (Sales) and Related Practices
Listing Contracts and Practices
Types of Listing Contracts:
Full Service Model:
agents provide a variety of services to assist the seller in the sale of his property
Limited Service Model:
varies from the basic insertion of the listing into the MLS to models that provide more service
not to the level of the full-service model.
Basic Protection Agreement:
seller enters an agreement to compensate the agent but is not obligated to an employment model
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9. Listing Contracts and Practices
Chapter 8
Listing Contracts and Practices
Full Service Listing Agreements
Open Listing:
seller lists a property with the assistance of one or more brokers
broker generating the sale is entitled to the commission
if owner sells property (not to a prospect generated by the broker), the owner owes no commission.
any number of firms can accept an open listing
not beneficial to owner or broker
can lead to legal action or disputes
Exclusive Agency Listing:
property listed with one broker who gets commission if he/see sells
if owner sells, broker does not get commission
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10. Listing Contracts and Practices
Chapter 8
Listing Contracts and Practices
Full Service Listing Agreements
Exclusive Right to Sell Listing:
The property is listed with only one broker.
Broker is entitled to a commission if the property is sold by anyone during the term of the listing contract (even the seller).
Best type of contract for broker and seller.
Limited Service Listing Contracts
Protection Agreement:
Seller agrees to pay a fee to the broker for the sale to a specific buyer
Does not list the property for sale to the general public
Owner consents to have his property shown to this specific buyer, but only under established terms
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11. Agency Contracts (Sales) and Related Practices
Chapter 8
Agency Contracts (Sales) and Related Practices
Listing Contracts and Practices
Brokerage Fee:
percentage of final sales price (not listing price)
most common arrangement found in listing contracts
Flat Fee and Limited Service Agreements:
Flat fee:
specified payment of money by the seller to the broker
often limited service contracts
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12. Agency Contracts (Sales) and Related Practices
Chapter 8
Agency Contracts (Sales) and Related Practices
Listing Contracts and Practices
Net listing:
broker receives the difference between the sales price and specified net to seller
strongly discouraged but not illegal
Referral fees:
other brokers refer buyers
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13. Listing Contracts and Practices
Chapter 8
Listing Contracts and Practices
Duration of the Listing:
Must be for specified period of time
No automatic renewals are allowed
Override or Extender Clause-
Protects the broker’s right to compensation for a period of time after expiration of the listing
Many REALTOR®/MLS agreements will terminate this clause if property is re-listed with another member firm
Property Data Sheet:
Contains information on the listed property
Agent has affirmative duty to discover and disclose
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14. Agency Contracts (Sales) and Related Practices
Chapter 8
Agency Contracts (Sales) and Related Practices
Listing Contracts and Practices
Termination of Listing Contracts:
Successful conclusion of transaction
Expiration of the term of the listing
Breach of contract by seller
Death of the listing agent (in many cases)
Destruction of the subject matter
In the event the agent cannot legally perform
No automatic renewals are allowed
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15. Agency Contracts (Sales) and Related Practices
Chapter 8
Agency Contracts (Sales) and Related Practices
Multiple Listing Service Arrangements
an organized method of placing listings in a pool
by member brokers
provides increased market exposure
Anti-Trust Law
Sherman Antitrust Act prohibits acts in the restraint of trade
price-fixing
group boycotts against different business models
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16. Laws Affecting Solicitation of Clients or Customers
Chapter 8
Laws Affecting Solicitation of Clients or Customers
Solicitation of Active Clients of Other Firms or Brokers:
Article 16 of the REALTOR® Code of Ethics prohibits the solicitation of an active clients of another REALTOR® member.
Federal and North Carolina Do Not Call Laws and Rules
Establishes a Do Not Call Registry
Prohibits the making of calls for a commercial purpose to a registered number.
Exceptions include:
calls with permission
calls with existing business relationship
calls made within 120 days of termination of business relationship
calls within 90 days of an inquiry into business products/services
Telemarketers required to search registry at least every 31 days
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17. Agency Contracts (Sales) and Related Practices
Chapter 8
Agency Contracts (Sales) and Related Practices
Laws Affecting Solicitation of Clients or Customers
“Junk Fax” Laws and Rules:
restrict unsolicited faxes without recipient’s permission
exemption for existing business relationship
must contain a prominent “opt-out” on the cover sheet
“CAN-SPAM Act”:
regulates SPAMMING by
requires subject of the to be accurately presented
must contain the name and physical address of sender
must contain a prominent “opt-out” feature
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18. Chapter 8 Listing Procedures Preliminary Listing Procedures
By first substantial contact with a seller the agent must review the Working with Real Estate Agents brochure:
seller must sign perforated panel to acknowledge receipt
broker to keep on file for at least 3 years
Agent must educate the seller (client):
Discuss contract provisions and seller and agent duties/responsibilities.
Explain duties to provide buyers required disclosure forms.
Discuss company’s marketing plan.
Discuss company’s commission policy and additional fees.
Explain importance of proper pricing.
Provide seller sample copy of NCAR sample Offer to Purchase and Contract.
Agent must sell himself and his company
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19. Chapter 8 Listing Procedures Final Listing Procedures Broker should:
inspect property with the seller and assist seller in proper completion of the Residential Property and Owner’s Association Disclosure Statement.
measure the structure according to Commission’s Residential Square Footage Guidelines
gather appropriate documents (i.e. deeds, title policy, protective covenants)
prepare and present a CMA
assist the seller in determining listing price
prepare of estimate of net proceeds sheet
review accuracy of property data sheet
use a well-drafted listing contract form
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20. Chapter 8 Listing Procedures Broker should:
Final Listing Procedures
Broker should:
ensure seller understands the contract provisions
give seller’s agent copies of everything signed
process listing according to:
North Carolina real estate law, rules, and regulations
Company procedures
implement marketing plan
maintain communication throughout the listing period:
set appointments
offer feedback
discuss prices changes when necessary
maintain a communication log
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21. Agency Contracts (Sales) and Related Practices
Chapter 8
Agency Contracts (Sales) and Related Practices
Buyer Agency Contracts
Buyer agency contract is:
agreement between a prospective buyer and a broker
broker acts as the buyer’s agent in the purchase of real estate
Agency Disclosure & Nonexclusive Buyer Agency Agreement:
less comprehensive than the Exclusive Right to Represent Buyer.
establishes a buyer agency relationship.
buyer does not have to pay a brokerage fee.
Broker is entitled to a commission when the broker is the procuring cause of the purchase.
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22. Agency Contracts (Sales) and Related Practices
Chapter 8
Agency Contracts (Sales) and Related Practices
Buyer Agency Contracts
Typical Provisions of a Buyer Agency Contract:
Type & general location of property is described.
Specific duration for the contract must be stated.
Employs the broker as buyer’s exclusive agent, but buyer may allow or disallow dual agency
Amount & method of compensation is defined.
Agent is given permission to disclose buyer’s identity.
Buyer is informed of and consents to agent’s representation of other prospective buyers.
Agent duties are described.
Buyer duties are described.
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23. Agency Contracts (Sales) and Related Practices
Chapter 8
Agency Contracts (Sales) and Related Practices
Buyer Agency Contracts
Typical Provisions of a Buyer Agency Contract:
Standard nondiscrimination language is included.
Buyer has the right to purchase a home warranty if one is not provided by the seller.
Additional provisions that may be negotiated between buyer and agent.
Parties agree to mediation first if a dispute arises.
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24. Buyer Agency Contracts
Chapter 8
Buyer Agency Contracts
Typical Provisions of a Buyer Agency Contract
Buyer is advised that;
agent cannot give professional advice outside field of expertise
agent cannot guarantee quality of service from any provider
Buyer agrees to pay for any authorized services and to hold agents harmless in regard to acts of contractors and quality of services provided by them.
Buyer acknowledges that he/she received a sample copy of the Offer to Purchase and Contract and a copy of the pamphlet “Questions and Answers on: Home Inspections.”
Confidentiality of offers is addressed.
Individual broker’s license number is required below the signature line.
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25. Agency Contracts (Sales) and Related Practices
Chapter 8
Agency Contracts (Sales) and Related Practices
Working with Buyers
Working with Buyers as a Seller Subagent
Any broker who is working with a buyer without a buyer agency agreement is considered to represent the interests of the seller.
Many firms do not allow this.
If a co-brokering agent is working with a buyer who will not agree to buyer agency and the seller refuses to allow co-brokerage with a seller subagent, the agent working with the buyer cannot show the home because there would be no agency alternative for her to practice.
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26. Agency Contracts (Sales) and Related Practices
Chapter 8
Agency Contracts (Sales) and Related Practices
Procedures for Buyers’ Agents
Prepare, present, and negotiate the offer to purchase
Assist the buyer with preparations for the closing:
Inspections
Coordination with the attorney
Coordination with lender
Final walk-through before closing
Notification of the buyer of necessary certified funds
Confirming the accuracy of the closing statement
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