Negotiating Listing Agreements

By Laurie Murphy

Now that the worst of the recession seems to be abating and you are one of the sellers who has been waiting in the wings for the past few years but ready now to take the plunge, you've selected a broker to represent you but your work does not end there.

Brokers and agents throughout the state use standard California Association of Realtors forms for every major aspect of the purchase and sales transaction.  You, as the broker's client however, are not stuck with these forms which are created by lawyers whose sole purpose is to protect the brokers and agents. 

The first significant form you as the seller will be presented with is the Residential Listing Agreement.  This is the agreement that gives the broker the right to list your home for sale.  Most agents or brokers will present this to you as just another form which you must sign "as is" to get your house sold.  Don't fall for it.  Many of them will tell you that 6% commission is standard.  It is not.  Certainly for the higher priced homes, most brokers will take a listing for 4-5%.  Also, if the transaction is an "in house" one, where the same agent represents both the seller and the buyer, most brokers will agree to even a lower commission since the entire transaction will be handled by the same people. 

This standard listing agreement contains many other traps for the unwary seller.  Unless modified, the broker is entitled to a commission if the property is not sold but leased instead and they will take their full commission out of your first rent check.  If they bring you a buyer who does not perform and you end up having to sue the buyer, the standard listing agreement requires you to pay their commission out of the proceeds of any settlement reached with the buyer or judgment obtained.  And, if you happen to retain a second broker after the first one is not successful in securing a buyer and the initial broker gives you a list of people he showed the home to, that person looks at it again and decides to purchase it, and you don't exclude that sale from the second listing agreement you signed, you could find yourself owing both brokers a commission. 

Many deals go through without a hitch but if yours does not, you do not want to be on the bad end of an agreement designed solely to protect your broker and agent.  Demand appropriate revisions to these standard agreements up front.  Once the deal goes south it will be too late.

 Contact M. Laurie Murphy