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Updated July 14, 2022 Reviewed by Reviewed by Thomas BrockThomas J. Brock is a CFA and CPA with more than 20 years of experience in various areas including investing, insurance portfolio management, finance and accounting, personal investment and financial planning advice, and development of educational materials about life insurance and annuities.
Part of the Series Guide to Selling Your HomeGetting Ready to Sell
Real Estate Agents
The Owner-Seller Option
The Selling Process
A listing agreement is a contract under which a property owner (as principal) authorizes a real estate broker (as agent) to find a buyer for the property on the owner's terms. In exchange for this service, the owner pays a commission.
Less commonly, the term listing agreement also refers to a contract made between a security issuer (e.g., a public company) and the financial exchange that hosts the issue. Examples of exchanges include the New York Stock Exchange (NYSE), the Tokyo Stock Exchange (TSE), and the London Stock Exchange (LSE).
A listing agreement authorizes the broker to represent the seller and their property to third parties. The listing agreement is an employment contract rather than a real estate contract: The broker is hired to represent the seller, but no property is transferred between the two.
Under the provisions of real estate license laws, only a broker can act as an agent to list, sell, or rent another person's real estate. In most states, listing agreements must be written.
Because the same considerations arise in almost all real estate transactions, most listing agreements require similar information, starting with a description of the property. The description typically includes a list of personal property that will be left with the property when it's sold, as well as a list of personal property the seller expects to remove (for example, appliances, and window treatments).
The listing agreement also specifies the listing price, broker's duties, seller's duties, broker's compensation, terms for mediation, an automatic termination date, and any additional terms and conditions.
Though listing agreements are legally binding, it's possible to terminate the contract in certain situations—for example, if the broker does nothing to market the property. In addition, the listing agreement will be terminated if the property is destroyed (e.g., by a fire or natural disaster), or upon the death, bankruptcy, or insanity of either the broker or seller.
With an open listing, a seller retains the right to employ any number of brokers as agents. It’s a nonexclusive type of listing, and the seller is obligated to pay a commission only to the broker who successfully finds a ready, willing, and able buyer. The seller retains the right to sell the property independently without any obligation to pay a commission.
The Multiple Listing Service (MLS) is a shared database established by cooperating real estate brokers to provide data about properties for sale. MLS allows brokers to see one another's listings of properties for sale with the goal of connecting homebuyers to sellers. Under this arrangement, both the listing and selling broker benefit by consolidating and sharing information and by sharing commissions.
With an exclusive agency listing, one broker is authorized to act as the exclusive agent for the seller. The seller retains the right to sell the property without obligation to the broker. However, the seller is obligated to pay a commission to the broker if the broker is the procuring cause of the sale.
An exclusive right-to-sell listing is the most commonly used contract. With this type of listing agreement, one broker is appointed the sole seller's agent and has exclusive authorization to represent the property. The broker receives a commission no matter who sells the property while the listing agreement is in effect.
Article SourcesThe offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.
Description Part of the Series Guide to Selling Your HomeGetting Ready to Sell
Real Estate Agents
The Owner-Seller Option
The Selling Process
The subprime meltdown includes the economic and market fallout following the housing boom and bust from 2007 to 2009.
Seller-paid points are a form of discount offered on real estate paid by a property's seller that lowers the cost of a home purchase for a buyer.
A sublease is the renting of property by a tenant to a third party for a portion of the tenant’s existing lease contract.
In real estate, a short sale is an asking price for a home that is less than the amount that is due on its existing mortgage.
The gross income multiplier is obtained by dividing the property's sale price by its gross annual rental income, and is used in valuing commercial real estates, such as shopping centers and apartment complexes.
Capital improvements are permanent structural changes to a property that enhance its value, increase its useful life, or allow for a new use.
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