Different Real Estate Listing Agreement and Service Agreement: Ask Joe

I think I have found the right seller to sell my house. What is the next step in the process?

It’s good news. Ideally, you have discussed your service expectations and checked your vendor on RECO’s free online registrant directory to confirm they are in good standing.

The next step is to sign a listing agreement with your seller’s brokerage. A listing agreement is a legal contract that generally requires you to work exclusively with a brokerage while you sell your home. An agreement can encompass all activities associated with the sale of a property, including details of the financial structure – what you will pay to the listing broker and, if applicable, how much you will pay to the buyer’s broker. Or it may be limited to specific services such as advertising, and not include services such as organizing open houses or negotiating offers.

Before you sign an Enrollment Agreement or a Service Agreement, you will want to carefully read and understand the document. Do not hesitate to ask your salesperson to explain it to you, line by line. It’s a good idea to enlist the services of a real estate attorney in the process, so they can address any concerns you may have about the deal.

If the agreement makes you a client of the brokerage, the brokerage is obligated to act in your best interests, which is sometimes called a fiduciary duty. This means that your seller, your brokerage and its employees must follow your instructions, protect confidential information (for example, the minimum price you will accept for your home) and protect your interests in the sale. As a client, you are expected to be open and honest with your seller so they can help you sell your home.

If you enter into a service agreement to sell your home, you should not expect the same relationship and may choose to share fewer details with your seller.

It is important to note that if you find a buyer on your own while you have an active agreement, it is better to direct potential buyers to your representative since you will be contractually obligated to compensate your seller for his efforts.

The agreement should clearly state the date it begins and the date it ends. If the agreement stipulates a term longer than six months, you are legally required to initial, thereby authorizing the duration of the term.

Most listing agreements also include a condition called a disclaimer. This means that for a period of time after the listing agreement expires, you are required to pay your brokerage the agreed-upon commission if you sell your home to a buyer who was presented or shown at the property when the contract was active.

If you have a question about the process of buying or selling a home, please email [email protected]

Joe Richer is Registrar of the Real Estate Council of Ontario (RECO) and contributor to The Star. Follow him on Twitter: @RECOhelps


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