Listing Agreement

1. What are the types of listing agreements?

There are 3 primary types of listing agreements. Each is different. The 3 agreements are: 1) Open Listing, 2) Exclusive Right To Sell, & 3) Exclusive Agency.

2. What is an Open Listing?

An Open Listing is essentially a commission agreement. The seller can sign this type of Agreement with many different real estate brokers. If a broker brings a buyer & the deal is consummated, then the seller pays the broker the commission as per the Open Listing Agreement. The seller can also sell on his own, without a broker. In this case, he would save the commission. Only 1 broker would be able to earn a commission. The broker would provide the lowest level of service with this Agreement, usually including none or very few of the services that are traditionally included in a Listing Agreement.

3. How is an "Exclusive Right To Sell" Agreement different from an "Exclusive Agency" Agreement?

An Exclusive Right To Sell Agreement means that the seller is hiring a specific broker to help them market the property. The seller can only work with that specific broker. The broker will expose the property to other brokers & their agents to help find a buyer. The seller will be obligated to pay the commission even if he finds his own buyer. The broker will provide the highest level of service with this Agreement, usually including all the services that are traditionally included in a Listing Agreement.

An Exclusive Agency Agreement means that the seller is still hiring only 1 broker to help them market the property, but they are reserving the right to find their own buyer & save all or a portion of the commission in this case, depending on the Agreement. The broker will usually provide partial service with this type of Agreement.

4. Which Listing Agreement is best?

It all depends on the seller's specific needs & experiences & knowledge. Most brokers & agents will not show a property with a "For Sale By Owner" sign in front, for fear of "losing control" of their buyer. On the other hand, if a seller has a lot of experience regarding marketing & negotiating, they can save some nice money by creating a unique Listing Agreement with their broker, including some services but not others & allowing the seller to save some money in commissions in certain circumstances.

5. Can real estate professionals show listings from other real estate agencies?

Yes. Most real estate brokers "co-broker" their listings with other firm's agents via the Multiple Listing System, or MLS. All properties for sale go onto the MLS, which provides a special method for searching all the properties that are for sale in a given segment, allowing buyers the opportunity to find the best deal that matches their search criteria. If another agency sells the house, then the commission will be split between the 2 brokers, according to the terms of the Listing Agreement. The seller will not be liable for additional commissions.

6. Do I have to list my property with a real estate agency?

No. You can try to act like a "For Sale By Owner" or "FSBO". Many sellers try that route first. If you are successful this way, then you won't need to hire a broker. If you can't sell this way, you can always hire a broker later. Most FSBOs end up listing with a broker. There are many reasons that FSBOs aren't successful selling their own property.

Signing a Contract

1. What is a down payment?

After obtaining an Acceptable Offer from your buyer, a Contract of Sale is prepared by the seller's attorney & forward to the buyer's attorney for review & signatures. The buyer must sign the contract & write a check for earnest money (down payment) to be held by the seller's attorney or escrow company in a special, non-comingled, account, on behalf of both buyer & seller. The amount of the down payment is negotiable. It should be enough of a percentage of the purchase price so that the buyer will be induced to complete the transaction. If the buyer doesn't complete the transaction at the buyer's choice, the seller at times may keep the down payment, depending on the circumstances.

2. Under what conditions would the down payment be returned to the buyer?

In the event that the seller is unable to provide "clear title" to the property. This includes an inability to clear a lien, judgment, or other encumbrance on the property or cloud on the title, by the time of the closing. These items will show up on a title report, which is ordered by the seller's attorney. Also, if the contract includes a mortgage contingency & the buyer is unable to procure a mortgage, the down payment would be returned to the buyer.

3. Under what conditions can the seller keep the down payment?

The seller would keep the down payment if the buyer backs out of the contract without cause. This is called "liquidated damages" & is considered the compensation for keeping the property off the market during the contract period.

4. What is a Property Disclosure Statement?

Colorado State law requires that sellers of improved property provide the buyer with a Property Disclosure Statement which points out the condition of different systems of the property. The seller should disclose any problems or issues they know about. In lieu of giving the Property Disclosure Statement, a seller may pay $500 to the buyer & many sellers do this instead.

5. Does the seller need to provide a Lead Paint Disclosure?

If the house was built before 1978, the law requires the seller to disclose that the house could contain lead-based paint & give the buyers the results of any tests the sellers have done.

6. Must the seller leave all the appliances?

It is not mandatory that the seller leave the appliances, unless they are permanent fixtures of the house, like a built-in range or countertop stove. If the seller wants to remove any appliances, they must disclose that before contracts are signed, preferably on the MLS listing.

7. Does the seller need an attorney & how important is it to hire a local attorney?

It is not advisable to enter into a real estate transaction without an attorney. The seller's attorney will prepare the contract of sale & negotiate the terms of the sale with the buyer's attorney, hold the down payment in his escrow account, protect the seller from any potential liabilities, help clear up title issues, & move the transaction towards a closing. Most towns have codes of regulations & ordinances that affect real estate within that district. A local attorney has knowledge of the local zoning regulations & pending land use legislation that may affect a particular property. A local attorney's experience with local real estate & insurance professionals, as well as building & tax department personnel will also help expedite the transaction.

After the Contract has been signed

1. What is a title report?

After the contract is signed by both buyer & seller, the buyer's attorney will order a title report on the property. A title report is a statement of the current circumstances of the right to or ownership of a parcel of land. The title company will examine the public records, review the findings & render an opinion as to who the fee owner is & lists anyone else who has legitimate rights or interests in the property, such as mortgage lenders or easement holders. The report will also list any judgments or liens against the property that the seller will need to satisfy prior to closing.

2. What happens if the title is clouded?

It is the seller's obligation to clear all liens & judgments before title can be transferred. If the seller is unable to clear the title issues, then the purchaser can void the contract & request that the down payment be returned to him.