Generally speaking, you should have a clear agreement on goals, responsibilities, communications, and payment. Of the four, communication failures cause the most lawsuits, and payment issues cause the most surprises. Your agent cannot work well for you if he or she does not have a clear idea of your goals.
Require the agent to provide you with a general marketing plan before you sign the contract with him or her. If the agent's entire plan consists of checking Multiple Listing Service (MLS) for potential purchases, or putting a yard sign out to sell your property, you should know that in advance.You cannot possibly know if your agent is doing a good job if you do not know what his or her job is. You should also agree on how often the agent will supply you with progress reports and what information should be in those reports. Do you want a list of all contacts with a synopsis of the content, or do you want only the high points?
By communications, I mean things such as how soon you expect a return phone call or email. Proper communication also means having a clear understanding of what the agent will do for you, what he or she will not do, and his or her responsibilities regarding warning you about property defects, overpricing, or other such dangers. You must also completely understand who the agent represents - you or the seller. Ask as many questions as you need to satisfy yourself on these issues.
For single-family residential properties, the typical listing commission is usually from 6% to 7%. In a seller's market, that can go much lower. Commercial agents generally charge a higher rate, up to around 10%. That rate will slide downward as the price goes up. You usually will not see a 10% commission on a US Dollars 10,000,000 property. Most contracts provide that the listing agent's commission is fully earned at the point he or she provides a buyer who is ready, willing, and able to purchase at price and terms acceptable to the seller. In other words, if the agent brings a full price offer with no contingencies, and the seller decides to reject it and ask for more, the seller probably owes the commission even if there is never another offer and no sale.
In addition, if the seller accepts an offer, but then refuses to go through with closing, or cannot complete closing because of title problems, he or she will still owe the agent a full commission. Buyers' agents/brokers, who represent buyers and go out to find properties for them, typically charge from 4% up to around 10% if they find a seller who will not pay a commission.
Most residential listing contracts are for six months, although they may be as short as four months in hot markets. Most commercial property listing contracts are for a minimum of one year and may be as long as eighteen months. The longer time period is because of the smaller pool of potential buyers and the frequent need to expose the property to a nationwide audience. Also, it takes longer to make buying decisions at the corporate level than the household level. For those reasons, it usually takes longer to sell a commercial property.
Many listing contracts have something called an override clause. It entitles the agent to his or her commission if the property sells to someone who learned about the property from the agent but purchases it within some time period after the listing expired. That time period is usually six months. The intent is to protect the agent in case he or she finds a buyer within the last few months or weeks of the listing period, but closing does not take place until afterward.
It is also to protect agents from dishonest sellers who wait until the expiration of the listing agreement and then contact the potential buyer themselves. If your property is unsold at the end of the listing period, you should ask for a list of the people the agent considers covered by the override clause.You can give that list of names to any new agent you hire, and require that a sale to those buyers will not result in a commission being due to your new agent also. Otherwise, you could find yourself legally obligated to pay two full commissions to two different agents.
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