How Does a Real Estate Listing Agreement Work in Massachusetts
Are you considering selling your Massachusetts home? You'll be asked to sign a contract when you sell a home with a real estate agent. It is known as a "listing agreement" or listing contract.
There are several different types of real estate contracts. However, the most commonly used real estate contract is an exclusive right to sell.
We will cover everything you need to know about these real estate listing contract types, so you feel confident moving forward with your sale. Let's dig in!
What is a Listing Agreement and How Do They Work?
A listing agreement is a legal document between real estate brokers and homeowners. It outlines the terms and conditions of the listing and includes the details of any exclusions or restrictions.
Listing agreements allow real estate brokerages to represent home sellers and their property to potential buyer prospects.
Under real estate licensing laws, only real estate brokers can serve as intermediaries by listing, marketing, or renting another person's property. In most states, formal listing contracts are signed before any actions to sell can occur.
Real Estate listing agreements in Massachusetts will contain the description of the property, the asking price, the agreed-upon commission, the broker's and seller's duties, the length of the contract, and other terms and conditions.
In Massachusetts, the contract will also state whether the real estate agent will practice dual agency. Dual agency in real estate is when a real estate agent represents both the buyer and seller.
In several states, dual agency is banned because it is a conflict of interest to attempt to represent both buyers and sellers in the same transaction.
Many real estate agents do not participate in dual agency due to having a conscience of what's morally correct.
In real estate, a listing agent represents sellers. On the other hand, a buyer's agent represents buyers.
What Are The Types of Listing Contracts in Massachusetts?
There are essentially three common types of listing agreements in Massachusetts. By an overwhelming margin, an exclusive right to sell is the most common.
Exclusive Right to Sell Agreement
In Massachusetts, you can expect the real estate agents you're interviewing to bring an exclusive right-to-sell agreement to execute.
Under an exclusive right-to-sell contract in Massachusetts, one real estate broker is selected as the seller's representative. They become the seller's sole agent in the transaction.
With an exclusive right-to-sell agreement, the real estate broker will be compensated by an agreed-upon commission regardless of who brings the buyer while the contract is in force.
Since the seller agrees to one party representing their interests, they need to be certain they are making the best choice. The real estate brokerage and the listing agent become the seller's fiduciaries throughout the contract period.
Real Estate brokers and the assigned listing agent have numerous responsibilities throughout the transaction.
Exclusive Agency Agreement
An exclusive agent agreement is similar to an exclusive right-to-sell contract. The difference is that a seller retains the right to sell the property.
If the seller can procure the buyer without the assistance of an agent, they would not be obligated to pay a commission.
If a real estate agent was the procuring cause of the sale, the seller would still be obligated to pay the agreed-upon commission.
Open Listing Agreement
Under an open listing agreement, sellers retain the right to use as many real estate agencies to sell their property as they like. Hence the property is "open" to any real estate agency.
Since the contract is non-exclusive, the seller will only be responsible to the real estate brokerage that procures a buyer.
The seller also has the right to sell the house without a brokerage. An open listing is rare and the least desirable arrangement with real estate brokers.
They are rarely used in Massachusetts or other states.
What is a Pocket Listing?
A pocket listing is a form of an exclusive right-to-sell agreement. However, it is different in the fact that the listing brokerage does not cooperate with other real estate agencies.
The property is not added to the multiple listing service, which severely limits the exposure for the seller. Since there is limited exposure online, the seller gives up the tremendous benefits of their ability to find a buyer and get top dollar for their home.
Most sellers are not best served by agreeing to a pocket listing. The most common time a pocket listing may be used is for celebrities or political figures who need to keep their sale private.
Allowing a real estate agent to have a pocket listing would be foolish for most Massachusetts sellers.
Can a Listing Agreement Be Terminated in Massachusetts?
A contract can be canceled in limited circumstances. The clients must prove that the real estate brokerage acted in bad faith.
For example, if the real estate broker did not advertise the property or enter it into the multiple listing service as represented in the contract.
The death of the owner of the property would also terminate the contract. The owner's legal heirs would not be forced to honor the contract.
Generally, sellers cannot terminate because they are unhappy with their agent. A contract is a contract. If the real estate contract was not enforceable, it would serve no purpose.
Firing a real estate agent without a legitimate reason will be challenging.
Work With a Top Massachusetts Listing Agent
Do you plan on selling your home? Are you located in the Metrowest, Massachusetts area? If so, feel free to reach out for assistance. I've been successfully selling homes for the last thirty-seven years.
Reach out for a private interview to sell your home.
Final Thoughts on Real Estate Listing Contracts
Massachusetts has three main real estate listing contracts: exclusive right to sell, exclusive agency, and open listing.
Of these, the exclusive right-to-sell agreement is the most popular. One real estate broker is selected as the seller's representative and is compensated for their services regardless of who brings the buyer.
An exclusive agency agreement is similar, but the seller retains the right to sell the property without paying a commission.
Lastly, an open listing agreement allows the seller to use multiple real estate agencies to sell their property.
Still, they are only obligated to pay the commission to the real estate broker who procures a buyer.
Additionally, pocket listings are an exclusive right-to-sell agreement in which the listing brokerage does not cooperate with other real estate agencies, and the property is not added to the multiple listing service, limiting the exposure for the seller.
Did you enjoy this advice on Massachusetts real estate listing agreements? See other real estate articles on NewsBreak for more timely tips and advice. Bill often writes about general real estate, mortgages, finance, moving, and home improvement.
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