The listing agreement is the backbone of most real estate transactions. It is the agreement undergirds nearly every property for sale on one of the ubiquitous REALTOR® Multiple Listing Services. The Listing Agreement is a two-prong document, (1) it gives the agent the rights to advertise the Seller’s property, and (2) it sets up the relationship between Seller and agent, establishing the rules of engagement and the expectations of both agent and principal. Oftentimes, the listing agreement will also contain a “data input sheet” where the MLS can get all the necessary programmable information needed to create the digital billboard.
Without a listing agreement, life for brokers gets a lot more risky. The simple thought experiment that shows the value of a listing agreement is as follows: An agent shepherds a client through a sale, holding their hand through the process, talking them off a ledge when the client gets angry and demands to terminate, eventually carrying them to the halcyon fields of the escrow office to sign the closing documents. Right outside the escrow office, the Seller hands the Broker a written document that says, “I’m firing you, you are no longer my agent.” The Broker nonetheless asks the Seller, “What about our agreement that I’d get 2.5% of the sale price? I did everything you asked me to do!” To this, the client shrugs and responds, “What agreement? I fired you before the sale happened.” With nothing in writing, the Broker has an uphill battle to prove they are entitled to the sweat of their brow commission. The natural solution to the situation is to have the client and agent put the relationship into writing. Better yet, have the parties sign the dang thing and make it look way more like a legally binding contract. That’s exactly why we have listing agreements.
The Oregon REALTORS® Form 9.3 Listing Agreement is a statewide listing form that can be used to establish the agency relationship. It technically creates an exclusive agency relationship between the Seller and the firm/brokerage, with the firm deputizing the Principal Broker and Broker to also act under the agreement. This means: if the Broker or Principal Broker quits or dies or moves to another firm, the listing stays with the firm.
The form asks the parties to set an expiration date for the listing agreement, and to set the listing price [the price that the property will be listed for]. If the Seller sells the property, if the agent finds a “ready, willing, and able to purchase Buyer,” if the Seller intentionally torpedoes a transaction, the agent gets their commission. Worth noting: “ready, willing, and able” means the buyer is completely prepared to get to closing without issue. If the Buyer is “willing to buy” but needs a contingent right to purchase because they have some screwball financing, that Buyer is not ready, willing or able.
The form further explains what will happen if a Seller gets to keep the earnest money; does some of it go to the agent, or does it all go right back to Seller? It sets up the authorities, telling the agent what they are allowed to do, when they can market the property, where they can advertise it, whether they can use lockboxes or internet services like Craigslist, etc. The Seller also promises that they can sell the property and that they won’t lie on the various disclosures they are asked to make. If things go haywire, the Seller indemnifies the Broker for any harms caused by the representation, damages caused by the Seller, or litigation based on misrepresentations and breaches of warranty. In other words, if the agent gets sued for doing their job and it’s the Seller’s fault, the Seller will pay for it.