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How do I Negotiate a Broker Listing Agreement?

by Jann Seal

Listing your property for sale is an investment, as you’re agreeing to pay a licensed real estate agent to market and sell your home. Your monetary commitment is the commission you agree to pay the broker, under which the agent works. That percentage of the sale price is negotiable, and the agent receives her share of what she’s negotiated with her broker. Understand the local customs regarding commissions and the current market before negotiating a listing agreement.

Meet with several agents to understand your local market before agreeing to list your home. Study the comparables they submit, the length of time homes are on the market, listing prices and price reductions, and whether the most recent sales were fair market, short sales or foreclosures. Ask what price the agent suggests you list your home for and how she arrived at that price. Agree to use the agent who gives you an answer that’s based on fact, not hope. Begin negotiating your listing agreement.

Agree to a listing term of six months if your market has normal selling conditions; three months if sales are brisk and longer for a slow market. Insert a termination clause and agree to pay a cancellation fee to cover the agent’s expenses. Expect to pay a processing fee to the brokerage, as outlined in the contract. This is a negotiable point that is charged by brokers to cover their costs of storing your records for a state-mandated period of time.

Remember the commission requests of all the agents you interviewed and base your offering commission on the market average. Do not expect a lot of traffic to your property if your commission is low, as agents must split their fee with a buyer’s broker; they examine the amount offered before showing property and set priorities. Negotiate a declining commission if your property is priced at and sells above $1 million.

Put in writing the type of marketing you expect from your agent. Do not agree to hang a lock box on your home for agents to use if many valuables are in the property, and ask your listing agent to accompany all showings if it makes you more comfortable. Conclude negotiations if she refuses this request.

Ask for weekly reports on your showing activities and for sales in the area in case a revised marketing plan is necessary. Base all your moves on what the market tells you. Add a clause to the contract agreeing to pay the commission only upon a successful closing of the sale.

Tip

  • Ask the listing agent to agree to a 2 1/2 percent commission, plus a 3 percent commission to a buyer's agent, to increase showings.

Warning

  • Do not expect your agent to contribute to your sale by turning over part of her pre-negotiated lower commission if a purchase contract doesn’t meet your financial expectations.

About the Author

Jann Seal is published in magazines throughout the country and is noted for her design and decor articles and celebrity *in-home* interviews. An English degree from the University of Maryland and extensive travels and relocations to other countries have added to her decorating insight.

Photo Credits

  • John Foxx/Stockbyte/Getty Images