What Is a Listing Agreement?
A listing agreement is a document in which a property owner contracts with a real estate broker to find a buyer for the owner's property. The owner executes the listing agreement to give a real estate broker the authority to act as the owner's agent in the sale of the owner's property. However, the owner must generally pay a commission to the broker.
- A listing agreement is between a real estate broker and the property owner to find a buyer of that property.
- Listing Agreements are not limited to real estate.
- There are three types of listing agreements: open listing, exclusive-agency listing, and exclusive-right-to-sell listing.
- If participating in a stock trade, it must be communicated through the major exchange.
- Almost all of the listings must include a description of the property.
How a Listing Agreement Works
A listing agreement authorizes the broker to represent the principal and the principal's property to third parties, including securing and submitting offers for the property. Under the provisions of real estate license laws, only a broker can act as an agent to list, sell or rent another person's real estate, and in most states, listing agreements must be in writing.
Because the same considerations arise in nearly all real estate transactions, most listing agreements require similar information. This includes a description of the property (which should have lists of any personal property that will be left with the real estate when it is sold, and of any fixtures and appliances that aren't included), a listing price, the broker's duties, the seller's duties, the broker's compensation, the terms for mediation, a listing-agreement termination date, and additional terms and conditions.
A listing agreement can also cover documentation for a company’s listing of its securities on an exchange, such as the New York Stock Exchange (NYSE).
Death, bankruptcy, or insanity can and will terminate a listing agreement.
To trade on major exchanges, companies must complete listing agreements with the exchanges themselves. They must meet certain criteria; for example, in 2018, the NYSE had a key listing requirement that stipulated aggregate shareholders equity for the last three fiscal years of greater than or equal to $10 million, a global market capitalization of $200 million, and a minimum share price of $4.
In addition, for initial public offerings and secondary issuers must have 400 shareholders. Other major exchanges include the Tokyo Stock Exchange or TSE, the New York Stock Exchange (NYSE), Nasdaq, and the London Stock Exchange (LSE).
Types of Listing Agreements
With an open listing, a seller employs any number of brokers as agents. It’s a non-exclusive type of listing and the selling broker is the only broker entitled to a commission. As well, the seller retains the right to sell the property independently without any obligation
With an exclusive agency listing, the seller employs one broker to act as the exclusive agent of the property owner. The broker receives a commission only if he or she is the procuring cause of the sale. In addition, the seller retains the right to sell the property independently without obligation
With an exclusive-right-to-sell listing, one broker is appointed as the sole agent of the seller and has exclusive authorization to represent the property. The broker receives a commission no matter who sells the property while the listing agreement is in effect.