Exclusive-right-to-sell listing agreements
In an exclusive-right-to-sell listing, one broker is appointed as the seller’s sole agent. The listing broker is given the exclusive right, or authorization, to market the seller’s property. If the property is sold while the listing is in effect, the seller must pay the broker a commission regardless of who sells the property: the listing broker, another broker, or even if the seller finds a buyer without the broker’s assistance. Sellers benefit from this form of agreement because the broker feels freer to spend time and money actively marketing the property, making a timely and profitable sale more likely. From the broker’s perspective, an exclusive-right-to-sell listing offers the greatest opportunity to receive a commission. The majority of residential listing agreements in Illinois are exclusive-right-to-sell listing agreements.
Exclusive-agency listing agreements
In an exclusive-agency listing, one broker is authorized to act as the exclusive agent of the seller-principal. However, the seller retains the right to sell the property without obligation to the broker. The seller retains the right to sell the property without financial obligation to the listing broker.
Open listing agreement
In an open listing (known in some areas as a nonexclusive listing), the seller retains the right to employ any number of brokers as agents. The brokers can act simultaneously, and the seller is financially obligated only to that broker who successfully produces a ready, willing, and able buyer. If the seller personally sells the property without the aid of any of the brokers, the seller is not obligated to pay a commission.
Negotiated terms of an open listing agreement should be in writing to protect the broker’s ability to collect an agreed-on fee from the seller. Written terms may be in the form of a listing agreement (if the broker represents the seller) or a fee agreement (if the broker represents the buyer or the seller does not wish to be represented). However, many Open Listing Agreements are oral.
Net listing
A net listing provision specifies that the seller will receive a net amount of money from any sale, with the excess going to the listing broker as commission. The broker is free to offer the property at any price greater than the net amount the seller wants; the difference is the broker’s fee. Because a net listing can create a clear conflict of interest between the broker’s fiduciary responsibility to the seller and the broker’s profit motive, net listings are legal in Illinois but not recommended due to the potential for fraud.
Guaranteed Sale
Sometimes, brokers and sellers enter into guaranteed sale agreements, in which the broker agrees to buy the listed property if it fails to sell before the end of the listing period. Typically, these guarantees are made to the seller as an inducement to list the property with the broker.
In Illinois, any exclusive listing agreement must be in writing and is subject to other legal requirements, noted in detail in the Illinois Real Estate License Act of 2000.
Special Listing Provisions
Multiple listing A multiple listing clause may be included in an exclusive listing. It is used by licensees who are members of a multiple listing service (MLS). An MLS is an information/ marketing organization whose members make their listings available for showing and sale through all the other member licensees.
An MLS offers advantages to licensees, sellers, and buyers. Licensees develop a sizable inventory of properties to be sold and are assured a portion of the commission if they list property or participate in the sale of another licensee’s listing. Sellers gain because the property is exposed to a much larger market. Buyers gain because of the variety of properties on the market.
The contractual obligations among the member licensees of an MLS vary widely. Most MLSs require that a licensees, turn over new listings to the service within a specific, fairly short period of time after the licensee obtains the listing. The length of time during which the listing licensee can offer a property to the public on her own without involving the MLS varies. Of course, sellers must be informed and give their written consent for any delay in notifying the MLS. This gives the listing company a strong chance to sell its own listing.
Under the provisions of most MLSs, a participating licensee makes a unilateral offer of cooperation and compensation to other member licensees, when the listing enters the MLS. The licensee must have the written consent of the seller to include the property in an MLS.
Under Illinois law, a licensee working with a buyer is not considered to be a subagent of the seller. No offer of subagency can be made through an MLS in Illinois today. Illinois law states that a buyer is represented as a client by the licensee with whom she is working unless that consumer chooses not to be. This approach makes it clear to all parties who is represented by whom.
While a few buyers choose to remain as customers without representation, even that lack of agency is now subject to disclosure. Generally, a notice of no agency would be provided. If nothing is said about agency, licensees are considered to be representing the consumer with whom they are working, either as a designated agent for the consumer (unless there is a written agreement to the contrary) or as a licensee if performing only ministerial acts.
In spite of these relatively clear lines with regard to whose agent is whose, sellers often still pay the fees for both agents in a transaction. These fees are called cooperative commissions. In an Illinois MLS listing data sheet, this is typically stated as “coop: X% or as a flat fee.” Paying someone a commission does not create agency in Illinois.
