So you’re deciding to sell your NYC home. Congratulations, you’ve now got a lot ahead of you and a big check waiting at the end. But before you can start, you’ll need the help of a listing agent. Going the FSBO route is not recommended, especially in the current slow market. With the help of a listing agent, you stand a better chance of selling sooner, and for a better price. After taking the time to interview a prospective agent, it will come time to sign the listing agreement. It is when you make things official with the agent in a written listing agreement that will outline the terms of the relationship.
A lot goes into this, and if you’ve never dealt with one before, it can understandably make you nervous. Here’s the lowdown on what it covers, as well as what may or may not be negotiable.
A relatively straightforward procedure, but it helps to understand what goes into one. Here’s what you need to know about exclusive listing agreements with NYC brokers.
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What is a Real Estate Listing Agreement?
A legal agreement between a homeowner who wants to sell their home and a real estate brokerage that wishes to help. The contract is legally binding and can come in several different types. Below are the three most common:
A listing agreement is a contract between a seller and a real estate agent (listing agent) that says the agent has the right to list your house. These contracts are suitable for the agent, as it obligates you to work with them for a set time. It’s also good for the seller because it sets out the responsibilities of the agent and what you can do if they don’t meet them. You must understand the terms of the agreement as you’ll be bound legally by them.
Usually, a page or two long, these contracts are typically written in straightforward language. Brokerage firms generally have their in-house form that individual agents adapt as necessary. Keep in mind that you can have some terms changed or added if you’re not happy with something.
Exclusive Right to Sell Listing
The most common type of listing agreement in NYC. It gives the listing agent (or brokerage) full control over the listing and rights to an agreed-upon commission once the home sells. Only one broker will be working on this property.
Exclusive Agency listing
Similar to the exclusive right to sell, the critical difference that if you find a buyer on your own, then the agent doesn’t receive a commission. However, don’t expect an agent to be happy with signing this. With no guarantee of a commission, they may not work as hard to sell as they would with an exclusive right to sell agreement. It can mean your home takes longer to sell or doesn’t sell at all.
A listing agreement with the lowest level of commitment. With this, an agent from any brokerage that brings you a buyer gets the commission. Or there’s no commission if you can find a buyer on your own. However, it’s doubtful any listing agent will accept this. Data from the NAR shows that in 2017, less than 8% of homes sold by the owner. Typically, they went for far less than those sold by agents.
What Goes into a Listing Agreement?
You must read the contract carefully. If something seems a bit vague, ask the agent for clarification. Although it’s uncommon to have an attorney look over the listing agreement, it certainly wouldn’t hurt. These are the most important things that you’ll see in any listing agreement.
The amount you’ll pay the agent. The standard amount in NYC is 6% of the selling price, but you may be able to negotiate a lower rate if you have a previous relationship with the broker or have multiple properties to sell.
Exclusive right to sell
It gives exclusive rights to the agent to list, market, and sell your home for the duration of the agreement.
The contract will specify when it starts and ends. It is usually for six months, but three-month agreements are not uncommon. Three to six months should be fine, but if it hasn’t sold by then, it could signal that something may be wrong. If so, then you can always reevaluate the price or marketing.
Safety and protection clauses
While the contract will have an expiration date, likely, it’ll also include a provision to protect the broker after that date. It prevents a seller from holding back on a buyer until the agreement expires to avoid paying the commission.
The exact responsibilities of the agent will usually be, spelled out. It is worth looking closely at. If there’s something you disagree with or would like added, you can always negotiate changes.
You may also be required to verify your legal position to sell the property.
The contract will state how any disputes will be, handled should they occur. For instance, through mediation or binding aberration.
There are several other things that the listing agreement may state, such as the marketing plan and whether or not co-brokering is allowed, but this is the bare bones of most contracts. One other thing you’ll likely find in NYC contracts is a particular notice on lead-based paint. Any property built before 1978 is legally obliged to disclose to the buyer any information on its presence.
Don’t sign until you’ve read everything, and also don’t be afraid to ask for amendments if you’re uncomfortable with something. Listing agreements are very straightforward, but as with anything asked to sign, you should always read through it carefully.
How to Negotiate Real Estate Commissions
If it’s not already clear, an exclusive right to sell listing is the best agreement to go with. You’ll be guaranteed the best service, and you can be sure the agent has your back in all negotiations with potential buyers. But beyond that, there’s still more to negotiate in a listing agreement.
Negotiating the Real Estate Agent Commission
Antitrust laws dictate that there can be no required or standard commission price. That means it’s negotiable. However, there are valid reasons why you would still want to agree on a fair commission price. Keep in mind; the commission split between the listing agent and buyer’s agent. Any buyer’s agent that sees a listing with a low commission will be less motivated to take their clients to view it. It can mean it will take longer to sell and might even mean going through a price cut. Avoid the trouble this will cause and negotiate a fair commission rate with your agent from the start.
In NYC, real estate commissions are typically 5-6% of the final closing price. Some sellers chose to negotiate for a tiered commission structure. It gives the listing agent a higher commission if they can close over the initial asking price or a lower commission if it closes under.
Most listing agreements are for six months, but some can be as short as one month. The majority of agents will prefer six-month contracts as a way to be confident the job will get done. Considering the current slow market in NYC, it’s far better to negotiate a lengthy sales contract.
Additional Listing Terms to Negotiate
Beyond the main areas of exclusivity, commission, and duration, there are other smaller things that you need to consider before signing on the dotted line. One of these will be your marketing budget. A photographer will be required, perhaps even a 3D photographer, who will be paying for that? Next, there’s home staging. Does the agent feel this is necessary, and what will the budget be for this also? A schedule for all this will also need to be agreed upon.
When will the staging be done? On what date will the listing be published online? When will the first open house be? There are all these little nuances to the listing agreement that you need to discuss and put into writing. As an added point, you may want to agree on a date in which you will lower the price of the property if no offers are forthcoming.
That’s a listing agreement in a nutshell. This agreement will control your entire home sale from the listing price to the amount you’ll own the agent on closing. Make sure you understand what you agree to and ask further questions about the meaning of specific terms and clauses. Your agent will be happy to explain as they’ll need you in on this too if the sale is to be a success.
NYC Exclusive Listing Agreement Sample
Address: 555 Park Avenue, New York, NY 10055
Re: Listing Agreement for 555 Park Avenue, New York, NY 10055
Dear Mr & Mrs. Smith
Thank you for choosing ACME Real Estate to market your apartment. We have already discussed the various steps to be taken to bring you as many well-qualified customers as possible, and I assure you that I am committed to getting you the best possible price in the shortest possible time.
The following reflects the agreement between us. If this meets with your approval, please sign and return the enclosed copy.
You have employed ACME Real Estate as a real estate broker with exclusive right to sell the above-captioned apartment. You represent that Mr & Mrs. Smith, Inc., the owner of the above property.
This agreement shall be valid as of August 20, 2018. It shall continue in full force and effect until November 20, 2018.
ACME is authorized to offer the apartment for sale at $1,000,000 and to represent that the common charges of the apartment are currently $1,000 per month. The property tax is $900 per month.
ACME Residential is authorized to solicit the cooperation of other licensed real estate brokers who will act as agents for the prospective purchasers and to work with them on a cooperating basis for the sale of the above apartment. If the apartment is sold according to this agreement, whether to a Purchaser or Board of Managers, who exercised its right of first refusal, including a sale to the Lessee whether during the term of this agreement of afterward. ACME fee for service to be paid by you shall be five (5%) percent of the total sale price of the apartment.
In the event another licensed real estate broker solicited by us is involved in this transaction, ACME Residential shall pay the cooperating broker a fee for service by a separate agreement. With such broker and in no such event shall the fee for service paid by you exceed five (5%) percent of the selling price.
During the term of this exclusive right, you agree to refer to ACME Real Estate all inquiries, proposals and offers received by you regarding the apartment, including not limited to those from principals and other brokers. You agree to conduct all negotiations concerning the sale or other disposition; of the apartment solely and exclusively through ACME Residential.
Within three (3) business days after the expiration of the listing time term, we shall deliver to you in writing a list of no more than six (6) names of persons who inspected the premises during the listing term. If within three (3) months after the expiration of the listing term, a contract is signed to sell the premises to a person on the said list, we shall be entitled to the service fee paid by you, which will equal to and in no event shall exceed either: a. Five (5%) percent of the selling price when an outside cooperating broker represents the purchaser; or b. Three (3%) percent of the selling price when the buyer presented is a direct client of ACME Real Estate.
Funds distribution upon closing
If you receive any settlement monies due to buyer’s default on a fully executed contract with all contingencies fulfilled, ACME Real Estate will be entitled to 10% of said monies. In the situations when the property subsequently gets sold to another buyer from the said list within three (3) months after the contract expires. ACME shall apply received 10% of the settlement monies toward the amount of the service fee paid by you; which should be equal to but in no event exceeding five (5%) of the selling price for non-direct sale; or three (3%) percent of the selling price for direct sale.
ACME represents you, the Seller, on ACME’s exclusives.
Listing Agreement inclusions
Special Lead Paint Notification
If your property was, built before 1978, you must disclose to the Purchaser and the Purchaser’s agent. All information is known to you regarding the presence of lead-based paint and lead-based paint hazards within this target housing. All information known to the Seller’s agent regarding the presence of lead-based paint and lead-based paint hazards within this target housing disclosed to the Purchaser. Federal laws require that the Purchaser has given a 10-calendar day period (unless otherwise agreed in writing) to conduct a risk assessment or inspection for the presence of lead-based paint before becoming obligated under the Contract of Sale to purchase the target housing.
Fair Housing Notification
ACME Real Estate is committed to upholding the city, state, and federal Fair Housing requirements prohibiting discrimination.
This agreement shall bind and benefit the personal representatives, successors, or assigns of the parties.
Facsimile signatures shall be construed and considered original signatures for purposes of enforcement of the terms of this Agreement. The same may be executed in counterparts and taken together shall constitute the whole of this Agreement. This agreement may not be changed, rescinded, or modified except in writing, signed by both of us.
Agreed and Accepted by the Property Owner____________________
ACME Real Estate____________________