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1 Chapter 20
CHAPTER 20: The Principal-Broker Relationship: Employment
I. Explain a listing agreement as an employment
contract
A. Purpose and need to specify Brokerage
Commission
B. Protecting the Broker
C. Protecting the Owner
II. Discuss types of Listing Agreements
A. Define Exclusive Right to Sell Listing
B. Define Exclusive Agency Listing
C. Define Open Listing
D. Define and give an example of a Net
Listing
E. Define and give an example of an Advance
Fee Listing
F. Define and give an example of an Advance
Cost Listing
III. Explain Exclusive Authority to Purchase
IV. Discuss history and purpose of Multiple Listing
Service
A. Market Exposure
B. Computerized MLS
C. Videodisk
V. Discuss requirements for broker compensation
and explain the need for Procuring Cause
VI. Terminating the Listing Contract
A. Mutual Agreement
B. Abandonment, etc.
VII. Discuss the market for Bargain Brokers
A. Flat-Fee Brokers
B. Discount Brokers
VIII. Discuss Perceived Value
Explain how the listing cloaks the agent with the
authority to perform.
These first three employment contracts define
the agent's authority and self-protection
capabilities.
The following "types" of agreements are
This is a growing area-Buyer
Brokerage.
The MLS is not an "exclusive club" and is
open to all board members who abide by the
rules.
Give specific criteria for your
state.
Explain this particular problem if you don't have
an exclusive right to sell agreement. Emphasize
that if either party abandons, damages may
result to the other party.
Point out that these brokers prove that there is
competition in the marketplace.
This chapter covers the employment relationship between a broker and the principal.
The main topics of the chapter include the listing agreement, exclusive right to sell
listing, the exclusive agency listing, open listing, net listing, and the listing period. The
chapter also covers the multiple listing service and broker compensation, and
discusses procuring cause, employment contract termination, and bargain brokers.
Note that the formalities of employment are not necessarily required to establish an
agency relationship, so the licensee may be responsible as an agent without the
benefits of formal employment! In addition, a broker may be hired by the
Chapter 20 2
Page Ref.
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351 367 Opening Remarks
351 367
353 369
354 369
354 370
Listing Agreement
Brokerage Commission
Protecting the Broker
Exclusive Right to
Sell Listing
355 371 Net Listing
356 372
358 374
358 374
Teaching Tips
Start this chapter with a general overview of the listing process.
Also, review the differences between a broker, sales associate,
licensee, and REALTOR.
Finally, relate how the theory of agency "fits" into the
broker/agent's role.
Stress: An executed listing contract creates a hiring whereby an
owner hires a broker as his agent. As such, the broker and/or his
sales associates may be held civilly liable for any wrongdoing.
Local Distinction: Does your state require a written listing
agreement?
Local Distinction: In addition to or in lieu of the agreement
shown in Figure 20.1, "walk through" the one that is most often
used in your market.
Stress: ALL commissions and fees charged by brokers are
negotiable. See the Sherman Antitrust Act.
Common Misconception: Stress that this broker protection clause is
common. Many students feel it is unfair until they understand its
purpose. Put them in the role of the broker/agent.
Local Distinction: Provide students with copies of various types
of listing contracts generally used in your state. Review each,
starting with the most common.
Stress: Net listings create agency disclosure pitfalls, i.e., fair
pricing.
Stress: Buyer Agency is more common than just five years ago.
Still, there are misconceptions. Emphasize that a buyer's agent is
working for the best possible "deal" for his client, the buyer. Thus,
they are looking for "the most amount of house for the least amount
of money," in direct contrast to the goals of a seller and his 'agent,
"the most amount of money for the least amount of house."
Exclusive Authority
to Purchase
Multiple Listing
Service (MLS)
Market Exposure
Expanding the Text: Stress that most MLS services will accept
only exclusive Right to Sell listings for dissemination, while others
require that all types of listings be submitted. In either case, most
services require that the listings be submitted within hours of the
time signed by the seller.
Stress: Provision for buyer broker access to MLS.
3 Chapter 20
Page Ref.
Hard Soft
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359 375
360 376
Teaching Tips
Broker Compensation
Procuring Cause
Common Misconception: Since it is customary for a broker to be
paid at or after closing, most students do not realize that the
commission may be paid at some other agreed time. Discuss the
theory that it is customary for a broker to be entitled to his
commission upon providing a ready, willing, and able buyer, but
that as a practical matter it generally is not paid until closing. A
buyer's broker can be paid by the seller!
Stress: It is important for agents to keep accurate records detailing,
among other things, when they worked with each prospect. Records
can make the difference in being able to prove procuring cause.
361 377 Terminating the Summary: Listing contracts are generally terminated by:
Employment Contract 1. Sale
2. Passage of time
3. Mutual agreement
4. Abandonment
5. Death of either party
Incompetency of either party
6.
7. Bankruptcy of either party
362 378 Flat-Fee Brokers Local Distinction: Refer to your local franchises. Discuss variable rate
commissions used in your area.
363 379 Wrap-Up 1. A real estate listing contract is not really a real estate contract,
but is rather an employment contract? (True)
2. All real estate commissions are set by a regulatory board, such
as the state real estate commission? (False, all commissions are
negotiable.)
3. Name and briefly describe the four types of listing agreements: a.
Exclusive Right to Sell: The seller pays a commission to the
listing agent regardless of who sells the property. b. Exclusive
Agency: Seller can sell his own property and not pay a
commission to the listing agent. c. Open: Can be listed with
multiple brokers at once and the one who sells it is the only one
paid any commission. d. Net: The commission is the amount
which exceeds the seller's desired net proceeds.
4. Most listings are written such that the broker is entitled to his
commission upon producing a ready, willing, and able buyer?
(True)
5. A broker that cannot prove procuring cause will probably not
receive any commission if contested? (True)
6. A listing is an example of a special agency? (True)
Chapter 20 4
