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Chapter 20: The Principal-Broker Relationship: Employment

An employment contract between the owner/seller and the real estate broker.

LISTING AGREEMENT

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An agreed amount of compensation the owner agrees to pay the broker.

Not set by law.The amount of the fee is

negotiable between the owner and the broker.

Typical commission fee in the US is 5% to 7% of the selling price.

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BROKERAGE COMMISSION

1. Exclusive right to sell

2. Exclusive agency

3. Open listing

4. Net listing

LISTING CONTRACT TYPES

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The listing broker is entitled to a commission no matter who sells the property during the listing period.

This is the most common type of listing.

EXCLUSIVE RIGHT TO SELL

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Similar to the exclusive right to sell except the owner may sell the property himself during the listing period and not owe a fee to the broker.

Broker may be less enthusiastic under this form of listing.

EXCLUSIVE AGENCY

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There are no exclusive rights.Whoever sells the property will earn the

fee.Brokers are reluctant to develop a sales

effort.

OPEN LISTING

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Owner states the price he wants for the property and agrees to pay the broker anything above this amount as commission.

NET LISTING

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Exclusive Authority to Purchase – an agreement where the broker works for the client, the buyer!

Primary responsibility is to the purchaser.Principal is now the Buyer.Buyer Agency!

BUYER REPRESENTATION

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EXCLUSIVE AUTHORITY TO PURCHASE

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EXCLUSIVE AUTHORITY TO PURCHASE (continued)

A service among REALTOR® members to offer compensation to other member brokers and increase the market exposure for the listed property.

MLS

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Commission earned when agreed between owner and broker.

Usually occurs when a “ready, willing and able buyer” is produced.

Procuring cause is the one whose efforts originated the procurement of the sale.

BROKER COMPENSATION

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the one whose efforts originated procurement of the sale.

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PROCURING CAUSE

Mutual agreementAbandonment

TERMINATING THE AGREEMENT

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FLAT-FEE BROKERSDISCOUNT BROKERVARIABLE RATE COMMISSIONS

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BARGAIN BROKERS

Key Terms

Advance fee listing Exclusive authority to

purchase Exclusive right to sell Multiple listing service

(MLS)

Net listing Ready, willing, and able

buyer Real estate listing

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