How to Negotiate a Broker Listing Agreement

A listing agreement is a contract between a real estate broker and a seller.

Real estate brokers help individuals and business buy and sell property. Typically sellers pay real estate brokers a commission for effecting a transaction, while buyers pay the broker nothing. Sellers contract with real estate brokers by signing a listing agreement. Each listing agreement includes some common terms and conditions that can be negotiated between the listing seller and the listing broker.

Instructions

1. Establish the commission rate. Real estate brokers typically ask for 6 to 7 percent of the selling price as a commission. Start your negotiations at 4 to 5 percent. Keep in mind that a lower commission rate may not be a better deal for you, since the best brokers will demand market commission rates. Other terms of the listing may be more important than simply the commission rate.

2. Discuss the term of the listing. The vast majority of real estate listings are exclusive, meaning that only one broker can represent the property. Since you're locked into using only one broker for the term of the agreement, consider asking for a shorter-than-average term. Average terms are six months to a year. You may be better off paying top commission rates to a good broker who agrees to a short-term listing than sitting on a property with a low-commission-rate agreement that has a 12- to 18-month listing term.

3. Set your asking price. Typically, real estate brokers want you to sell your property at a fair price. If it's overpriced, they'll work hard and never close the sale; if it's underpriced, they'll make less commission than they could have. Consider using an independent third party appraisal service in addition to the advice of your broker when setting the listing price.

4. Add other contract terms and exceptions. You may want to add a clause to the contract that states the broker is not due a commission if you find a seller on your own. Many brokers will turn down listings with these terms, but it's always worth asking for.

References

• Real Estate Listing Agreement