How To Read Your Real Estate LISTING Contract

read-your-contract-example.jpgThe Listing Contract, otherwise officially known as the Exclusive Right-Right-To-Sell Listing Contract, is the document you’ll use when you hire the Realtor you choose to help you market and sell your home in Colorado. As I work in the Boulder real estate market representing both buyers and sellers I’m required to use this and other commission approved forms. It’s always a great idea to understand your real estate contracts and documents.

The Colorado Real Estate Commission has a number of approved forms that they require all Realtors to use. The first of these documents that comes into play for sellers is the listing contract. The main thing to keep in mind is that most of the contract is template oriented info and you can easily find the transaction specific info that pertains to you and the sale of your home. That info that your Realtor puts in the contract appears as a different font type. Click on the image to see an example of this.

You’ll also want to pay specific attention to particular portions of the contract. This isn’t in order of importance as I think different sellers have different needs. Rather, this is generally in order of occurrence in the Listing Contract. I’ll give you here a brief explanation of these areas and show you examples of what they look like so you can more easily locate these critical points in the listing agreement and review them with a sense of familiarity.

sellers-agent-duties.jpgFirst you want to look at the kind of representation issue… do you want your Realtor to work for you as a sellers agent or do you want a Realtor to be your transaction broker? It’s a choice you want to make but usually a fairly easy one in that the essential issue is, if you choose ‘seller’s agent’ over ‘transaction broker’ you actually get representation.

listing-contract-price.jpgFollowing that, the key point becomes the price. Pretty simple if you and your Realtor have done your homework. I often provide the listing contract with most everything filled in and the price left empty. This give you a chance to review the other details of the contract while you review at your own pace the Market Analysis that I’ve given you so you can think about what price you want to use to enter the marketplace. You’ll be able to accept certain terms such as an FHA loan or VA depending on the local limits allowed. If, as of this writing, we soon see the limits raised by the federal economic stimulus package, we’ll probably see many more FHA loans and fewer Jumbo Loans which will save Boulder area buyers lots of money on their loans.

inclusions-and-exclusions.jpgThe next part of the contract worth your attention is the inclusions and exclusions section. While some things are typically included such as anything that’s attached to the house, some things are optional. The listing contract specifies what you’ll include as part of the deal for the buyers such as things like the refrigerator, washer, dryer or the dog house in the back yard… here’s an example of the part of the contract that covers that issue.

hoa-fees.jpgNext it’s good to make sure that if the house you’re selling has a homeowner’s association, your listing agreement has the right info specified. This part of the listing contract gives useful information to your Realtor about how much your HOA fees are and how frequently they need to be paid. Your Realtor will use this information when marketing your property so you’ll want to check this and make sure that it’s correct.

listing-contract-commission.jpgNow comes one of the things that often people think of first. The listing commission. It’s section 16 of the Colorado Real Estate Commission approved form. The unfortunate truth is that many people think of the listing commission first and overlook the most important issue. Is this Realtor capable, experienced and passionate enough about his work to get me the best results? Points to consider on commission include: generally about 3% of the fee goes to the buyer’s agent as a cooperative compensation for helping sell the home by bringing in the to the home. Great listing agents spend money to prepare the seller’s home for market by providing services such as pre-inspection, staging consultation, professional cleaning, and professional marketing. This is spent in advance, from their own resources as an investment in the process. If your home doesn’t sell, your Realtor might not get paid. Talk to your Realtor, review the materials from your Realtor and take the time to fully understand exactly what’s going to be done to get your home sold. Your efforts to understand the strategy and tactics your Realtor plans on using will help you make an excellent choice.

listing-contract-additional-provisions.jpgThe final key part of the contract I want you to take a special look at is the Additional Provisions section. This is the part where your Realtor will put in any extra terms that might be specific to the way s/he does business or anything specific to your arrangement for this transaction. Your Realtor should be able to explain what these additional provisions mean and why they’re included in your contract.

While there are certainly some other parts of the Listing Contract worth your time and review, I hope that this gives you an opportunity to have a starting place for understanding some of the key elements of the document.

Keep in mind that it’s always a great idea to talk to a lawyer if you feel concerned about any contract you read. I’m not a lawyer and if you need legal advice, a lawyer is the only source for legal advice of course. You might also want to think about consulting with a good accountant if you think there’s any chance that your transaction might affect your personal or business tax liability. It frequently does have some impact for many people, especially if they are self employed.

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