Unit 6: Brokerage Agreements Flashcards
Buyer Agency Agreement
A buyer agency agreement is an employment contract. In this case, the broker is employed as the buyer’s agent. The buyer is the principal. The purpose of the agreement is to find a suitable property. A buyer’s broker must protect the buyer’s interests at all points in the transaction
Comparative Market Analysis (CMA)
Brokers can help sellers determine a listing price for the property by using a comparative market analysis (CMA). A CMA analyzes properties similar to the subject property in size, location, and amenities. Though appraisals are more in depth than a CMA, a CMA still requires an amount of skill and consideration
A broker price opinion or CMA shall be in writing either on paper or electronically
Contemporaneous Offers
When buyer brokers are working with two or more clients who are seeking similar properties in the same price range, the buyer’s broker is permitted to show alternative properties to prospective buyers or tenants. Specifically, the buyer’s broker does not breach a duty or obligation to the client by showing alternative properties to prospective buyers or tenants, by showing properties in which the client is interested to other prospective buyers or tenants, or by making or preparing contemporaneous offers or contracts to purchase or lease the same property
However, brokers must provide written disclosure to all clients for whom the licensee is preparing or making contemporaneous offers or contracts to purchase or lease the same property and must refer to another designated agent any client that requests such referral
When a buyer’s agent is acting as designated agent for more than one prospective buyer who the designated agent has reason to believe is making or preparing to make contemporaneous offers to purchase the property located at a specific address, the buyers have the option of referred to another designated agent who will serve as the agent of the buyer
Exclusive-Agency Listing
In an exclusive agency listing, one broker is authorized to act as the exclusive agent of the seller-principal. However, the seller retains the right to sell the property without obligation to the broker. The seller is obligated to pay a commission to the broker only if the listing broker or a cooperating broker has been the procuring cause of a sale. The seller retains the right to sell the property without financial obligation to the listing broker
In Illinois, exclusive listing agreements must be in writing
Exclusive Right-To-Sell Listing
In an exclusive right-to-sell listing, one broker is appointed as the seller’s sole agent. The listing broker is given the exclusive right, or authorization, to market the seller’s property. If the property is sold while the listing is in effect, the seller must pay the broker a commission regardless of who sells the property: the listing broker, another broker, or even if the seller finds a buyer without the broker’s assistance
Sellers benefit from this form of agreement because the broker feels freer to spend time and money actively marketing the property, making a timely and profitable sale more likely
From a broker’s perspective, an exclusive right-to-sell listing offers the greatest opportunity to receive a commission
Most residential listing agreements in Illinois are exclusive right-to-sell agreements
Market Value
The most probable price a property would bring in an arm’s-length transaction under normal conditions on the open market. A CMA estimates market value as likely to fall within a range of values (e.g., $335,000 to $350,000)
Minimum Services
All exclusive brokerage agreements must specify that the sponsoring broker, through its sponsored licensees, will provide the following required minimum services:
(1) Accept delivery of and present to the client all offers and counteroffers to buy, sell, or lease the client’s property or the property the client seeks to purchase or lease
(2) Assist the client in developing, communicating, negotiating, and presenting offers, counteroffers, and notices that relate to the offers and counteroffers until a lease or purchase agreement is signed and all contingencies are satisfied or waived
(3) Answer the client’s questions relating to the offers, counteroffers, notices, and contingencies
Multiple Listing Service (MLS)
A multiple listing service may be included in an exclusive listing. It is used by licensees who are members of a multiple listing services (MLS). An MLS is a marketing organization whose members make their listings available for showing and sale through all the other member licensees
Net Listing
Specifies that the seller will receive a net amount of money from any sale, with the excess going to the listing broker as commission. The broker is entitled to any amount exceeding the seller’s stated net. The broker is free to offer the property at any price greater than the net amount the seller wants
Net listings are illegal in many states and are discouraged
In Illinois, net listings are legal but not recommended
Open Listing
The seller retains the right to employ any number of brokers as agents. The brokers can act simultaneously, and the seller is financially obligated only to that broker who successfully produces a ready, willing, and able buyer
There are multiple brokers
Only the selling broker is entitled to a commission
Seller retains the right to sell independently without obligation
Negotiated terms of an open listing agreement should be in writing
Option Listing
Gives the broker the right to purchase the listed property at some point in the future. The specific length of time period is by agreement and usually matches the length of the listing. The broker has the right to purchase the property
Statute of Frauds
Exclusive brokerage agreements must be in writing to be enforceable in court. Oral agreements are not illegal, but they are not recommended because they cannot be enforced in court
In Illinois, according to the Illinois Real Estate License Act, all exclusive brokerage agreements must be in writing and must indicate the required minimum services to be provided to the consumer in return for compensation or the right to receive compensation from another
