A person who wishes to sell their property usually
signs a contract with a real estate company. The contract is called an
Exclusive Seller Representation Agreement. This agreement is the
initial contract between the seller and the realtor and signing such a
contract without having precise knowledge of its content could be a
costly mistake. At worst it could mean that no one else, including you,
will be allowed to sell your property without the realtor getting a
Exclusive Seller Representation Agreement
You’ve always been warned to ‘read the fine print,’ and for good
reason. Some of us tend to check the main points we want covered and skim
over the rest, trusting that we are dealing with honest people.
Contracts are, by their very nature, obtuse and hard to read. When you are
selling one of the biggest investments you have obtained in your life, it
is truly important that you read the fine print!
Content of the Contract
There are variations from state to state and the contract may be called
something other than an Exclusive Seller Representation
Agreement. By whatever name, a rose is still a rose. To sell your property
through a realtor, you usually have to enter into some sort of contract
with the realtor.
The Exclusive Seller Representation Agreement can cover such
common subjects as:
The seller is retaining (hiring) the realtor to sell their
The amount of time that you will allow the realtor to attempt to
sell your property - In general, a realtor will attempt to sign you up
for an entire year. Do you really want the realtor to own the right
to sell your home for that long? Realtors may dislike a shorter
time period, but you can specify as little as 3 months. In this day and
age, advertising your home is almost instantaneous so stand firm and
don’t let the realtor bulldoze you. Besides, the realtor has an ace up
his sleeve usually hidden under the Brokerage Fee (more about that
The property address and legal description.
The price, down payment, acceptable selling terms.
Title and Existing Encumbrances – Any loans or liens you have
against the property.
Multiple Listing Service Authorization – Allows the realtor to put
your home and information about your home on the internet; a real
plus as your property is instantly advertised on the world-wide
Duties of the Realtor – Your protections under this contract should
be addressed in depth, including the realtor’s confidentiality duty to
Information Warranty – The information you give had better be true,
don’t try to hide things; it could cause problems laters.
Transaction Related Services Disclaimer – If the Seller (You) hires
someone that the realtor suggests to fix a problem and it creates even
more problems then the realtor is not to be blamed. For
example, if your pipes are leaking and the plumber that the realtor
recommended destroys your hot water tank, you can’t sue the realtor. Don’t
rely on the realtor’s advice; investigate any professionals before you
Included Items - Don’t think you can take your great-grandpa’s wood
stove or your prize rosebushes; items attached to the real estate are
automatically included. Make certain you clearly state those items
excluded from the sale.
Severability – If an item in the contract is found to be invalid,
the remaining provisions are not impaired. In plain English, if the
Seller or the realtor makes some sort of error it doesn’t necessarily mean
the entire contract is void.
Any number of subjects and/or conditions can be covered in a real
estate contract and you must take the time to read and understand all of
them. There are ways you can protect yourself and retain the right to
eventually fire your realtor in the event you feel it necessary to do so.
Take Control of the Real Estate Contract
Some sections of the Exclusive Seller Representation Agreement
warrant a very thorough examination. Before signing the Exclusive
Seller Representation Agreement you should put the following sections
under a mental microscope.
Consent to Limited Dual Representation and Assigned Agency
You must keep in mind that realtors work for a commission check;
they are not in the business of volunteering their time and effort.
The commission is most often split between the realtor selling your
property and the realtor representing the buyer. If a realtor is lucky
enough to sell your home to a buyer they are representing, then they don’t
have to split the pie.
Under Limited Dual Agency, your realtor will know your secrets, such as
the least amount you’re willing to sell your property for.
will also know the buyer’s secrets, such as the highest amount the
buyer is willing to pay. This could work against you or for you, depending
upon the circumstances. Realtors are usually ethical and remember –
the higher the sale price, the bigger the commission check.
You can generally consent to Limited Dual Agency as confidential
information, which might be to the Buyer’s benefit, cannot be revealed
without your permission. By default the realtor’s duty is to the person
selling the property. In most cases, Limited Dual Agency is okay for the
Seller but a bad idea for the Buyer.
Seller Notification and Consent to Release from conflicting Agency
This section of the contract usually just rehashes the previous
section. Read it carefully for any subtle additions or clauses. Realtors
don’t want to get sued or have to deal with sticky legal issues (who
does?) so they want to make sure you understand that they might represent
Seller’s Property Disclosure Form
A potential buyer makes an offer on your place and puts down earnest
money. At that point you have a set amount of time to provide the buyer
with a Property Disclosure. If the buyer finds something on the
Disclosure that is unacceptable, then they can rescind (take back) their
offer without losing their earnest money. Make sure you are accurate and
honest when filling out this form; avoid problems later on.
Brokerage Fee - Know YOUR Rights
Realtors understandably want to protect their investment (time, effort,
money) in selling your property. The Brokerage Fee section of the
contract is usually found right on the front page and deals with, not only
their payment for selling your property, but an obtuse clause that a
Seller would not typically associate with a discussion of realtor fees.
This ‘fine print’ subject is solely for protection of the realtor and,
while it may not be labeled as such in the contract, it is commonly
known in the real estate industry as the Protection Clause.
Brokerage Fee Section
Real estate commissions are generally from 6 to 10 percent across the
country, depending on the type of real estate. Why is the fee stated in
terms of percent instead of dollars and sense?
Fees are stated in percent primarily because the real estate market is
based on commissions.
A realtor wants to sell your property for the
highest price, because they get bigger commission check. This commission
system motivates realtors to work harder at getting the highest price
for the Seller.
Another added benefit to the realtor is the same idea behind an
automobile being priced at $2999 instead of $3000. Doesn’t it sound better to
hear you have to pay 6% of $100,000 than have to shell out $6,000?
Allow Only the Smallest Bite Out of Your Apple
You can negotiate with the realtor what percents you want to pay for
selling your property. Say commissions are running around 6% for homes
in your area. If you tell the realtor you’re willing to pay 3% to him
and 2.5% to the buyer’s realtor, you’re saving .5% of the commission.
If your home sells for $100,000, then you just put $500 back in your
pocket. It’s no skin off your realtor’s nose as their piece of the pie is
still intact and you’ve saved yourself a hefty chunk of change. This
strategy is especially effective in a Seller’s Market (more people
trying to buy homes than people willing to sell their homes).
Hidden Realtor Protection
Finding the right realtor is so important; you don’t want to get stuck
with someone who isn’t willing or able to give you the best service in
selling your property. Buried in the Broker Fee section of the
contract is terminology that won’t let you fire your realtor or sell your
property yourself for a specified amount of time, even if the realtor sits
back and does absolutely nothing to sell your property.
In legalese (lawyer talk) the wording could be something similar to:
“the brokerage fee is payable if the property or any portion thereof or
any interest therein is, directly or indirectly sold, exchanged or
optioned or agreed to be sold, exchanged or optioned within _______ days
following expiration of the term hereof, to any person who has examined,
been introduced to or been shown the property during the term hereof.”
If you read something similar to the above statement written into the
contract that your realtor hands you, your first thought would probably
be, “What in the heck?!” Any intelligent person would most certainly
be excused for not realizing just how insidious that little paragraph
Look at that paragraph closely. In plain English it says that you
have to pay the realtor’s commission if your property or any part of
your property changes hands to anyone who has seen or even heard about
your property. Whatever number is inserted in that blank
effectively allows the realtor to be paid if you or someone else sells your home
even after the contract has expired.
There are probably some unscrupulous people who hire a realtor and then
try to sell their property to someone the realtor has brought to them
without paying the realtor’s commission. This little clause protects
the realtor, but it also effectively stops you from firing an incompetent
realtor. Don’t allow this to happen to you. Make sure the number
written in that blank is either a big fat zero (0), or at most, 30 days.
Read the Fine Print and Know How to Protect Yourself
You have the right to pay whatever commission percentage you
want and you have the right to limit the amount of time you’ll allow
the realtor to attempt to sell your home. If you want to take those
prize rosebushes, you can, if you fill in the blanks properly. Speak
up and make sure the blanks of the Exclusive Seller Representation
Agreement are filled in with data that benefits you.