A real estate broker acts as an agent for both the buyer and seller of property. In most cases, the seller retains the broker and works with the buyer. The broker works for the seller to solicit potential buyers. The seller then evaluates the proposed offers and determines if a sale is in their best interest. A broker must be licensed by a state regulatory agency.
A listing agreement is an employment contract between the seller and broker. The listing agreement usually authorizes the broker to show the property to potential buyers. There are two types of listing agreements:
- Open Listing: A broker earns a commission only if the broker successfully sells the real estate – however, if someone else finds the buyer the real estate broker is not entitled to a commission
- Exclusive Listing: A broker is entitled to a commission even when another person sells the property
Most listing agreements allow a broker to collect a commission when a broker is able to present a ready, willing, and able purchaser. This usually means when a person is able to pay the purchase price. The buyer must be able to perform the contract by demonstrating they have the available finances to purchase the property.
If a prospective buyer makes an offer that satisfies the terms in the listing agreement a broker has earned his commission even if the buyer refuses to sell. The offer must satisfy the terms of the listing agreement. A buyer’s offer that is less than the asking price doesn’t entitle the real estate broker to a commission.
Selling your house or property is a complicated process. An experienced real estate attorney will help you decide whether to hire a broker and what kind of agreement to make with a broker. A real estate lawyer can also represent you in court if a dispute arises between you and your broker.