Listing/Purchase Contracts

Listing Contract A contract between a Seller and a Buyer, where in the Broker is employed by the Seller to represent the Seller in the sale of the property, a written employment agreement which creates the principal/agent relationship in real estate transactions

A Seller has a listing (a contract) with the Brokerage Company, not the salesperson or real estate agent.  

A copy of the listing must be given to the principal (Broker) upon execution, hence the minimum number of copies to prepare (counting the original) would be two one for the principal and one for the agent

*There are no standard forms for listing properties in Arizona.  

Listing Must Have: 1.   Be in Writing 2.   Include the date of inception and date of expiration (there is no requirement of certain number of days for a listing)3.   Terms and Conditions (what the Seller wants, this defines the services)4.   Stated compensation (how much is the fee - $,% or personal property)5.   Description of property (not every contract needs a legal description, not essential)6.   Signatures

Four Kinds of Listings: 1.   Exclusive Right To Sell Seller owes commission, even if the Seller sells the property himself, Broker is due of commission, no matter who sell the property (including the owner himself), one Broker is given the sole and exclusive right to sell the property for definite term of time, and if the property is sold by anyone within that time, including the owner, the Broker is entitled to a commission Should be approached as being the best service to the client Only get paid, when the job gets done Many times Buyers, who go to homes for sale by owner reduce the money offered in the sale because they take off a commission (most often the Buyer gets the benefit, not the Seller of a home for sale by owner)2.   Exclusive Agency Broker is due a commission, no matter who sells the property, except for the owner, one broker is chosen as exclusive agent but the owner reserves the right to sell the property without obligation to the broker3.   Open Listing (General) Broker due a commission only if sells the property, a owner lists property with a number of brokers with the commission payable only to the broker who sells the property and the owner reserves the right to sell the property without obligation to any broker (a seller can have lots of these open listings with a variety of real estate companies whichever ones sells the property that one gets the commission) (open listings are not placed in the Multiple Listing)4.   Net Seller wants a net amount for himself, everything is excess of that amount is a brokerage commission, owner is to receive a certain sum of money as cash after a consideration of all selling expenses and existing loan payoffs and the broker is free to offer the property for sale at any price higher than the listed price and the broker's compensation is the amount over and above the seller's price needed (how much the Broker gets paid) This is illegal in some states, but not in Arizona) Seller's agent is obligated to share all offers with the Seller, even if that means not getting a commission.   This listing is discouraged by the National Association of REALTORS´┐Żbecause of the problems it can cause.  

Common Clauses in Residential Listing Contracts: 1.   Owner's permission to advertise property.   2.   Owner's permission to place sign on property.   3.   Owner's permission to accept earnest money on their behalf and to issue receipt.   4.   Agreement of owner to furnish title insurance and convey title.   5.   Agreement of owner to pay commission6.   Agreement of a 90 day clause (provides that if property is sold by owner within a stated period of time after the expiration of the listing to any party with whom the broker negotiated during the listing term, the owner must pay broker commission7.   Hold-Harmless Clause agreement by owner to hold agent harmless from any liability or damage arising from incorrect information supplied by the owner8.   Statement that property is offered without respect to race, color, sex, religion, national origin, familial status or handicap according to the Fair Housing Laws9.   Statement that commission rate was not set by the Association of REALTORS´┐Ż

Mere Volunteer A broker that accepts a verbal employment and then sues for a commission (merely volunteering services)

Procuring Cause

Who actually caused the sale or purchase of a property

Multiple Listing Service (MLS) A cooperative effort wherein brokers sell properties listed by other member brokers with an agreement to split the earned commission

Multiple Listing It is an exclusive right to sell or exclusive agency listing with the additional authority of the broker to distribute the listing to other members of the Multiple Listing Service.  

Sherman Anti-Trust Act Law created to maintain business competition, any conspiracy between businesses to manipulate or control the marketplace in order to limit consumer choices for products/services would be a violation of this act.   Examples of Violations:  price fixing Agreements between brokers to set commission rates Group Boycotts Brokers agree not to do business with a particular company Agreements not to compete in certain areas Brokers agree not to work in certain parts of the town

Possible Test Questions: 1.   What is a listing contract A listing contract is an employment or compensation contract.   2.   Are verbal listings illegal Verbal listings are illegal because Arizona law requires that all listings must be in writing.   3.   Must a listing contract have a monetary amount (commission) written on it No, a listing contract does not need a monetary amount (commission) listed on it.   There are a variety of means of receiving compensation such as money, % or personal property.   However, a stated compensation must be on the listing contract.   4.   Can you still receive compensation (commission) if you do not have it in writing No, you may not receive compensation (commission), unless it is written down.   This is Arizona law.   5.   What is the difference between an Exclusive Right To Sell and an Exclusive Agency The difference between an Exclusive Right to Sell and an Exclusive Agency is that the Exclusive Right to Sell gives a Broker a commission no matter who the listing agent sells to, even if the seller sells the property.   An Exclusive Agency pays a commission to the Broker to unless the Seller sells the property.  

Example:  Listing

Homeowner wants to sell home for $100,000 Cash

Listing Agent finds a ready willing and able buyer to purchase for $100,000 the Seller turns down the offer.   6.   Does the Seller owe a commission to the listing broker Yes, the seller does owe a commission because the services were given for the listing.   Broker may sue the Seller.   7.   Can the Broker force the Seller to sell No, the Broker can not force the Seller to sell.   The seller did not promise to sell.   8.   Can the Buyer sue the Seller for specific performance No, the Buyer can not sue the Seller for specific performance because the Seller did not sign, there was no performance given.   9.   Which of the following is not a legal listing in Arizona Exclusive Agency Exclusive Right to Sell Multiple Listing Multiple Listing is not a legal listing in Arizona.   A multiple listing is an organization that posts listings for Brokers.   10.   style=": 7.   0pt "Times New Roman"">What kind of listing is illegal in some states, but not in Arizona Net Listing is illegal in some states, but not in Arizona.   Net listing is when the Seller wants a net amount for himself, everything is excess of that amount is a brokerage commission (how much the Broker gets paid) purchase Contracts Contract for the purchase and sale of real property in which the Buyer agrees to purchase for certain price and the Seller agrees to convey purchase Contract Should:  Minimum number of copies counting the original is four Should be neat and legible Should be carefully worded, without ambiguity Avoid using uncommon abbreviations Should tell the whole story about the agreement between the two parties, with nothing left to oral understanding Signatures of all parties in proper spaces Any changes to contract must be initialed by all parties (indicate date and hour of the change) Earnest Money Sum of money paid by the Buyer, usually at the time that the offer is signed, as evidence of the Buyer's good faith and intention to complete the transaction.   Earnest Money Requirements:  purchase contract is the receipt for the earnest money (copy is given to the Buyer at the time of signing) Form of earnest money (cash, check, etc.   ) must be described on contract Accepting a post-dated check as earnest money can be dangerous Earnest money accepted by salesperson should be turned over to the broker promptly and not later than the close of the next business day Earnest Money Status:  At the time the Buyer makes an offer, the broker becomes the trustee for the money (earnest money).   The Buyer can, at any time, prior to the acceptance of the offer by the seller, withdraw the offer and get earnest money back.   When a broker gets an offer accepted by the Seller, the broker becomes a trustee of the money (earnest money) for both the Buyer and the Seller.   This money should be kept intact by the broker.   In case, the money needs to be returned to the Buyer, if the Seller can'tshow good title to the property or if the Seller defaults on the contract.   If the Buyer defaults, the broker will have to account for it to the Seller.   Arizona Residential Purchase Contract Clauses Include:  Instruction by the Seller to the broker to deposit the earnest money into the broker's trust account or in a neutral escrow depository Agreement that when the loan is to be assumed, the loan figure in the contract is an approximation Specifying the alternatives of the Seller, if the Buyer breaches contract Giving definite time allowance to the Seller to perfect title , if the title search comes up with a cloud Agreement that the evidence of title is the issuance of a Title Insurance Policy, insuring the purchaser in the full amount of the purchase price Agreement upon an escrow a closing date Agreement by the seller to maintain the property and be responsible for the heating, cooling, plumbing, electrical appliances, etc.   up to a specific point in time Statement pin pointing who would suffer the risk of loss to property by reason of fire, vandalism, flood, etc.   , after the creation of contract between the Buyer and Seller Statement that the Buyer is of legal age Statement placing the Buyer into a position of caveat emptor (Let the Buyer Beware) Statement that the contract is not binding unless, executed by both the Buyer and Seller 'time is of the Essence in which punctual performance is an essential requirement of the contract, prevents unjust delaying on either the part of the Buyer or Seller when closing escrow Agreement by Buyer and Seller to execute escrow instructions within 10 days after the acceptance of the offer Agreement to pay the escrow fee and other costs of the transaction Expressed time limit given to the Seller to respond to the Buyer's offer Agreement by the Seller to pay the broker a stated sum of money as commission Agreement that if the Buyer breaches the contract and the Seller declares the earnest money forfeited, the Seller will share the earnest money 50/50 with the broker, instead of paying a commission Commissioner's Rules Concerning Listings/Purchases:  *All offers on a property must be promptly submitted to the principal, delays will not be tolerated by the Adventure Commissioner.   *Licensees are not permitted to use high pressure tactics on either parties *Licensees must guard against inaccuracies in their representations to customers (Misrepresentations are actionable by law, failure to disclose restrictions by zoning laws or other conditions affecting the use of the property is misrepresentation) *Negotiations concerning property listed with one licensee shall be conducted through the listing broker, unless the listing brokers and principal waive such a requirement or no licensed representative of the listing broker is available for 24 hours Licensee should not discourage any party to a real estate transaction from seeking the advice of an attorney possible Test Questions:  1.   If a dispute arises from a poorly written contract, what will happen If a dispute arises from a poorly written contract, it will be construed most strongly against the party, who wrote the contract.   In event of a dispute, the handwritten word takes precedence over the pre-printed word (more important and enforceable).   2.   What does Article 26 of the Arizona Constitution state Article 26 of the Arizona Constitution states that real estate agents can (have the authority to) write contracts.   3.   Must a purchase contract include earnest money No, a purchase contract does not have to have earnest money.   However, earnest money has become a powerful tool in convincing a Seller to go with a purchase contract.   4.   When earnest money is taken, what must the purchase contract state When earnest money is taken, the purchase contract must state three important elements:  the amount of the earnest money, the form is which it was taken (cash, check, etc.   ), and where this earnest money is to be deposited.