Overview and Definition of an Exclusive Right of Sale Listing Agreement
A Florida Exclusive Right of Sale Listing Agreement (commonly referred to as an "exclusive right of sale agreement") is a contract between a Florida property owner (seller) and a licensed real estate broker. This agreement legally authorizes the broker to act on behalf of the seller in regard to selling the seller’s property, and, if sold, entitles that broker (or their brokerage firm) to a commission, regardless of who pays the commission. Florida Statute ยง 475.001(12) defines an ‘exclusive right of sale listing agreement’ as "an employment contract under which a property owner grants a licensed broker the sole right and authority to sell or lease, within the stated time period, the owner’s property, to find a purchaser or lessee who is ready, able, and willing to purchase or lease, and to collect a valuable consideration therefor, and in which the owner agrees to pay a commission to the broker regardless of who purchases or leases the property . "
The sale of property is just one type of real estate transaction covered under this term. For example, the lease of property is another real estate transaction covered under an exclusive right of sale listing agreement. Like most contractual relationships, the agreement must be signed by both the seller and the broker, and thus both parties must be in agreement to the precise terms within the document. The agreement looks very much like a sales contract, but there are key differences between it and a sales contract that we’ll take a look at in other sections.
The major takeaways here are: (1) it does not matter who pays the commission of a sale, whether the seller or the buyer, if the sale occurs, and, (2) it has to be in writing and signed by both the seller and the agent (the agent has to have a license to practice real estate law in Florida) or it is not enforceable under Florida law.
Exclusive Right of Sale in Florida: Advantages
For the seller, it offers clarity, structure and control. You’ll know exactly what you are getting for what you’ll be paying and when your payments are expected to be made. You won’t have to hope that your agent is more "motivated" than other real estate professionals who may also be trying to sell your home.
An exclusive sale listing also offers sellers some protection against agents "double-dipping" for commissions. Without this agreement, your agent may require you to pay their commission if a buyer-client they’ve been working with makes an offer on your home. The exclusive sale listing means you know your agent is not required to try to represent the buyer – and collect a second commission – at the same time they are representing you.
Florida Exclusive Right of Sale: Terms and Conditions
The typical Florida exclusive right of sale agreement will contain, among others, the following provisions: Duration of the Agreement: The Florida exclusive right of sale listing agreement will generally last for six months from the living date. Pricing Terms: The price will be agreed to by the seller and realtor prior to the listing. If the seller allows a bid start price, the contract terms may be modified after submission and acceptance of the bid sale. Listing Agreement Duties of the Parties Under Florida Law: Florida law specifies particular duties and obligations upon each party, including the real estate company, real estate agent, seller and buyer. The parties owe the other "undivided loyalty, full disclosure, obedience, confidentiality, reasonable skill, care, and utmost good faith in the transaction."
Duties of the Listing Agent
The listing agent under an exclusive right of sale agreement has an array of responsibilities and duties to the seller that, if fulfilled, can mean the difference between a successful real estate transaction and a breach of the agreement. In general, the listing agent must:
Real Estate professionals have significant duties to their clients. Under the National Association of Realtors code of ethics, when a real estate professional accepts an exclusive representation agreement from a seller they, "pledge themselves to protect and promote the interests of their client," and add, "[t]hey must treat all parties honestly." See, Canon 1. When it comes to the exclusive right of sale listing agreement, the duties of the listing agent extend to the following: Listing agents should be mindful of these duties, and how fulfilling them will benefit the seller and the seller’s interest in the property.
Drawbacks for Sellers
Sellers must also be wary of how the terms of the Exclusive Right of Sale Listing Agreement could affect their property if a buyer defaults on the purchase and sale agreement. If the buyer defaults, the seller must then seek to have the Contract for Sale and Purchase of Real Estate rescinded and the earnest money deposit returned. However, where the seller used an Exclusive Right of Sale Listing Agreement, the seller’s ability to reach an agreement with a buyer over the return of the earnest money deposit may be affected by the Agreement .
The seller cannot accept any written offers to sell the property until it has completed all of the terms and conditions of the Exclusive Right of Sale Listing Agreement. If a contract is signed with an offer other than the one signed on behalf of the broker, then the seller may be in breach of the brokerage agreement. At that point, the seller may find themselves between the buyer and their broker arguing over how to handle a default and who should receive the earnest money deposit. The more people who have a hand in determining what happens to the funds the more likely it is that litigation could occur. If a listing does not sell quickly, this can happen multiple times.
How to Enter a Florida Exclusive Right of Sale Agreement
Before embarking on the process of selling a property, sellers must first familiarize themselves with the various types of real estate listing agreements in Florida. In order to properly understand the Florida Exclusive Right of Sale Listing Agreement, sellers should understand the steps they must take to initiate the agreement in the first place.
Prior to entering an Exclusive Right of Sale Agreement in Florida, sellers must carefully choose an agent who is willing to act in their best interest by advocating for the seller’s desired price for the sale of the property. The agent and seller should then negotiate the terms of the agreement, such as the desired sales price, incentives, timing, the type of property to be sold and whether the broker will be entitled to commission if the seller sells the property without the aid of a broker in the sales timeframe. By properly discussing these terms at the outset of a listing agreement, each party’s expectations can be met.
For an Exclusive Right of Sale Listing Agreement to become effective, the seller must agree to the terms of employment, price, commission and duration, and both parties must sign the agreement, which makes it enforceable. Both the buyer and real estate agent should sign and retain copies of the agreement.
Once the Exclusive Right of Sale Listing Agreement is signed, the sale of the property can get underway pursuant to the negotiated terms previously decided, including starting to list the property for sale by placing a sign outside the property, putting photos online, listing the property on websites like MLS and sending out real estate alerts to other brokers.
Important Legal Issues for Florida Sellers
Before selling property, sellers should understand the legal implications which go well beyond listing or selling the property. Sellers who agree to an exclusive right of sale listing agreement with a real estate broker should be aware of the provision in that agreement pertaining to the payment of commission on sales of the property not only during the listing period but for a period after the expiration of the listing period.
The Florida Exclusive Right of Sale Listing Agreement provides: Should you sell or agree to sell the Property (whether through a contract for sale, exchange, trade or lease with an option to purchase) to any person or entity during the term of this Agreement or within ___ days (the Post-Listing Period) after the termination hereof, I/we agree to compensate Broker as provided in the section labeled COMMISSION above. I/we understand that if the Property is sold during the Post-Listing Period and has been shown during the term of the Listing Agreement to the purchaser thereof, I/we agree to compensate Broker as provided in the section labeled COMMISSION above.
Not only does this provision require the seller to pay the broker a commission after listing period, the provision is interpreted to mean that the seller must pay the commission in the event the seller sells the property during the post-listing period to an unrepresented buyer that was introduced to the seller during the term of the listing agreement . In that instance, the seller would be required to pay the commission to the listing office. The commission can be paid to the broker even though the buyer is not being represented by the listing broker.
Additionally, the owner is agreeing to pay the commission in the event there is a lease with an option to purchase the property.
I am often contacted by sellers who are unhappy over having to pay a broker a commission on the sale of their property even after the listing expired. Often these sellers just signed the listing agreement without reading the terms, not realizing that they were agreeing to such a provision, that the broker expected to receive a commission despite not representing the buyer and/or that they agreed to pay a commission on a lease with an option to purchase the property.
Florida law requires a broker to review the listing agreement with the owner and explain the terms. The Florida Real Estate Commission may investigate claims that the broker violated the law by failing to do so.
A seller of any residential type property or a residential lot must also receive a copy of the Florida Department of Business and Professional Regulation’s publication entitled "Fifty Questions 10 Most Asked By Homebuyers." This publication explains the rights of buyers of residential property and is required by Chapter 475.278, Florida Statutes.