Understanding a Listing Agreement
When you talk to a real estate agent about marketing and selling your home, they will show you different types of listing agreements. Most listing agreements are in effect for six months to a year. They provide for you to list the property with the real estate agent of your choice. Some listing agreements are exclusive to that particular real estate company while others allow you to deal with other agencies.
From the listing arrangement, you can expect the real estate agent to market the home, provide you guidance as to the preparation of the home through staging or otherwise and take the lead on all negotiations from the time an offer is received through to the closing of the property. If a realtor represents both a seller and a buyer , both parties will be entitled to be treated fairly, with all pertinent information disclosed, with no opportunity for any unfair advantage.
Some listings further provide that unless the contract is terminated, the commission will be paid to the real estate agent even if the property is sold directly by the homeowner. With some listing arrangements, there may be a fee for early termination.
For many homeowners, having a real estate agent market their home saves them from having to put much time and effort into the selling process. The financial outlay for the home’s marketing is also for many considered as an upfront cost that significantly enhances the potential of a quick sale at a good price.
Common Reasons for Cancelling a Listing Agreement
Still others experience buyer’s remorse and decide they can’t afford to sell after all. But whatever the reason, homeowners are typically left with two options: ride it out with their realtor and risk the house not selling, or go through the length process of trying to cancel the agreement.
Here are some of the most common reasons that homeowners decide to cancel their home listings:
If you are unhappy with the service you are receiving from your realtor, you may want to consider negotiating a new agreement with another realtor rather than canceling an existing one, especially if you are satisfied with the contract terms. When you cancel a listing agreement with a realtor and then sign a new one with a different realtor, you may be required to relist your home at a higher price and for a longer period of time.
Just as marital separation agreements are no-fault, the same goes for listing agreements. If, for some reason, the realtor does something you consider to be stupid, immoral, or unsafe, you can likely cancel the contract with the realtor in order to protect yourself. Also, if you realize you want to go with a different realtor, get a new agent, and have him or her take over your property without charges (that often occurs if the new agreement is signed soon after the last one was canceled).
Steps Needed to Cancel a Listing Agreement
Examine the Terms of the Agreement
Before initiating cancellation of a listing agreement, read the terms of the agreement to check for any contingencies that might allow you to cancel (e.g., the sale price is not within the listing range, or the property has not sold within a certain amount of time). A contingency may make it easier for you to cancel the listing agreement.
Communicate with your Real Estate Professional
If no contingencies exist, the next step in the cancellation process is to communicate your desire to end the agreement to the individual or entity with whom you listed the property. For example, if the property is listed with a real estate agent, you would communicate with him/her directly, but if it’s with a broker, you would need to reach out to the broker (not the agent) to cancel the listing.
A majority of the time, real estate professionals will fulfill the cancellation request. If however, the individual or entity with whom the property was listed refuses to discuss canceling the listing agreement with you, consider having all discussions with the words "cancellation of the listing agreement" prominently written at the top of all correspondence. Select words that show it’s in the best interests of all concerned to immediately cancel the agreement. Personally, I wouldn’t use the words "terminate" or "rescind." The real estate professional is entitled to a commission if he/she sells the property after the listing expired. If the listing agreement is cancelled, and the property sold shortly thereafter, there would be no commission to pay. If the listing is simply "terminated" or "rescinded", there would be a commission to pay.
If things are still not going well after you’ve communicated your desire to cancel the listing agreement, write a letter detailing the cancellation process.
If the individual or entity with whom the property was listed continues to refuse to discuss cancellation of the listing agreement, consider hiring a real estate attorney for assistance.
In addition to drafting a letter requesting cancellation of the listing agreement, a statement should be drafted indicating (clearly and legally) that the parties’ business relationship has ended. This may help to prevent any further dealings between the parties and to avoid any damages as a result of continuing business relations. I recommend that any such statements be narrowly tailored to the specific terms of the business relationship to avoid any potential conflicts going forward (this is important particularly if you are engaging in business with the individual or entity with whom the property is listed following the cancellation process).
If you choose to personally enlist a particular service provider to assist you with the cancellation process and things turn out poorly, the issue may be resolved without legal intervention. However, if a service provider refuses to cancel the listing agreement, reach out to a real estate attorney for further assistance.
Understanding Possible Fees and Penalties
In your standard listing agreement, there should be a section outlining the potential penalty or fee if you terminate. While this is an area where these contracts tend to vary from legislation to legislation, the most common entry is that the original contract will be extended for 30 days or so. This extension holds true and is in effect during the time the house is re-listed with a new agent. The time period usually begins when a request is made by the homeowner to cancel the original contract. To protect yourself and your interests, it is always best to have the exact details of your remuneration and charges included. For what they are worth, many agents will agree to forego these penalties, and it really does depend on how personable your agent is.
The bottom line is that most salespeople are interested in making sales, and in their efforts to generate the happiest customers possible, they may not hold you to the contract. If you go through the proper channels as listed above, they may even drop the entire penalty if you ask for one that is not already included in your contract. Should that fail, you will have to decide how much you are willing to negotiate with your current real estate agent as you work to find a solution for both parties.
Legal Aspects to Be Aware Of
As with entering into a real estate listing agreement, the termination of that agreement carries legal considerations. In the United States, contract law is primarily governed by state law. Each state treats contract law somewhat differently. In many states, real estate agency law is statutory and contract law principles are imported into the construction of listing agreements. The delivery of some type of written communication notifying your real estate broker that you no longer wish to be represented by them, should be an important first step in effecting a cancellation.
However, to be sure , reading the fine print in your listing agreement is still a good place to begin a review of any potential legal issues. Some listing agreements may actually set forth requirements that must be followed to either terminate or cancel the contract. For example, do you have to wait 30 days? Do you have to submit it in writing? Do you need a reason? What does the brokerage firm want in writing? While unique to the specific situation, these are a few examples of where a review of the details in the listing agreement should come into play.
If the idea of breaking up with your agent, your agency and your real estate listing agreement has already turned from I’m not happy, to this feels illegal, we recommend that you seek the counsel of a qualified attorney for guidance.
Alternatives to Cancelling a Listing Agreement
Before canceling a real estate listing agreement, consider whether the matter can be resolved in a less confrontational way. It is oftentimes best to keep your options open to avoid the transaction devolving into an adversarial process. Consider when appropriate the following options:
Renegotiate the listing agreement. If the market has changed since you first entered into a listing agreement, present your agent with current market data and try to renegotiate the terms of the listing agreement in a way that works for both of you. For example, sometimes agents will basing their commission on a percentage of the purchase price plus a bonus if the property sells for a certain amount over the listed price. You may want to do away with the buyer’s premium, or at least limit it, and maybe even increase the agent’s base commission percentage.
Ask your listing agent’s broker for a different agent to work with. If you have overall confidence in your listing broker, but are not happy with the individual representative you were assigned to, you may be able to reassign your listing to a different agent within the same brokerage. Do not assume that the broker will automatically put you with another agent – ask for it.
Ask your listing agent if they will attempt to work out the issues through mediation. If what you have been asking for is not too unreasonable, often your agent will be willing to sit down with you and try to come to an agreement by way of a "mid-course correction".
Ask your listing agent whether she will mediate between the two of you. If you have not had a good experience with your agent, you can ask her whether she is willing to be the point person for the negotiations. This can be helpful in forcing her to hear both sides and educate both parties as to how agents and brokers function.
Final Takeaways and Conclusions
Remember, cancelling a real estate listing agreement doesn’t have to be complicated. Knowing exactly what your rights and obligations are under the agreement is the key to a successful termination. Once you’ve read this article, you should have a better understanding of what you’ll need to do in order to effective terminate any listing agreement. Be sure to pay close attention to the terms within your agreement, and act promptly if you begin to feel like it’s no longer in your best interests.
You can use the strategies provided above to cancel any type of real estate listing agreement , including an open, exclusive, multiple, or net listing. Even if you’re not the person who signed a purchase agreement, you could still be responsible for the real estate commissions that are due upon closing, so take the time to learn the ins and outs of your agreement and take action as soon as possible if you’re not getting the results you expected.
If you’re never able to cancel a listing agreement on your own, you may need to enlist some help. It’s always important to have guidance and advice from a real estate professional so you can be certain that you make the correct termination demands.