This form is used by a buyer’s agent when employed by a prospective buyer as their sole agent, to prepare an offer to render services on behalf of the buyer to locate and acquire property for a fixed period of time.
Authority to act on the buyer’s behalf
A listing agreement is a written employment arrangement between a client and a licensed real estate broker. On entering into a listing agreement, the broker or their agents are retained and authorized to diligently perform real estate related services on behalf of the client in exchange for payment of a fee. [Calif. Civil Code §1086(f); see RPI Form 102-104 and 110-112]
A client who retains a broker may hold an ownership interest in real estate, which the client seeks to:
- sell[See RPI Form 102 and 102-1];
- lease[See RPI Form 110]; or
- encumberas collateral for mortgage financing. [See RPI Form 104]
Further, the client retaining the services of a broker may be seeking to acquire an interest in real estate as a:
The individual employed by a client to provide real estate services in expectation of a fee is always a licensed real estate broker. Thus, if a dispute arises with a client over the client’s failure to pay the agreed-to fee, it is the broker employed under a written listing signed by the client who pursues collection.
A real estate agent employed by the broker may solicit and enter into a listing, but the agent does so acting on behalf of the broker. The agent has no independent right to enter into or enforce a listing agreement naming the agent as the person employed. Essentially, the agent is an agent of the agent — their employing broker.
Types of listing agreements
A variety of listing agreements exist, each employing and authorizing a broker to perform real estate related services under different conditions. The variations usually relate to:
- the type of services to be performed by the broker and their agents;
- the extent of the broker’s representation; and
- the events which trigger payment of a fee. [See RPI Form 102-104 and 110-112]
The objective served by most types of listing agreements is the sale or purchase of single family residential (SFR) property. Others are for residential-income and commercial-income properties comprising industrial, retail, office, farm and motel/hotel or unimproved parcels.
Without regard to various agreements or the type of property described in the listing, all listings fall into one of two general categories or employment:
- exclusive; or
Exclusive right-to-buy listings
For brokers and their agents, an exclusive right-to-buy listing agreement creates a parallel activity to a right-to-sell listing for marketing property for sale. Under a buyer’s listing, a prospective buyer employs a broker to locate suitable properties of the type and utility the buyer seeks to purchase. [See RPI Form 103]
As with an exclusive right-to-sell listing, the exclusive right-to-buy variation contains provisions stating a broker fee is to be paid by the buyer — unless the seller agrees to pay the fee — when the buyer acquires property of the type described in the buyer’s listing during the term of the listing or safety period.
Importantly, use of the exclusive right-to-buy listing provides greater incentive for brokers and their agents to perform since the buyer’s commitment to pay a fee is in writing. Further, the exclusive aspect imposes a duty to work diligently and continuously to meet their buyers’ objectives. [See RPI Form 103 §2.1]
The buyer, on entering into an exclusive right-to-buy listing, also benefits from the greater likelihood the broker and their agent will find the particular type of property sought. The safeguard under a written employment is the screening of property by the broker and their agent since they:
- have extensive access to available properties;
- investigate and qualify available properties as suitable before they are presented to the buyer; and
- advise the buyer on both the short and long-term advantages and disadvantages of each property presented.
Critically, a buyer’s broker locating properties listed by other brokers does not become a dual agent or lose their status as the buyer’s exclusive agent when the buyer’s broker coordinates with a seller’s broker to obtain information on their listings.
Also, the seller typically pays the buyer’s broker’s fee — either directly (which is the best practice) or through the seller’s broker. This fee activity does not create a dual agency.
A broker who seeks and locates properties at their buyer’s request does so and negotiates the purchase terms as the buyer’s agent regardless of who pays the fee. Again, the seller typically pays the fee from the gross sales proceeds paid by the buyer.
Alternatively, the buyer may directly pay their broker’s fee as part of their total purchase price — their cost of acquisition of the property. With the buyer’s agent paid, the seller receives the remainder of the price paid as their gross proceeds from the sale and is responsible for payment of any fees the seller’s broker has earned. [See RPI Form 151 §9.1]
As always, all compensation received by a broker and their agents arising out of a transaction involving their client needs to be fully disclosed to the client.
The buyer’s listing agreement
The Buyer’s Listing Agreement – Exclusive Right to Buy, Exchange or Option published by RPI (Realty Publications, Inc.) is used by brokers and their agents to prepare and submit to prospective buyers their offer to render services on their behalf as the buyer’s sole real estate agent. Under the listing, a broker is employed to locate property sought by the buyer in exchange for the buyer’s payment of a fee when the buyer acquires the type of property sought. [See RPI Form 103]
Under the Statute of Frauds, signed written documentation of an obligation to ensure the payment of a fee is the legislatively enacted and judicially mandated requisite to collection of a brokerage fee. Written documentation is critical to manage the relationship when working for a buyer.
Each section in Form 103 has a separate purpose and need to enforce collection of the fee earned. The sections include:
- Brokerage services: The employment period for rendering brokerage services and the broker’s due diligence obligations are set forth in Sections 1 and 2. General provisions for enforcement of the employment agreement and broker fee-splitting arrangements are included in Section 3;
- Brokerage fee: The buyer’s obligation to either pay a brokerage fee or assure payment of the brokerage fee by the seller or seller’s broker, the amount of the fee and when the fee is due are set forth in Section 4;
- Property sought: A general description of the type of property to be located for the buyer is entered; and
- Signatures and identification of the parties: On completion of entries on the listing form and any attached addenda, the buyer and the broker (or agent) sign the document consenting to the employment.
Without the buyer’s written promise to pay a fee, the broker cannot enforce collection when the buyer attempts to bypass them and acquire property of the type sought or on which the broker provided information.
Without the buyer’s written promise contained in a buyer’s listing agreement, no fee earned is collectable from anyone, unless:
- the broker enters into an oral or written fee-sharing agreement with the seller’s broker documenting the buyer as their client (which is a precarious arrangement); or
- the seller intentionally interferes with the performance of the buyer’s oral (or written) promise to pay a fee.
Preparing the buyer’s listing agreement
The following instructions are for the preparation and use of the Buyer’s Listing Agreement — Exclusive Right to Buy, Lease or Option, first tuesday Form 103. This form is used by a buyer’s agent when entering into the employment of a buyer as their sole agent retained for a fixed period of time, to locate and acquire property.
Each instruction corresponds to the provision in the form bearing the same number.
Editor’s note — Check and enter items throughout the agreement in each provision with boxes and blanks, unless the provision is not intended to be included as part of the final agreement, in which case it is left unchecked or blank.
Enter the date and name of the city where the listing is prepared. This date is used when referring to this listing agreement.
- Retainer period:
1.1 Listing start and end date: Enter the date the brokerage services are to commence.
Enter the expiration date of the employment period. The expiration needs to be set as a specific date on which the employment ends since an exclusive listing is being established.
2. Broker’s obligations:
2.1 Broker’s/agent’s duty: The broker and their agents promise to use diligence in their effort to locate the property sought by the buyer. The agency duties a broker and their agents owe the buyer are always implied, if not expressed in writing.
3. General provisions:
3.1 Agency Law Disclosure: Acknowledges receipt of the Agency Law Disclosure – Real Estate Agency Relationships, which is to be attached as an addendum to this agreement. [See RPI Form 305]
3.2 Authority to share fees: Authorizes the broker to cooperate with other brokers and share with them any fee paid on any transaction.
3.3 Mediation agreement: States the parties agree to non-binding mediation after 30 days of informal negotiations prior to filing a court action
3.4 Attorney fees: Entitles the prevailing party to attorney fees if litigation results from the buyer’s failure to pay fees or the broker’s breach of an agency duty.
3.5 Choice-of-law provision: States California law will apply to any enforcement of this employment.
4. Broker fee:
4.1 Fee amount: Enter the fee amount negotiated to be paid as a percentage of the sales price or a fixed dollar amount. This amount will be paid when any one of the following conditions occur triggering payment:
a. Fee on any sale: States the broker fee is earned and due if the buyer acquires, exchanges for or options property during the listing period. [See Form 103 §4.1(c) for fee due on post-listing period sales]
b. Termination fee: States the broker fee is earned and due if, during the listing period, the buyer terminates this employment or withdraws from pursuing the purchase of real estate.
c. Safety clause fee: States the broker fee is earned and due if, within one year after the listing expires, the buyer enters into negotiations for the purchase, option, or exchange of property the broker exposed them to during the listing period. Within 21 days after expiration of the listing period, the broker needs to provide the buyer with a list of the qualifying properties reviewed with the buyer during the listing period. [See RPI Form 123]
4.2 Fees paid by seller: The buyer will not owe any fees if the seller pays a fee or the seller’s broker shares a fee in an amount acceptable to the broker. If the seller or the seller’s broker do not agree to pay or share a fee with the broker, the buyer is to pay the broker fee in addition to the purchase price.
4.3 Hourly fee: Enter the negotiated dollar amount of the broker’s per hour fee. The hourly fee is earned for time and effort spent on behalf of the buyer if property is not optioned or acquired by purchase or exchange after a diligent effort is made to locate property.
Type of property sought
Property description: Enter a description of the type of real estate sought by the buyer, including its size, general location, purchase terms, and property requirements.
Broker’s/Agent’s signature: Enter the date the listing is signed. Enter the broker’s name and California Bureau of Real Estate (CalBRE) license number. Enter the agent’s name and CalBRE license number. Enter the broker’s (or agent’s) signature. Enter the broker’s address, telephone numbers and email address.
Buyer’s signature: If additional buyers are involved, check the box, prepare a Signature Page Addendum form, reference this listing agreement, and enter their names and obtain their signatures until all buyers are individually named and have signed. Enter the date the buyer signs the listing and the buyer’s name. Obtain the buyer’s signature. Enter the buyer’s address, telephone numbers and email address.
Form navigation page published 12-2015.
Last revised 12-2014.
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