This is the fourth episode in our video series covering a licensee’s authority to act on a client’s behalf under a written listing agreement. The third episode covers the two distinct legal aspects under a listing agreement.

Open versus exclusive

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 extent of the broker’s representation;
  • the type of services to be performed by the broker and their agents; and
  • the events which trigger payment of a fee. [See RPI Forms 102-104 and 110-112]

The purpose for most 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.

Despite the application of various agreements to the type of property described in the listing, all listings fall into one of two general categories:

  • exclusive; or
  • open.

Exclusive listings

Under an exclusive listing, a broker receives the sole right to represent:

  • an owner by marketing a listed property for sale or lease and locating a qualified buyer or tenant [See RPI Forms 102 and 102-1];
  • a buyer or tenant by locating property [See RPI Forms 103 and 103-1]; or
  • an owner or lender to mortgage a property.

An exclusive listing requires an agent to use diligence in their efforts to fulfill the client’s objectives to locate a buyer, tenant or lender for the property. An exclusive listing has a specified period of employment set by a mandated expiration date of the employment, such as 90 or 180 days after its commencement.

If the broker fails to include an expiration date in an exclusive listing, they face disciplinary action by the Department of Real Estate (DRE) on a complaint. [Calif. Business and Professions Code §10176(f)]

Two types of exclusive employment agreements for buying and selling real estate exist:

  • an exclusive agency listing for a seller or buyer; and
  • an exclusive right-to-sell or right-to-buy listing agreement. [See RPI Forms 102-104]

Both types of exclusive listings establish the broker and their agents as the sole licensed real estate representatives of the client. However, these variations are distinguished by whether or not the broker is entitled to a fee when the property is sold or located solely by the efforts of the client.

Under an exclusive agency listing

fee provision, the broker does not earn a fee when the client, acting alone and independently of any other broker or the seller’s broker, accomplishes the objective of the employment, i.e., selling the listed property or locating and buying the property sought.

Conversely, under the fee provision in an exclusive right-to-sell/buy agreement

, the broker earns a fee no matter who produces the buyer or locates the property sought under the listing during the listing period.

This is the case whether it is the client, the seller’s broker or another broker or representative of the client who produces a buyer or locates a property. [Calif. Civil Code §1086(f)(1)]

An exclusive employment is an example of a bilateral contract.  The broker or agent agree to exercise due diligence to fulfill the client’s real estate objectives. In exchange, the client, be they the buyer or seller, promises to pay a fee under various circumstances.

In the context of a contract, it means both parties are bound to act. Stated another way, it’s a promise for a promise.