A Comprehensive Guide to Listing Agreement Termination
Listing Agreement Defined
At its core, a listing agreement is an employment contract between a homeowner and a real estate broker that gives the broker the power to represent the homeowner in the sale of their property. In exchange, the homeowner agrees to compensate the real estate broker with a commission if the broker finds a suitable buyer within a specific timeframe, upon satisfactory terms.
The listing agreement is the formal employment contract that triggers the fiduciary duty that the broker now owes to the seller. Under Florida Statute 475.278, a broker must perform the following duties:
A listing agreement can be exclusive (meaning, the broker is the only broker hired) or non-exclusive (meaning , the seller can also hire other brokers). The listing agreement should also specifically describe what actions are required by the seller, and the broker. It should very clearly describe the commission structure and explain whether the seller will also need to pay commission if the property is sold, within a certain timeframe, within a certain number of miles of the property, etc.
Many listing agreements are now "one page" documents. But this "one page" often comes with multiple "addendums" which then has multiple clauses that affect the interpretation of the section of the one page agreement in question. Without scrutinizing the listing agreement, one might miss important information or clauses that may alter the obligations of both the broker and the owner.
Termination of the Listing Agreement
A listing agreement may be terminated for a number of reasons. These include:
A. The parties mutually decide to terminate the listing agreement.
B. One party to the listing agreement unilaterally decides to terminate the listing agreement.
C. The listing agreement is terminated because the purchaser/seller breaches the contract.
D. The listing agreement is terminated because that buyer/seller’s ability to live up to the terms of the contract has changed dramatically.
1. If the sale is contingent upon the buyer selling his or her current property, the buyer’s ability or inability to sell his or her property is one reason a listing agreement is terminated. Alternatively, if the seller puts his or her house on the market, the buyer may decide not to buy the property. Both of these are reasons a listing agreement is terminated.
2. If the buyer is unable to obtain the necessary loan or other funding in order to pay his or her mortgage, this will be a reason for terminating the listing agreement.
Legal Implications of Listing Agreement Termination
The listing agreement you sign with a real estate agent is a legal document, and as with any legal document, it has to be rescinded properly to avoid complications or unintended consequences later on. While the real estate agent is responsible for seeing the process through correctly, sellers can face legal penalties for issues such as misrepresentation if the proper steps for termination are not followed.
The three most common legal ways a real estate agent can end a listing agreement are:
Mutual agreement – The seller and real estate agent can end the contract by signing a document agreeing to terminate the listing. To do so, all parties to the contract must agree to the termination. If you are in a situation where the real estate professional failed to hold up his or her end of the deal, such as regularly letting listings linger for longer than six months even if requested otherwise, you can attempt to have them consent to termination for cause. If they refuse, you may have to explore the remaining options.
Breach of contract – If you feel that your real estate agent has breached the contract by doing something that is a violation, you may be able to terminate the listing agreement. This can be a good option for sellers who feel that their agent isn’t acting in their best interest, such as refusing to lower a home price or letting a property languish without showings. Typically, the first step is making your real estate agent aware of the breach and giving them an opportunity to correct it. Most times this will be successful in prompting a real estate agent to make things right. But if it does not resolve the issue, it can be used as evidence of a breach of contract.
Expiration – In many cases, the listing agreement simply comes to an end at the expiration date. If that’s the case, a seller should not have to take any steps to end the relationship because it will end of its own accord. However, many agents have standard contracts that give them optional "extensions" that can make the contract continue for several more months if the property has not sold after the initial term. If that is the case, again, communication with the agent is key—is the listing agent going to extend the contract one more month or not? Does the seller feel their house is fairly valued and that an extension may bear fruit? If so, it’s best to just let the contract end on its own. If the seller feels the house is overpriced and another contract extension would be a waste of time, it’s better to put pressure on the agent to withdraw the listing than to let the contract automatically renew.
How to Terminate a Listing Agreement
When considering termination of a listing agreement, the listing agent should not act unilaterally to unilaterally terminate it. Instead, the agent should notify the client with a copy of the proposed release. If the listing agent receives no response, the agent may then terminate the listing agreement on behalf of the seller/client. If there is any indication that the seller/client does not wish to terminate the listing agreement, the agent should consider waiting until the agreement has expired.
When notifying the seller/client of the desire to terminate a listing agreement the listing agent should consider the following steps:
The listing agent should prepare a Proposed Release of Listing Agreement (or similar document) which will serve to evidence the intention of both parties to terminate the agreement. Usually, the proposed release should be signed by both the seller and the listing agent however, the seller/client should be reminded that the listing agent will be terminating the listing agreement if no response is received from the proposed release. The agent might call, email and/or mail the proposed release in an attempt to secure the signature of the seller/client. If the agent receives no response from the seller/client, he/she should consider waiting until the listing agreement expires before terminating it on behalf of the passive seller/client. If it seems unlikely that the passive seller/client will respond to the proposed release one way or another, the agent may unilaterally terminate the agreement. Again, the agent should put the termination in writing.
Potential Repercussions of Listing Agreement Termination
The repercussions of terminating a listing agreement can be serious. When the seller prematurely terminates a listing agreement, he or she could be liable for damages and/or forced to pay the commission the broker would have earned if the property had sold while the listing was in effect.
A real estate broker is entitled to a commission if they are the "procuring cause" of the sale of a property. This is usually the case, unless a sales contract provides for a definite termination date, as opposed to a list agreement which remains in force until the property is sold, the listing is extended, or the listing is otherwise cancelled. Unless a termination date has been provided, the seller who seeks to rescind an oral agreement may be liable for commission because the broker is the "procuring cause" of the sale when the house is sold after the cancellation of the listing agreement.
In Brown v. Voss, 463 So.2d 299 (Fla. 1985), the Florida Supreme Court held that a real estate broker holding an exclusive listing agreement is entitled to only one commission only. However, a broker who has a listing agreement without a specified termination date is entitled to a commission if the property is sold while the exclusive listing agreement is in effect. The Florida Supreme Court explained –
A broker who holds an exclusive listing is required by law to look after the interests of a seller by obtaining the highest sale price obtainable by reasonable efforts. . . . The same fiduciary duty does not run from a seller to the broker for a reasonable compensation for the services the broker renders in finding a buyer and taking care of both parties’ interests through the closing. Riscica v. Shires , 154 So.2d 794 (Fla. 1st DCA 1963). . . .
And since the broker fears that the effects of his wrongful conduct will come back to haunt him – since the broker may be liable to the seller for any damages that the seller suffers by reason of the broker’s disclosure to the buyer of the price and terms explicit in the listing agreement – the broker will be, if not circumspect, at least careful not to make such a disclosure:
The purpose of that rule is to protect the seller from any injury to his interests that might arise from the wrongful act of a broker. It is thus rooted deep in the concept of the fiduciary relationship between the broker and his client which develops under the terms of the listing based upon trust, loyalty, and confidence.
Brown v. Voss, at 300-301.
To minimize potential litigation, sellers should make it clear to prospective buyers that the seller intends to terminate the listing within 20 days. Also, buyers who prefer a particular property and are concerned about the status of its listing agreement should consider placing a contingency in the sale agreement that clearly defeats the commission of the listing broker.
Preventing Listing Agreement Disputes
It goes without saying that preventing any dispute from arising is the best strategy. So when it comes to listing agreement termination, there are several ways you can ensure a smooth transaction from signing to selling.
Communication is key: Meet with your real estate agent or broker to discuss all aspects of the listing agreement. A thorough understanding of the contract terms helps both parties be on the same page. This way, you won’t be surprised by fees or unable to meet timelines for closing out the agreement.
Know your contracts: Understanding the elements of your listing contract is critical, and having a copy in hand for reference is never a bad idea. When you are clear on how you can avoid one-sided contract termination, as well as where there are acceptable breaches, you will have confidence in seeking closure when obligations are met.
Ask for help: Remember, when in doubt, you can – and should – seek legal advice and counsel from an attorney. It is advisable to have legal counsel involved when reviewing or writing contracts or interpreting terms, conditions, requirements, limitations and other vital aspects of a listing agreement.
Listing Agreement Termination FAQ
It is important that you terminate any listing if you have a working relationship with a new licensee broker. If the broker who originally listed your home has abandoned the contract, there may be ways you can terminate the listing agreement without a new broker.
How can I terminate a cooperative listing? The listing cannot be terminated by you unless there is a written termination signed by both parties. It may be that you simply have made a decision to go in a different direction.
I am not happy with my listing agent and want to terminate the listing. You can terminate the listing if you are unhappy with its terms or conditions, if there is a disagreement about repairs or such issues as whether the agent is following your conditions to bring potential buyers to your home.
My agent is not bringing buyers to my home and I am having a problem with the offer submitted. I want to terminate the listing. You can terminate if this is the situation. While the agent may be trying to get potential buyers to come to your home , his or her role is to protect your interests in finding buyers and negotiating offers. In this case, not bringing buyers may be a violation of the listing agreement terms and conditions.
Why is my broker terminating the agreement? I have paid for a listing and have not sold the home. There are times where the listing broker may terminate the listing because he or she feels that you are not living up to the conditions of the listing agreement by not keeping the home in showable condition or making needed repairs. While this may incur the penalty of forfeiting significant sums in advance fees, you may be better off making these repairs and preparing the home for buyers.
What happens if I sell my home myself after I have a listing agreement with a broker? If your listing is currently active, the agent still holds your exclusive right to represent you and sell your home. If you decide to sell your home without the agent it can result in legal action. A good approach is to follow the terms of the listing and contact the agent to find out how to cancel the listing.