About Seller Brokerage Agreements
A Seller Brokerage Agreement is a legally enforceable contract between a property owner and a real estate brokerage, which authorizes the brokerage to represent the owner’s interests in the sale of a property. In Newfoundland & Labrador, Industry Members use standardized forms approved by NLAR for real estate transactions.
Industry Members are required by the Real Estate Trading Act and By-Law to provide a copy of all contracts to the client. This includes any subsequent documents affecting the contract, such as amendments (a form documenting a change to the original contract’s terms) or schedules (a form detailing specifics of the property).
The Seller Brokerage Agreement contains the following information:
- The names of the parties (the owner and the brokerage)
- The description of the property (legal and municipal)
- The expiry date of the contract
- The obligations of both parties
- The signatures of the parties
A Seller Brokerage Agreement containing any of the following is NOT enforceable:
- No expiry date
- More than one expiry date
- Does not specify the commission agreement
- Does not provide terms under which the commission is payable
- Role of the brokerage and the Industry Member
A Seller Brokerage Agreement is the basis of the agency relationship between the brokerage and the owner. The real estate brokerage is the legal entity in the contractual relationship with the seller; however sellers will usually work with one Industry Member of the brokerage.
Types of listings
This form of listing gives one brokerage the authority to act on the seller’s behalf. “Exclusive” does not mean the brokerage can unilaterally keep the listing to itself and prevent other brokerages from showing or selling the property, unless the client requests it. While most sellers want the best exposure possible, there are circumstances where a seller may have need for privacy or wish to exclude certain brokerages or Industry Members from conducting showings and bringing offers.
Unlike the open listing (below), the seller will be obliged to pay the listing brokerage a commission even if the seller sells directly to a buyer. The exception to this is if a specific buyer(s) is excluded from the contract at the time the Seller Brokerage Agreement is signed.
Multiple Listing Service® Listing:
The Multiple Listing Service (MLS®) is a cooperative arrangement managed by the real estate board (Newfoundland & Labrador Association of REALTORS®) as a service to their membership. The system enables member brokerages to cooperate in the showing and selling of properties listed by all other member brokerages thereby encouraging transactions between clients of all the cooperating brokerages. This system can be an advantage to a seller wanting wide exposure for the property.
MLS® contracts contain a term authorizing the listing brokerage to post the listing and allow cooperating member brokerages to access the property. While MLS® encourages a spirit of cooperation between brokerages, an MLS® listing contract authorizes only one brokerage to act for the seller. That brokerage holds responsibility for marketing, negotiations, and payment of commission to cooperating brokers.
Typically, the Multiple Listing System® will not allow a member brokerage to post a listing that excludes any other member brokerage. Therefore, if a seller wants to restrict certain brokerages from accessing the property, they should enter into an exclusive listing (above) and advise the brokerage of their restrictions.
Many consumers will be familiar with the Web site www.realtor.ca (formerly www.mls.ca). The site displays information on listed properties across Canada and is the consumer version of the MLS® used by Industry Members.
An open listing is one where the owner gives one or more Industry Members the authority to find a buyer for the property, while the seller also reserves the right to try to sell it. They are most commonly found in commercial properties. However, it is also an option for a residential “for sale by owner” property owner who is willing to work with real estate professionals who have buyer clients. These agreements may be written or oral. The terms usually allow Industry Members to bring buyers to view the property and require the owner to pay commission if the Industry Member is successful in selling the property to that buyer.
The seller may also authorize the Industry Member to advertise the property. Because the Industry Member may be competing with other Industry Members, as well as the “For Sale by Owner” seller, many Industry Members are reluctant to spent money on such advertisements. Further, this type of listing could not be listed on the Multiple Listing System® (discussed below).
A variation of the open listing is the “Fee Agreement and Seller Customer Acknowledgement” listing contract. This is most often used between a real estate Industry Member and a “by owner” seller when the Industry Member has a specific buyer in mind for the property. The agreement will identify the potential buyer and often requires the seller to pay a commission to the associate if that buyer purchases the property. This agreement prevents the buyer and seller from entering into their own negotiations and cutting out the Industry Member who has done the work to introduce them. It also makes it clear that the brokerage represents the buyer and not the seller.
When Does a Contract End?
A Seller Brokerage Agreement can end or terminate in a number of ways:
- Expiry: The term of the contract is for a certain length of time. When the expiry day arrives, and the aim of the contract is not fulfilled, the contract will end.
- Performance: If the contract is performed, in other words the sale successfully completes, the contract will end. This date will be the final completion date or closing date, not the day the seller and buyer agree on an offer.
- Agreement: The parties might mutually agree to end the relationship. This should be done in writing. If the wish to end the contract is one-sided, an agreement may need to be negotiated. For example, it might include compensation for work done to date, waiver of certain obligations, and so on. Consumers should seek legal advice when the agreement to end a contract is in dispute.
- Impossibility of performance (frustration): A contract can end because of events beyond the control of the parties. For example, the listed property may be expropriated by the city, in which case it cannot be sold by the seller. The listing contract will be impossible to perform and will end when the expropriation order occurs.
- Breach of contract: A contract is breached when a party to the contract fails to meet an obligation under the contract. Consumers should seek legal advice when they suspect the contract has been breached.
Attention: A Seller Brokerage Agreement creates legal obligations for both the owner and the brokerage. For that reason, you should read, understand and agree to all the terms of the contract BEFORE signing it. It is your responsibility to read and understand the content before signing any contract.
What is the hold-over period?
The listing brokerage’s authority ends upon the expiry date of the contract. After that date, they cannot market or show a seller’s property. However, the hold-over period is in effect for 180 days after the expiry date. If a buyer who was introduced to the property from any source during the listing period, subsequently purchases the property though a private transaction with the seller during the holdover period, then the seller is liable for the total commission as stated on the contract.
In the event that a buyer who was introduced or shown to the property from any source during the listing period, who then purchases the property under another listing taken with another brokerage at a lower rate of commission, the seller may be liable to the original listing brokerage for the difference.
The intent of the clause is primarily to protect the listing brokerage from a seller or a buyer who may deliberately wait until after the expiry of the Seller Brokerage Agreement in an attempt to avoid commission payment.
Note: the hold-over period does not include any buyer who was excluded from the Seller Brokerage Agreement at the time of signing.