What is the proper procedure to make changes to a listing agreement?

I hired a real estate professional to sell my home. The seller representation agreement (listing agreement) I signed is for four months. It’s only been two months, but I want to terminate the agreement, can I?

The short answer is yes, but it can be complicated.

The agreement you signed is a legal contract between you and a real estate brokerage to sell your home. It contains a start date and an end date, as well as provisions for ending the agreement early. If you and your real estate professional agree in writing to end the agreement before the end date, the agreement immediately ends.

If you change your mind about selling your home and your real estate professional agrees to end the agreement early, you may be responsible for reimbursing your real estate professional for reasonable expenses they incurred while your property was for sale. Those potential expenses need to be listed on the agreement when you sign it; your real estate professional can’t add them after the fact. These expenses may include, but aren’t limited to, reimbursement of advertising, measurement, or photography costs.

But, what happens when you want to end your agreement early and your real estate professional doesn’t agree?

If you want to end your agreement early because you want to work with a different real estate brokerage, there could be consequences. For example, if you begin working with another real estate brokerage, and your property sells, your first real estate brokerage could make a claim that commissions are payable to them since the brokerage didn’t agree to release you from the obligations of your agreement. You could find yourself owing commission to two brokerages.

Think carefully about why you want to end your agreement early. If it’s because you genuinely changed your mind about selling, perhaps your employment situation changed, be open and upfront with your real estate professional. You won’t be the first seller who has a change of heart or financial circumstances, but your real estate brokerage is under no requirement to release you from your agreement.

Another possibility is that your real estate professional may agree to a conditional termination of your agreement. Conditional terminations typically require the seller to agree in writing that they won’t re-list their property for sale with another real estate brokerage before the end of their original agreement.

If you want to end your agreement early because you and your real estate professional are not working well together or you have concerns about their performance, RECA encourages you to speak to their broker.

“Ask Charles” is a question and answer column by Charles Stevenson, Director of Professional Standards with the Real Estate Council of Alberta (RECA), www.reca.ca. RECA is the independent, non-government agency responsible for the regulation of Alberta’s real estate industry. We license, govern, and set the standards of practice for all real estate, mortgage brokerage, and real estate appraisal professionals in Alberta. To submit a question, email [email protected].

A "listing agreement" is a contract between a real estate agent (the agent who will be listing the property for sale) and the home seller. It primarily says that the agent has the right to list (advertise and handle the sale of) the house. If you'll be selling, it's important to understand the terms of this agreement, because you'll be bound by them. And while a listing agreement is advantageous for the agent, because it obligates you to work with that person for at least a minimum amount of time, it also protects you, the seller, by explaining the agent's responsibilities and what to do if he or she doesn't meet them.

Key Terms of Home Listing Agreements

Here are some of the most important terms covered by the standard real estate listing agreement.

• The commission amount you'll pay your agent. This will usually be 5% to 6% of the proceeds of the sale. Close to half of that will traditionally be turned over to the buyer's agent following the sale. See Negotiating the Agent's Commission When Selling Your House for details.
• Exclusive right to sell. This gives your agent has the exclusive right to sell your property for the duration of the agreement. Other types of arrangements with an agent are possible, but the exclusive arrangement will be your agent's first choice.
• Duration. Your listing agreement will last for a set amount of time, such as three or six months. From your perspective, a shorter listing agreement is better. If you don't like the agent's services, you can walk away and choose a different agent. (And if you're happy, renewing should be easy.) Of course, from the agent's perspective, a longer listing agreement is preferable, because the agent is going to do a lot of work to get the house ready to sell, and won't want to risk losing a commission just as the property is starting to garner real interest.
• Safety or protection clause. Even though the contract has an expiration date, it will probably also include a clause that protects the agent or broker after that date. This prevents you from trying to avoid paying an agent's commission by finding a buyer while you're represented by the agent, but waiting to conduct the sale until your listing agreement expires. You'll want an exception made within the contract if you are ending the relationship because you decide to change listing agents, however—if that agent sells quickly and your clause entitles the first agent to a cut, you could owe two commissions.
• Duties. The agreement might lay out the activities the listing agent is authorized to conduct on your behalf. Read through this carefully, making sure you understand everything. If there are specific duties you want to make doubly sure the agent will handle—for example, listing the property on the MLS, posting a yard sign, or creating a listing sheet—specify those as well.
• Representations. The agreement might also require you to verify certain facts—for instance, that you're in a legal position to sell the property and that to your knowledge, no one else has an ownership interest in it.
• Dispute resolution. The agreement will probably specify how you will handle disputes that you can't work out with the agent informally, such as through mediation or binding arbitration.

Changing a Standard Home Listing Agreement

Most real estate listing agents use standard forms created by state or local Realtor associations to create their listing agreement. Don't sign without reading carefully, however—and don't be afraid to ask for changes or amendments.

Agents sometimes resist changing their standard agreements, having used them many times in the past without incident. Nevertheless, if you're uncomfortable with something, there's no reason it can't be changed. Small changes can be written right on the contract (make sure you get a copy) and initialed, and large changes can be added on separate addendums and referred to in the contract itself.

For more on working with a real estate agent when you sell your house, see the book Selling Your House: Nolo's Essential Guide by Ilona Bray (Nolo).

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