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Why an Attorney Should Review your Real Estate Listing Agreement

Posted on: April 13, 2012

In most commercial and residential real property transactions, sellers will utilize a real estate broker to market and sell their property.  Often times, and preferably, the broker and seller will memorialize their relationship in writing by virtue of a real estate brokerage agreement, likely in the form of a listing agreement.

Listing agreements are generally set forth on pre-fabricated forms and are usually prepared by the real estate broker or agent. More times than not, listing agreements will favor the broker.    Sellers of both residential and commercial property will often have an attorney review their purchase and sale contracts, but not their brokerage agreements.  This is a mistake that could end up costing a seller thousands of dollars.

Generally, a broker or agent may not place, or cause to be placed, in the public records any writing which purports to affect the title of, or encumber real property.  Fla. Stat. § 475.42(j) (2012).  However, a broker may be able to place a lien on your property where it is expressly permitted by a contractual agreement, such as a listing agreement.  Id.  Why would a broker want to place a lien on your property?  For the purposes of securing its commission pursuant to the listing agreement.  

Should you unknowingly agree to such a provision, and a lien is ultimately placed on your property, not only will the lien inhibit your ability to dispose of the property, but it can also cost you significant attorneys’ fees to have the lien successfully removed from the property.   

There are additional hidden issues in a listing agreement that make the decision to hire an attorney a prudent one.  For example, where a buyer defaults under the purchase and sale contract, the seller generally has the option to retain the buyer’s deposit as liquidated damages. A listing agreement may contain a provision entitling the broker to a certain percentage of this retained deposit, sometimes up to as much as 50%. Where commercial properties or luxury residential real estate are involved, the deposit will likely be significant.

Accordingly, if detailed attention is not paid to a brokerage agreement, a seller may unknowingly consent to a lien being placed on their property or forfeit a large percentage of their retained deposit.  Your interests will be better protected by having an attorney review these agreements before you execute them.