What is a Co-Listing Agreement?
A co-listing agreement is simply defined as an arrangement wherein a property is listed for sale by two or more listing agents rather than a single listing agent. In the context of multiple listing agreements, a co-listing agreement allows for two or more real estate brokers to work together in marketing and selling a property . Under a co-listing agreement, all of the commission fees and costs incurred by the listing agents will be shared among the co-listing agents according to the terms of the co-listing agreement. Depending on the specific terms of the co-listing agreement, two or more listing agents may share responsibility for the same listing, or some combination of listing agents may all be responsible for marketing the same property.
Co-Listing Agreement Form Essentials
Co-listing agreement forms can vary in complexity and detail. The key components, however, of a co-listing agreement generally include the following:
- Duties: What are the responsibilities of the various parties? For example, will one realtor do all of the listing work with the other merely acting as a backup, or are the parties to divide up tasks?
- Commission splits: For agents who work in the same brokerage, the broker might receive a set commission split, and each realtor could get a specified percentage. They might also agree to pay an outside realtor an additional amount.
- Collaboration: How will the realtors collaborate with one another? For example, will they work together on the sale strategy, hold joint open houses and do direct campaigning to target buyers?
This is not a complete list of all the possible components of a co-listing agreement, but it provides a good starting point and sense of some of the key matters that such an agreement typically addresses.
Advantages of Co-Listing Agreements
The nature of real estate allows for the opportunity to bring together two or more individuals who may be seeking different roles: one a listing agent, the other a selling agent. They pool their resources and expertise, many times potentially doubling their marketing efforts, providing a greater service to their clients. In an ideal scenario, both the listing agent and the co-listing agent share equal representation so that the seller has a comprehensive network at hand. On most occasions, however, one agent will be the listing agent and one the co-listing agent, giving them a 50/50 work share, obligating both agents to the seller and the property. When engaging in a co-listing agreement, you are legally creating a partnership between two or more real estate agents for the sole purpose of managing a particular sale. In doing so, the co-listing agents of the team agree to split the commission rewards evenly, a practice that provides one potential benefit for a co-listing agreement.
Co-Listing Agreements Challenges
In the dynamic world of real estate, co-listing agreements can sometimes become a source of confusion for agents. The moment you co-list a property, the stakes are raised. This can lead to misunderstandings over roles, commissions, and communication.
Who is doing what? It is important for each agent to be clear on their responsibilities and roles from the start. That’s why clearly defined tasks and duties are essential to the co-listing agreement. Make sure everyone knows who will handle which parts of the deal.
Who earns what? Establish a transparent commission structure. Both agents should be completely comfortable with how the commissions will be divided. It’s true: Nothing squashes teamwork faster than a commission dispute.
What happens when there’s friction? Any relationship can be put to the test under pressure. This is especially true when something has gone wrong. Sometimes an agent may feel overwhelmed or underappreciated. Others may feel they are being left in the dark or sidelined on a task. It’s crucial for the agents to be able to freely share their feelings about these things without fear of retaliation. The key is two-fold. First, have frequent, open meetings about the status of the deal. Exchange ideas and listen to each other. Second, make sure a co-listing agreement is in place before any problems arise!
Establishing a strong agreement, going in with clear procedures, and communicating well throughout the process should help to mitigate many of the potential problems with co-listing real estate properties.
How to Write a Co-Listing Agreement
The drafting of a listing agreement is the subject of my newsletter article this week. A listing contract can be negotiated to cover the issues that are important to the seller and the cooperating broker. A disagreement between the agents over what is due to one or the other when the property is sold, can be avoided by spelling out the arrangement in writing. A blank Co-Listing Agreement Form has been added to the selection of listing forms and it will let the parties set out their deal and have the written confirmation of their agreement. The Co-Listing Agreement Form is addressed in a separate article.
As is the case with all contracts the first thing to look at is the parties. While the seller is easy to define the problem with the buyer is a little more difficult. Who are you co-listing with? Do you both represent the same broker or each represent different brokers? I suggest that one agent sets the terms and the other agent signs it. It should work in most cases , because the second agent will have the protection that the contract is signed by someone who is authorized on behalf of the broker to sign.
Next you should talk about the property that is to be co-listed. Is it a single family home or a condo? If it is a condo do you have rules in place that the condo board has approved of your sale?
Now comes the money. Most brokers have their own rate of commission but for some Joint Agency Listings there is a division of commission. Even if there is no division of commission, if you both represent different brokers, you can say that you both will receive two and one half percent (2 and ½%) without saying how it is to be divided. You can speak in generalities with a simple "said rate is to be divided equally," or if you wish you can state the actual division of commission dollar amount. Often brokers give services in kind for one another.
Then specify when the co-listing ends. Is it a period of six months with one extension at the option of either party. Will you sign an extension. What happens if you are buying and selling at the same time? Do the commissions offset? What happens at the closing of the sale? What about insurance? Can you have a mini office in the house that is for the other party? What if someone wants to take your file and your commission and sell the property again? Are you really co-listing or is it a 50/50 at the end?
There are lots of things to consider. This is only a starting point.
Co-Listing Agreements Legalities
Legal Considerations in Co-Listing Agreement Forms
A co-listing agreement concerns only the brokerages and not the seller or the REALTOR®. However, it is good practice that when 2 REALTORS® agree to co-list a property, that they clearly communicate in writing which REALTOR® has the lead and which REALTOR® will be getting credit for anything related to the closed transaction, i.e., commission and Realtor® of the Year. A complaint arises only when the lead REALTOR® does not get the credit from the Association for being the listing agent. Of the 10 complaints I have seen on co-listing agreements, 8 of them arose because one of the co-listing REALTORS® felt he wasn’t getting credit for the efforts put forth in a transaction. When collaborating with another REALTOR®, both parties should be keeping a contemporaneous record of dates, times, conversations, etc. That way, if a dispute or complaint arises over who did what, the parties’ memories can be refreshed by reviewing the contemporaneous notes. Make certain that the seller is aware that the co-listing agreement does not bind him and that he should direct all communications and issues concerning the transaction to the lead REALTOR®.
Co-Listing Agreement Scenarios
Co-listing arrangements can be extremely beneficial, but they can also be a source of contention if not executed and agreed upon properly.
Real-life examples:
Scenario 1: In a recent case in Nevada, two realtors were involved as co-listing brokers in a new listing for a commercial space. The broker from the co-listing in charge was showing a client through the property when another co-broker took independent initiative to show the prospective client the same commercial space for a different client. Because the property was unoccupied, the second co-broker opened the lockbox without authorization and allowed her client into the space. After the client’s visit, the second co-broker left the lockbox key in the wrong compartment during a rainstorm, ruining the key and lockbox. The first co-broker notified the second, and the second co-broker denied having knowledge of the box’s damage. The first co-broker called the property owner, who stated that the damage would need to be repaired but he wanted to file a complaint against the second. Shortly after, the first co-broker realized he had an email from the second co-broker’s client stating she had allowed the first co-broker into the property to show her the space. In the end, both co-brokers were cleared of wrongdoing because neither was ultimately deemed to be at fault.
Lessons learned:
Scenario 2: A team of three Realtors in Castle Rock, Colorado, were involved in a situation in which two were assisting one who wanted to buy a house but was unable to do so personally due to an existing contingent contract. Instead, the buyer enlisted the assistance of his partner to buy the property. They made it clear from the beginning that they would be sharing the commission equally among the three Realtors. When the commission check came through the MLS, the agent of record issued a check for the full 6% commission to the seller. The co-brokers were surprised to find that the co-broker in charge issued a check from her own business account for what turned out to be only 1 . 5%.
This real estate office did not have an official policy in place for establishing co-listing agreement forms and clarifying payment obligations. The co-brokers argued over whether or not the co-broker in charge owed them a refund and there was disagreement over whether a credit was due to the buyer for the refund that the other two brokers thought was owed to them. At the end of the transaction, the commission was split to all three by 2%.
Lessons learned:
Scenario 3: In Wisconsin, two Realtors represented both the buyer and seller in the sale of the vacant land. At closing, the seller had the property’s commission check sent to his attorney’s office. The attorney received the check, recorded it into his records, and forwarded to the LLC members responsible for sale commissions. When the LLC received the check, it split it between two brokers working with the firm, both of whom were designated as the listing agents. Upon receipt of the commission, one of the brokers sent a check to his co-listing partner rather than an invoice. The co-listing broker thought the invoice was for more than the agreed amount – 3% – her co-listing partner said she was entitled to. Afterward the co-listing broker told her co-broker to take it up with the firm’s bookkeeper; however, the office distributed the majority of the commission to the broker who sent an invoice because the co-listing partner had not made a request for a specific amount as required by the firm. Thus, the co-broker never received the amount that her co-broker believed she was entitled to, even though she had received more than that amount from the initial payment.
Lessons learned:
As you can see from the examples above, no one co-listing agreement is the same. It’s important to know what exactly you’re getting yourself into, and to understand the ins and outs of your state’s co-listing agreement laws to ensure you protect yourselves, your clients, and your business.