Estimated study time: 45 minutes
Content:
A listing agreement is a contract between a property owner (seller or landlord) and a licensed real estate broker, hiring the broker to find a buyer or tenant for the property. It is an employment contract — the seller is the principal, the broker is the agent (employee or special agent for the purpose of the sale). Under Massachusetts license law, all listing agreements must be in writing to be enforceable. The listing agreement must specify: the property address and description, the listing price, the commission rate or amount, the start and expiration date of the listing, the broker's authority (to market, show, accept offers, and sign documents), and any special terms.
The four types of listing agreements tested in Massachusetts are: (1) Open listing — the seller may hire multiple brokers simultaneously; the commission is payable only to the broker who produces the buyer; the seller may also sell independently without paying a commission to any broker; no exclusive representation; may be oral or written. (2) Exclusive agency — the seller hires one broker exclusively but retains the right to sell independently without paying a commission; if a buyer is procured without the broker's involvement, no commission is due; must be in writing with an expiration date. (3) Exclusive right to sell — the most common listing type; the seller hires one broker exclusively and agrees to pay a commission regardless of who finds the buyer, including if the seller sells to a neighbor without the broker; must be in writing with an expiration date. (4) Net listing — the seller specifies a minimum net amount; anything above that minimum is the broker's commission; net listings are discouraged in Massachusetts and many states because of the inherent conflict of interest (the broker benefits from higher prices above the seller's minimum).
The exclusive right to sell listing is the standard professional listing agreement used by REALTORS® in Massachusetts. It creates a clear obligation for the seller to pay the commission and protects the broker's investment in marketing the property. The listing is entered into the Multiple Listing Service (MLS) — a cooperative database shared among all member brokers — making the property available to buyer's agents throughout the market. MLS participation is a condition of most brokerage office membership in local real estate boards. The listing agreement specifies the co-broke commission offered to a buyer's broker through the MLS. Since August 2024 (NAR settlement implementation), sellers are not required to offer buyer's broker compensation through the MLS, though they may choose to do so.
A listing agreement may be terminated before its expiration date by: mutual consent of broker and seller, seller's death or incapacity (in some circumstances), destruction of the property, sale of the property, expiration of the term, or the seller's broker's breach of fiduciary duty. If the seller terminates the listing in breach without cause and the property later sells within a specified "tail period," the broker may be entitled to the commission under the procuring cause doctrine. A broker earns the commission when a ready, willing, and able buyer is procured on terms acceptable to the seller — not simply at closing. However, in Massachusetts practice, most listing agreements specify that the commission is due at closing, making the passage of title the practical trigger.
Key Terms:
Quiz Questions:
Q1. A seller lists a home with ABC Realty under an exclusive agency listing. While the listing is active, the seller meets a buyer at a neighborhood cookout and negotiates a sale directly without involving any broker. Is the seller obligated to pay ABC Realty a commission?
A) Yes — the exclusive agency listing requires the seller to pay a commission for any sale during the listing term B) No — the seller retained the right to sell independently without commission under the exclusive agency listing C) Yes — the seller must split the commission with ABC Realty even in a private sale D) No — the seller may always sell independently without any liability to the broker
Answer: B — An exclusive agency listing gives the broker exclusive rights to market but preserves the seller's right to sell independently without paying a commission. If the buyer had been found through any broker (including ABC Realty's marketing), a commission would be due.
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Q2. A seller lists a home under an exclusive right to sell listing with ABC Realty. During the listing, the seller's sister calls and says she wants to buy the home. The seller sells directly to the sister. Is a commission due to ABC Realty?
A) No — family sales are exempt from commission obligations B) Yes — under the exclusive right to sell, a commission is due regardless of who produces the buyer, including the seller finding their own buyer C) No — the seller may always avoid a commission for sales to family members D) Yes — but only half the normal commission applies for private sales
Answer: B — The exclusive right to sell listing obligates the seller to pay the broker a commission on any sale during the listing period, regardless of who finds the buyer. This is the key distinction from the exclusive agency listing.
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Q3. A listing agreement has a co-broke offer of 2.5% to the buyer's broker. Under the post-2024 NAR settlement rules, is the seller required to include this co-broke offer?
A) Yes — Massachusetts law requires all MLS listings to offer buyer's broker compensation B) No — sellers are not required to offer buyer's broker compensation through MLS; it is optional C) Yes — co-broke compensation must match the listing broker's commission D) No — co-broke is only required for FHA and VA transactions
Answer: B — Following the 2024 NAR settlement implementation, sellers are no longer required to offer buyer's broker compensation through the MLS. Sellers may choose to offer co-broke compensation, but it is not mandatory. Buyers and their agents negotiate compensation separately.
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Q4. A seller lists a property with a minimum net of $500,000 under a net listing. The property sells for $600,000. What does the broker earn?
A) The standard commission rate on $600,000 B) $600,000 minus $500,000 = $100,000 as the broker's commission C) 3% of $600,000 = $18,000 regardless of the net listing terms D) Nothing — net listings are illegal in Massachusetts
Answer: B — Under a net listing, the broker earns the difference between the actual sale price and the seller's specified minimum net. The seller keeps $500,000 and the broker keeps $100,000. Net listings are legal in Massachusetts but discouraged due to the inherent conflict of interest.
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Q5. A seller signed an exclusive right to sell listing for six months. At month four, the seller fires the broker without cause and lists with a new broker. Two months later, the property sells. The original broker's listing contained a 60-day "tail" provision. Is the original broker entitled to a commission?
A) No — the original listing was terminated and the broker has no further rights B) Yes — the tail provision entitles the original broker to a commission if the property sells within 60 days of the listing termination to a buyer the original broker introduced during the listing C) Yes — the original broker earns a full commission regardless of who sells the property D) No — tail provisions are unenforceable in Massachusetts
Answer: B — A tail (or protection period) provision in a listing agreement entitles the original broker to a commission if the property sells within a specified period after termination to a buyer the broker introduced during the listing period. If the new broker found an entirely new buyer, the tail provision may not apply.
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