Authorization to sell
Authorization to sell is a listing contract whereby a representative is employed by a seller to secure a buyer for the property. An authorization to sell does not give the agent the authority to enter into a binding contract of sale. For an agent to enter into a binding contract she/he requires a special authorization just like a limited power of attorney. Unlike the contract for the sale of real property, the broker's authorization to sell need not contain all of the terms and conditions upon which the real property is to be sold. The details of the sale may be supplied orally pursuant to the broker's authorization, so long as the fact of employment is reduced to writing (this definition is based on estate principles)[1].
Types of authority
Two types of authority[2]:
- Actual authority - the principal conveys to the agent the right and power to act on the principal's behalf the with third parties. Actual authority may be express or implied. Express authority: principal expressly tells the agent, she/he has the authority. Implied authority: agent's authority is inferred from the principal's conduct (an agent has implied authority to do what is needed to accomplish assigned tasks)
- Apparent authority - the principal gives the appearance to third parties than an agent is authorized. The principal is liable to third parties if an agent acted with apparent authority, but the principal may hold the agent liable for exceeding his/her authority. The test for apparent authority is was it reasonable for the third party to believe the agent was authorized. Disregard secret instructions given to the agent by the principal unless the instructions were known to the third party.
Exclusive authorization and right-to-sell listing
This is example from real estate principles. The most commonly used form of agreement is the exclusive authorization and right-to-sell listing. With this type of listing, the broker is entitled to a commission no matter who sells the property. Even if the owner appears to find a buyer without the broker's assistance. The buyer may have found the property address on the Internet, for example, or may have seen a sign on the property and contacted the owner directly. The listing broker is the owner's agent but has the option of being a dual agent. The commission typically is shared with any cooperating broker or subagent who procures a buyer. This type of listing agreement usually contains a safety clause that will cover a buyer the broker is working with even after the listing expires, as long as the broker has registered that buyer with the owner. The contract will specify the length of time after the listing expires during which the broker may still be compensated[3].
Multiple listing clause
The multiple listing clause that is a part of the exclusive authorization and right-to-sell listing allows the property to be made available to other brokers participating in the multiple listing service (MLS). The requirements of the broker's multiple listing service determine whether the broker must place every listing into the MLS and how members of the MLS will be treated[4].
Examples of Authorization to sell
- An authorization to sell document is typically used in a real estate transaction when a seller hires a real estate agent to act as their representative to find a buyer. In this case, the seller would sign an authorization to sell document that outlines the services the real estate agent will provide, such as listing the property, advertising, and negotiating the sale of the property.
- Additionally, an authorization to sell can be used in other contexts, such as when a business owner hires a sales representative to sell their products in a new market. In this case, the business owner would sign an authorization to sell document that outlines their agreement with the sales representative and the terms of the sale.
Advantages of Authorization to sell
An authorization to sell is an important tool for sellers because it gives them control over the process of selling their property. It allows sellers to hire a qualified real estate professional to market the property and negotiate offers while they maintain control over the final decision. By granting this authority, the seller can be sure that the agent will be diligent in their efforts to find a buyer who meets the seller's expectations. Some of the advantages of an authorization to sell include:
- Increased exposure: By hiring a real estate professional, the seller can have their property listed on multiple websites and advertise it to a larger audience. This can help to attract more potential buyers to the property.
- Professional negotiation: A qualified real estate professional can help to negotiate offers from buyers, ensuring that the seller receives the best possible price for their property.
- Streamlined process: An authorization to sell allows the seller to avoid the hassle of dealing with multiple buyers, as the real estate professional can handle all of the details of the sale.
- Time savings: A real estate professional can help to expedite the process of finding a buyer, thus saving the seller time and effort.
Limitations of Authorization to sell
An Authorization to Sell is a listing contract that outlines a seller's appointment of a broker to secure a buyer for their property. In most cases, it does not allow the broker to enter into a binding contract of sale. Certain limitations to an Authorization to Sell include:
- It must be reduced in writing in order for the broker to enter into a binding contract of sale.
- It does not contain all of the details of the sale, such as the terms and conditions of the sale.
- The details of the sale may be supplied orally, as long as the fact of employment is reduced to writing.
- It does not create a fiduciary relationship between the broker and the seller.
- It does not guarantee that a buyer will be found or that the sale will be completed.
- It does not provide the broker with any authority to act on behalf of the seller, such as signing contracts or collecting payments.
- Joint Listing Agreement: A joint listing agreement is a contract between two real estate agents or brokerages to work together to market a property and find a buyer. The agreement outlines the roles and responsibilities of both agents, as well as how they will split the commission if they are successful in selling the property.
- Exclusive Agency Listing: An exclusive agency listing is an agreement between a property owner and a single real estate agent or brokerage to exclusively market and sell the property. If a buyer is found by the agent or brokerage, they will receive the full commission. If a buyer is found by someone else, the agent or brokerage will not receive a commission.
- Open Listing: An open listing is an agreement between a property owner and one or more real estate agents or brokerages to market and sell the property. The agreement outlines the roles and responsibilities of the agents, but does not guarantee them a commission even if the property is sold. If a buyer is found by any of the agents, they will receive the full commission.
In conclusion, Authorization to sell is an agreement between a seller and an agent to secure a buyer for the property. Other approaches related to Authorization to sell include Joint Listing Agreement, Exclusive Agency Listing, and Open Listing. Each of these approaches has its own advantages and disadvantages, so it is important to carefully consider your options before deciding which approach is right for you.
Footnotes
| Authorization to sell — recommended articles |
| Exclusive agency agreement — Sub agency — Standing offer — Sole distributor — Vesting order — Conditional contract — Bid shopping — Contract note — Sub broker |
References
- Atiyah P. S., Adams J. N., MacQueen H. L., (2005). Sales of Goods, Pearson Education, Harlow.
- DeBole P., Lanciano J. E., (2007). Regulation: Usiness Law & Professional Responsibiltiy / Federal Income Taxes, Lambers CPA Review, Crofton.
- Stapleton C. O., Williams M. R., (2014). California Real Estate Principles, Dearborn Real Estate, Dearborn.
Author: Paulina Czarnota
