Quick Guide to the California Residential Listing Agreement for Bay Area Homeowners

California Residential Listing Agreement

The California Association of REALTORS (CAR) Residential Listing Agreement (“RLA”) sets out the terms and conditions used by Bay Area REALTORs for listing most residential homes sold in California. This agreement lays the groundwork for the relationship between the REALTOR and the homeowner, outlining the responsibilities, rights, and expectations of both parties during the sale of residential property. Understanding this agreement is essential for both agents and sellers to ensure a smooth and legally compliant transaction process.

It should be noted that while there are several types of listing agreements, this article specifically looks at CAR Form RLA – the Exclusive Authorization and Right to Sell listing agreement, which is most commonly used by Bay Area and Silicon Valley REALTORs. This Quick Guide takes you through what I consider to be the most important paragraphs and clauses of this agreement between the listing agent and the homeowner.  However, it must be noted that the RLA is a legally binding contract and as such you may want to have it reviewed by your attorney before signing it.  This article should in no way be considered legal advice.

Introduction to the Residential Listing Agreement

The California Association of Realtors Residential Listing Agreement represents a foundational element of real estate transactions in California. This document not only formalizes the relationship between a real estate agent and a property seller but also sets forth the terms and conditions under which a property is marketed and sold. For sellers, knowledge of the agreement’s provisions is crucial for a transparent and smooth property selling experience.

Download a sample copy of the California Residential Listing Agreement Revision 12/23 here:
CAR Form RLA 12/23

Paragraph 1

This identifies the property that is to be sold, the names(s) of the seller and the real estate brokerage, and the beginning and ending dates of the listing agreement.

Paragraph 2

This is a simple paragraph which simply states the listing price and any special terms.  It’s important to understand that by signing a listing agreement you are not obligated to sell your home at list price, or any price. It only authorizes the broker to advertise your property for sale at that price (and only that price), and be paid for that work if – and only if – the sale is successfully closed (and assuming the seller does not default on specific terms of the listing agreement or a purchase agreement).

Paragraph 3

Part A(1) specifies the total amount of compensation to be paid to the listing broker.  Remember:  there is no standard commission, and commissions are always negotiable.

Part A(2) specifies a number of days past the expiration of the listing period (specified in paragraph 1) beyond which the seller agrees to pay the broker a commission if and only if, prior to the expiration of the listing period, the broker submits to the seller a list of names of buyers identified during the listing period, and one of those buyers makes an offer which is accepted by the seller and the sale then closes.

Part A(3) is important to note, as it states that the broker will be owed a commission if, during the listing period and without the consent of Broker the Property:

is withdrawn from sale, conveyed, leased, rented, otherwise transferred, or made unmarketable by a voluntary act of Seller

Remember that any contract in California requires that all parties to the contract act in good faith.  If the seller voluntarily and intentionally does anything that causes the property to become unmarketable that would be construed as a breach of the covenant of fair dealing and would therefore expose the seller to the risk of paying the broker a commission in this event.

Part D specifies how much of the broker’s compensation specified in paragraph 3A(1) will be paid to any cooperating broker.  It is important for sellers to understand that they are not obligated in any way to offer compensation to the Buyer’s broker.

However, in my opinion, any seller who fails to do so will limit their pool of prospective purchasers as that will reduce the incentive for buyers’ brokers to close the sale. My firm belief is that anything which limits the buyer pool ultimately reduces the likely sale price of any property, whereas a larger pool (greater demand) results in higher sale prices.

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Paragraph 4A

Specifies which items that may not be considered “real property” are included or excluded in the sale. Such items typically include major appliances, certain light fixtures, etc.

Paragraph 4B

Declares which items that may appear to “belong to the property” are actually liened or leased items.  These items typically include water softeners, propane tanks, and solar panels.

Paragraph 4C

This paragraph deals with “smart home” features like smart thermostats, lighting, cameras, locks, doorbells, window coverings and the like.  Some Bay Area sellers who want to keep this hardware can now exclude it from (or specifically include it in) the sale.

Paragraphs 5 & 6

These paragraphs explain the multiple listing service (MLS) and how important it is to ensure that your property is listed for sale on the MLS and that by selling off-market the seller stands to lose a considerable amount of money. Paragraph 6C says explicitly:

REDUCTION IN EXPOSURE: Any reduction in exposure of the Property may lower the number of offers and negatively impact the sales price.

Paragraph 7

Paragraph 7 is largely about the “Coming Soon” or “pre-marketing” strategy which many REALTORs employ.  It explains the rules around “coming soon” listings and how that will affect the broker’s ability to market the show the property to prospective purchasers. Seller may also specify in this paragraph that broker is never to publicly advertise the property for sale (effectively making it a pocket listing).

Paragraph 8

Provide the seller with information about how the MLS is used to market properties, and also allows seller to instruct broker to disallow sharing of the listing’s MLS data on the Internet (keeping it off consumer-facing real estate and broker websites).

Paragraph 10

This paragraph outlines the seller’s and broker’s duties.  Chiefly it informs the sellers that the Broker is obligated to present all offers to the seller (unless otherwise instructed in writing).  The 12/23 modification to the listing agreement now allows the seller to confirm in writing that no offers are to be presented to the seller for review until a specific date, or until the home has been listed on the MLS for a certain number of days.  I personally view this as bad practice and unnecessarily limits the broker’s ability to negotiate on the seller’s behalf.

It also instructs broker not to present “buyer letters” to the seller unless seller specifically instructs broker that they are to be presented. By default the listing agreement states that these are not be be presented as they protect the seller from claims that they are making a violation of fair housing laws.

Paragraph 12

This paragraph deals mostly with agency relationships and dual agency.  It explains that the broker may represent both the buyer and the seller in the transaction. More often than not, this means two different agents within the same brokerage ,but it may also mean a single agent represents both parties.  It does say that the broker is required to notify the seller in writing prior to or at the time of executing a purchase offer that the broker is representing both parties.

Paragraph 14

This paragraph authorizes the broker to take photographs and videos of the property for marketing purposes.  It also alerts the seller to the likelihood that buyers visiting the property may take their own photos and videos and that the broker cannot control such activity or what buyer may do with such media.  However, the language does allow seller to require broker to put notes in the confidential MLS remarks instructing showing agents to inform their clients that taking their own photos and video is not allowed.

Paragraph 15

Allows the broker to install a lockbox or lockboxes on the property.

Paragraph 19

This is where additional, “custom” terms can be entered into a listing agreement.  Check this paragraph carefully to make sure that anything a listing agent has promised to the seller is included here. Some listing agents will guarantee the seller that they’ll allow the seller to cancel the listing agreement at any time, which is definitely not standard language in the contract. If the listing agent makes any such assurances, check here to make sure they’re in writing.

Paragraph 22

The language in this paragraphs specifies if any dispute arrives between seller and broker that both seller and broker agree to go to mediation to resolve the dispute prior to resorting to arbitration or court action.

Additional Documents in the RLA Package

When your agent sends you a purchase agreement to sign, it will almost invariably contain numerous other documents for you to sign.  While the RPA itself is “only” 16 pages, the current page count of the total package is currently 26 pages all together.  Here is a run-down of the additional documents in the RPA package:

Disclosure of Agency Relationships

The Disclosure of Agency Relationships form in California is essential for defining the responsibilities and roles of real estate agents in a transaction. This disclosure must be given to buyers or sellers at the outset, even before any other property buying or selling documents are signed, making it the initial document in the RPA package. Its importance lies in its ability to ensure transparency and to aid clients in comprehending the scope and depth of the agent’s fiduciary responsibilities towards them. The signing of this form by all involved parties signifies their recognition and understanding of these agency relationships, thus promoting a more knowledgeable and reliable transaction process.

Fair Housing and Discrimination Advisory

The Fair Housing and Discrimination Advisory form acts as both a reminder and a commitment to uphold the principles of the Fair Housing Act and the California Fair Employment and Housing Act. This document clearly specifies the prohibition of discrimination in housing-related activities such as sale, rental, financing, or provision of housing, on the basis of race, color, religion, gender, disability, familial status, national origin, among other protected characteristics. By distributing this advisory, real estate professionals in California ensure that their clients are fully informed of their rights and duties under these laws. The form is instrumental in preventing discriminatory practices and fosters a culture of inclusivity and equal opportunity in the housing sector. This is particularly significant in diverse areas such as the Bay Area and Silicon Valley.

Possible Representation of More than One Buyer or Seller – Disclosure and Consent

The Possible Representation of More than One Buyer or Seller – Disclosure and Consent form is a key element in maintaining transparency and ethical standards in California’s real estate transactions. It is employed by real estate agents and brokerages in situations where they represent, or may potentially represent, multiple buyers or sellers interested in or negotiating for the same property. This form is crucial for disclosing any instances of dual or multiple representation to all parties involved, clearly outlining the Broker’s responsibilities and duties in these circumstances.

Wire Fraud and Electronic Funds Transfer Advisory

The Wire Fraud and Electronic Funds Transfer Advisory plays a pivotal role in modern real estate transactions, becoming increasingly crucial in an era where online transactions and digital communications are the norm. This document acts as both a caution and a guide for buyers, sellers, and real estate professionals, highlighting the dangers associated with electronic funds transfers and wire fraud. It details typical strategies employed by fraudsters, including email phishing and impersonation, aimed at redirecting funds to illegitimate accounts. The advisory strongly advises the verification of all wiring instructions with familiar and trusted contacts, preferably through direct phone conversations or face-to-face meetings, to mitigate the risk of financial loss and fraud.

Seller’s Advisory

The Seller’s Advisory is a critical document designed to guide and inform sellers during the real estate transaction process. This comprehensive form serves as an advisory, outlining the various responsibilities, risks, and considerations a seller should be aware of when selling a property. It includes key sections on the importance of accurate disclosures, legal compliance, potential tax implications, and the necessity of understanding the terms of the sale agreement. Additionally, it advises on the roles and limitations of real estate agents, emphasizing that they do not provide legal or tax advice. The Seller Advisory is an essential tool in ensuring sellers are fully informed and prepared for the intricacies of a real estate transaction, aiming to facilitate a smoother, more transparent selling process.

Conclusion

The California Association of REALTORS form RLA is one of the foundational documents of the real estate business in the Bay Area and California as a whole.  There are several different listing agreements that are used, however this one is the most common.

It is important to understand that this is an exclusive right to sell – which means that no matter how the property is sold, whether or not there is any direct involvement in consummating the sale by the broker, the broker is entitled to receive the full commission as stipulated in Paragraph 3A(1).  It is very important that sellers understand this, and all the other facets and nuances of this crucial real estate contract.

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sebfrey
Seb Frey helps long-time Bay Area homeowners make their next move easily the next one yet. If you're looking for a minimum of hassle, maximum net cash on sale, and certain results, contact Seb today.