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The Listing Agreement. Get It in Writing!

The Listing Agreement. Get It in Writing!


So you’ve made the right decision and have decided to sell your business with the aid of a broker. Now it’s time to sign the listing agreement. What are the important parts of the listing agreement that you need to be aware of?

First, the listing agreement should state the duration of the agreement and the commission rate. In the brokerage business, six months is a standard time frame for the duration of the agreement, and a standard commission is ten percent, although, like anything else, this is sometimes negotiable.

Second, our agreement states that if a prospective buyer purchases the business within 12 months of the expiration of the agreement but was shown the business during the term of the agreement, the commission is due. Every broker has this clause in his or her agreement to prevent being “backdoored”, or having a situation whereby the buyer and the seller collude to wait out the agreement in order to cheat the broker out of the commission.

Third, our agreement states that if there is a forfeiture of the deposit on the part of the buyer, the broker and the seller split this. Forfeiture of the deposit by the buyer does not occur often, but we have had several occasions where this did occur.

Fourth, our agreement states that if the seller changes his or her mind during the course of the agreement as regards selling the business, the commission is still due and payable. We do not work for free. The only instance whereby the listing agreement becomes null and void is if the seller dies during the course of the agreement, or if the business is destroyed by fire, flood, or any other act of God.

At Crown Business Brokers, our listing agreement is in plain English, so you do not need a law degree to understand it; however, we recognized that the seller is entering into an important, legally binding relationship with us for a significant period of time. That said, we encourage all sellers to have the listing agreement reviewed by an attorney if they choose to do so.

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