What is a listing agreement?

A listing agreement is a formal contract established between a property owner and a broker, which grants the broker the authority to sell or lease the property on behalf of the owner. This agreement outlines the terms and conditions under which the broker will operate, including details such as the listing price, the duration of the agreement, and the responsibilities of both parties.

This formal arrangement is crucial in real estate transactions because it provides a legal framework for the broker to market the property, negotiate with potential buyers or renters, and effectively manage the sale or lease process. By defining these terms, the listing agreement protects the interests of both the property owner and the broker.

In contrast, the other options do not accurately reflect the nature of a listing agreement. A contract between a lender and a buyer pertains to financial arrangements rather than property leasing or selling. A verbal agreement between friends lacks the formality and legal enforceability characteristic of a listing agreement. An informal agreement for a rental does not provide the comprehensive structure and protections associated with formal listing agreements in real estate.