A letter of authorization to sell property is a legal document that grants someone else the authority to act as a representative and manage the sale of property on the owner’s behalf. The person granting this authority is referred to as the principal, while the appointed party is known as the agent or representative. The agent is appointed to perform specified functions such as preparing contracts, negotiating on the property owner’s behalf, conducting a sale, and receiving documents. This authorization is typically given when the property owner is unavailable due to other commitments, a different location, or wants to entrust the sale to a qualified professional, such as a real estate agent.
This article will go over exactly what an authority to sell entails, its limitations, and the various types of authorization letters that exist.
There are usually three parties involved during the drafting of the authorization letter and the selling process as a whole:
- The first party is the property owner who is looking to sell. In other words, they are the homeowner.
- The second party is the potential buyer of that piece of real estate. Therefore, the contract is addressed explicitly to this party in general.
- The third party is the agent or broker who acts on behalf of the property owner when they are not present.
Types of Authority to Sell
There are two different main types of authority to sell. First, there is exclusive authority, and second is non-exclusive authority. Both have pros and cons, and the choice of one or the other is often up to the seller or the real estate agency’s policy.
Here is an account of these types and their respective pros and cons:
Exclusive authority is given to one specific agency or its firm. This means that they are the only entity with the legal right to represent and market the property on the owner’s behalf. This is the most common type of authority to sell and is beneficial for both the seller and the broker.
From the seller’s perspective, it can be advantageous only to need to communicate with one agent during the marketing and selling procedure. This means that the seller only needs to communicate with one person, who handles everything else on their behalf.
The main positive point of the broker’s perspective is that they are guaranteed a commission if the property is sold. The exclusive authority contract typically awards the broker a commission even if the seller finds a potential buyer without consulting the real estate agent.
Exclusive authority letters to sell typically have a specified timeframe for their validity. The broker will remain committed and focused on selling a property quickly. Therefore the sale will likely proceed quickly, benefitting both the real estate agent and the seller. If a property does not sell before the specified time limit, a seller has the right to renew with the same broker or try their luck with a different agent.
The primary disadvantage to an exclusive authority contract is if the real estate agent representing the owner does not have the required level of commitment to selling the property. In addition, as the owner is limited to one broker, they are restricted to the capabilities and effort put forward by them.
On the other hand, a non-exclusive authority allows multiple agents to market a property and represent a seller. This is often the choice for sellers who do not have a high urgency to sell a property.
The most important advantage to a non-exclusive authority letter to sell is working with multiple brokers simultaneously. This means that a seller is not restricted to working with one individual, and the marketing potential for the property is increased. In other words, more people representing a property means that a larger group of potential buyers will learn about it.
For the seller, the main disadvantage is the tediousness of needing to work with several brokers simultaneously. This results in a time commitment as they need to communicate and coordinate with several agents. Additionally, this can be problematic for the seller as the agents will not have a time limit on their property marketing. This means that the brokers will not act with the same sense of urgency, and the sale may not be a high priority for them.
In conclusion, choosing between an exclusive or non-exclusive authority to sell depends on the seller’s situation and urgency. An exclusive contract typically yields faster results, while a non-exclusive letter offers the benefit of being able to wait for a better offer price.
Note: Multiple listing clause. A multiple listing clause is often found within the exclusive authorization letter to sell. This clause will specify that the property can be marketed via other brokers involved in the multiple listing service. This may vary depending on the region, but a multiple listing service will generally specify the terms of this clause. In addition, it will determine how an agent must handle their listings and how the MLS will treat its members.
What to Include?
When drafting an authorization letter to sell a property, several key elements must be included. These components are both legally required and beneficial to all parties involved.
Make sure to include these seven components when creating the letter:
Date of signing
As with most legal documents, it is important to specify when the authorization letter is signed to establish the beginning of the period. Therefore, it is crucial to include the date in the letter.
In-depth information about the property should be included so that the broker understands the technical aspects of the property they are bound to sell. In addition, this ensures that the agent is appropriately marketing the piece of real estate so that the offer negotiation process goes smoothly.
Fee and tax responsibilities
The document should list which party is responsible for all fees and taxes applicable to selling a property. Be sure to include all fee and tax responsibilities in the letter.
For example, it’s essential to keep the following in mind:
- Notary fees
- Taxes to the Internal Revenue Service (IRS). This depends on the country but could be the capital gains, withholding tax, value-added tax, etc.
- Local government fees
- Title registration costs
Professional fee and agent commission rate
The agency or professional representing you may have a flat fee and a commission rate that should be established. The seller is fully aware of how much of the sale will go to their broker.
If the authority letter to sell has an expiration date, that must be included. Some non-exclusive authorities do not have a specified expiry, but the details of that condition must also be included.
This clause protects brokers from sellers who attempt to sell the property without providing proper commission to the agent for their services. For example, the clause may specify that the broker has the right to a specific commission rate for six months after the expiration date. If this is the case, include this clause in the letter.
This is fundamental, as the seller gives another individual the right to market and sell their property, so a signature is required.
Format of an Authorization Letter to Sell Property
A letter of authority to sell property is a formal document that demands appropriate formatting to enhance its professionalism, clarity, and legal validity. This prevents any potential miscommunications or misinterpretations.
Outlined below are the essential components of such a letter:
The header is the first component of the letter. It should indicate your name and address as the property owner and the date when the letter was written. Subsequently, provide the name and address of the recipient who has requested or would need the letter to proceed with the property sale. This helps you establish the context and identify the parties involved in the authorization.
Following the header, the letter necessitates a formal and respectful salutation. The appropriate salutation depends on the recipient’s name and title. To specify the recipient’s name, you should use: “Dear [Recipient’s Name] ” or “Dear Mr./Mrs./Ms. [Last Name],” Typically, the letter will be addressed to a prospective buyer or third party involved in the transaction.
Write an introduction that sets the tone for the letter and provides context behind granting authorization for the property’s sale. You should start this section with a subject line that clarifies the letter’s intent, such as “Letter of Authority to Sell a Property.” This should be followed by a statement specifying that you, the principal, categorically grant the named third party to represent you in the specific transaction.
In this section, you should provide detailed information about the specific property, powers, responsibilities, and tasks you are delegating to the authorized agent. So, start by defining the property in question by specifying its address, legal description, and other identifying information. Then, define the scope of the authorization. The authority may extend to marketing and advertising, property showings, negotiations, contract execution, financial transactions, paperwork, and documentation.
Additionally, it’s crucial to outline limitations applicable to the authorization, such as validity duration, contingencies, and right to revoke. The body section ensures that both you and the agent have a shared understanding of your respective roles within the property sale process.
This segment should provide any additional information that is needed to complete or support the authorization process. You can use this section to convey instructions such as flexible and fixed terms, preferred selling price, and communication channels. Also, use this section to mention any enclosures such as property surveys, inspection reports, or recent appraisals you will share with the appointed representative to facilitate their tasks.
Lastly, conclude the letter in a courteous and professional manner. You can end with a complimentary closing such as “Sincerely”, “Best Regards”, or “Respectfully”. After the complimentary close, provide your name.
Note: If the letter needs to be shared with other parties, include a “CC” section at the bottom. Then, list the names and contact information of parties to receive copies of the authorization letter.
Legal Considerations for Writing an Authorization Letter to Sell a Property
Writing an authorization letter to sell a property involves important legal considerations to ensure that the letter is valid, enforceable, and protects the interests of all parties involved. This is because any errors or omissions could have legal implications.
Here are several legal considerations to keep in mind:
Local laws and regulations
Different jurisdictions have varying laws and regulations governing the sale of property and authorization letters. Be sure to research and comply with local legal requirements. Taking the time to ensure that the letter is properly drafted and compliant with relevant laws is essential for a smooth and legally sound property sale process. Failure to do so renders the letter invalid and complicates the transaction.
Witness or notary
Depending on local legal requirements, you may need to have the letter witnessed by a third party or notarized to enhance its legal validity. A notary public verifies that you consented to transfer the specified authority. This limits the potential disputes regarding the authenticity of the representation.
Specificity and limitations of powers and responsibilities
Clearly outline the powers, responsibilities, and tasks you are delegating to the authorized agent. Use clear and unambiguous language to leave no room for misinterpretation or overlapping of roles. Also, specify any limitations imposed on the agent’s powers and responsibilities.
Samples and Templates
Many authorization letters to sell a property will follow a similar format and structure. Here is an example and a template that can easily be adjusted to match the needs of any real estate agent:
Template of the authorization letter to sell the property
I, [seller name], owner of the property on [property location], declare that I have authorized [agent] to sell the property on my behalf. [Additional relevant property details]. I acknowledge [agent] as [specify exclusive/non-exclusive authorization type] for marketing, negotiating, and selling the property.
Being my official agent in this sale, [agent] shall have the powers to market and negotiate the sale of the property according to their professional opinion. Any choices made by [agent] will be as if I made them. Once the property is sold under the appropriate conditions, a commission rate of [commission rate percentage / other fees] of the total amount shall be provided to [agent] for their services.
I, therefore, write this letter to transfer full authority to [name of the broker] to represent me during the sale and marketing process of the property. This authorization shall remain in effect until [expiry date or condition].
Phone No: [contact number]
Sample of the authorization letter to sell the property
Authorization Letter to Sell Property
I, John Smith, owner of the property on 212 Market Street, Williamsburg MA 12345, declare that I have authorized Ms. Jane Bridgerton to sell the property on my behalf. I acknowledge Ms. Bridgerton as my exclusive broker for marketing, negotiating, and selling the property.
Being my official agent in this sale, Ms. Bridgerton shall have the power to market and negotiate the sale of the property according to her professional opinion. Any acts done by Ms. Bridgerton on my behalf shall have the same effect as my own. Should he sell the property on terms acceptable to me, a commission rate of 3% of the total amount shall be provided to Ms. Bridgerton for their services.
I, therefore, write this letter to transfer him full authority to represent me during the sale and marketing process of the property. This authorization shall remain in effect until the 30th of June, 2022.
Phone No: 123-456-7890
Given below are authorization letter templates:
An authorization letter to sell a property is a crucial real estate document that ultimately protects the seller, broker, and buyer. In addition, it will lay out the selling process so that all parties are clear in terms of expectations and results of the sale. The choice between an exclusive or a non-exclusive authority to sell will depend on the seller’s needs.
In any case, the seller should carefully weigh the pros and cons of the different types of contractual possibilities available to them and decide what is right for them. Regardless of which authority is best for their case, it is always best to speak directly with the real estate agent and discuss sales expectations to make the process go smoothly.