Final answer:
Broker Tom requires the seller to sign a one party listing agreement to ensure commission payment if his client, Ed, purchases the property. This agreement is tailored for a single prospective buyer, unlike an exclusive agency agreement which covers any buyer.
Step-by-step explanation:
Broker Tom needs to have the seller agree to sign a one party listing agreement before he shows the property to his principal, Ed. This type of agreement specifies that the seller agrees to pay a commission to the buyer's broker if the buyer, introduced by the broker, purchases the home. It's important to understand that this is different from an exclusive agency agreement, which would give the broker the exclusive right to sell the property and earn a commission regardless of who buys it. The one party listing agreement is focused on just one potential buyer, which in this case is the principal Ed.
When discussing home buying, another important concept to understand is Escrow. This is a financial arrangement where a neutral third party holds funds or assets until a specific set of conditions are met, such as the completion of a home sale. In the context of homeownership, escrow accounts can also be used to handle property taxes and home insurance payments, often incorporated into the homeowner's monthly mortgage payment.