Read This Before Signing an Exclusive Right to Sell Listing Agreement

By 

Michelle Delgado

Updated 

December 14th, 2020

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Examples |  Common clauses | Local variations | Exclusive agency |  How to terminate | Learn more

What is an exclusive right to sell listing agreement?

An exclusive right to sell listing agreement is the most common type of contract sellers sign with their real estate agents.

In this arrangement, the seller agrees to work with a single listing agent throughout the process. This agent markets the home to buyers, handles negotiations, prepares paperwork, helps coordinate closing, and more.

No matter who ultimately buys the home — or how the buyer finds out about it — the seller will pay the agreed upon listing fee to this agent at closing.

Like other types of listing agreements, an exclusive right to sell contract gets agents and sellers on the same page by spelling out:

  • The general list of services provided by the agent
  • Responsibilities the seller agrees to uphold
  • When the agent will be paid, and how much
  • How long the relationship will last

Why are most listing agreements exclusive right to sell?

Exclusive right to sell agreements are the most common types of listing agreements. In fact, many real estate agents only offer this option.

Before sellers make it to the closing table, their agent will typically cover a number of upfront costs out of pocket. These include essentials like professional photography, signage, and other marketing materials.

Exclusive right to sell listing agreements ensure that when the home sells, agents will be paid back for these costs and rewarded for their efforts.

Among all the possible types of listing agreements, an exclusive right to sell arrangement offers the best guarantee that the seller’s agent won’t get cut out of the deal.

» MORE: Listing Agreements: Read This Before You Sign

Example: Exclusive right to sell listing agreement

Exclusive right to sell listing agreements are typically boilerplate contracts created by local or regional real estate associations.

Experienced real estate attorneys carefully vet these standardized agreements to help both sides avoid any legal issues.

In general, you’ll see a clause near the beginning of your listing agreement that confirms you’re signing an exclusive right to sell contract:

Sometimes, the exclusive right to sell clause is baked into a description of when you’ll pay your agent’s commission.

If the contract states that you’ll pay your agent no matter who ultimately buys the home, you know you’re signing an exclusive right to sell listing agreement:

Many exclusive right to sell listing agreements are built from similar or identical clauses that define a seller’s relationship with their agent.

Common clauses

We examined listing agreements and identified the most common clauses you’ll likely see in your contract.

Property details

Most listing agreements have a fill-in-the-blank section that gathers essential details about the property. These include basics, such as the address and confirmation that the seller owns the title — but may also include space to detail any appliances, fixtures, or additional property that may be included in the sale.

Listing price

The price the seller will ask for, based on the home’s condition and comparable properties in the area.

Commission

Listing agreements generally have a fill-in-the-blank section where the seller and agent will define a commission rate. The contract will specify the agent’s rate, when the seller will pay, and how commission will be split with the buyer’s agent.

Other fees and payments

Some listing agreements require the seller to reimburse the agent for marketing costs. Others will include details about how earnest money will be handled in the transaction.

Time period

Most listing agreements include a fill-in-the-blank section defining the contract’s start and end dates. Many also specify a short window of time after the contract ends during which the agent can still collect commission if a deal closes.

Each party’s duties

Each party will commit to doing their part to close the deal: The agent agrees to market the home, and the seller agrees to accommodate everything that entails (e.g., showings, open houses, etc.).

Agent’s authorization to represent the seller

The agent will be granted permission to act on the seller’s behalf when necessary. This allows the agent to legally install a lock box, post signage, and negotiate the deal. (Note: The agent cannot accept an offer on the seller’s behalf.)

Material defects

The seller agrees to disclose any material defects the property might have (for example, a cracked foundation). Under federal law, sellers are also required to disclose the presence of lead paint.

Seller’s disclosures

Sellers typically have to disclose any potential financial issues that would impact the sale, such as bankruptcy, back taxes, or loan defaults.

Fair housing compliance

Under federal law, neither the seller nor the agent can discriminate against potential buyers based on their race, color, creed, religion, sex, national origin, handicap, or familial status.

Designated or dual agency

If state laws allow dual or designated agency, the listing agreement may ask for the seller’s consent. In dual agency, the seller’s agent is also authorized to represent the buyer. Learn more.

Indemnification

The agent isn’t legally responsible if the seller misrepresents any aspect of the transaction. The seller will also be on the hook for any legal fees.

Dispute resolution

Any potential conflicts will be arbitrated by a third party.

Additional terms and conditions

A “free space” in which agents can add special terms requested by the seller.

Do exclusive right to sell listing agreements vary by location?

Although all exclusive right to sell contracts include the same general information, there are many local variations.

In particular, the seller’s location will determine what they have to disclose about their property. Even two counties within the same state might mandate different levels of transparency.

Some listing agreements include clauses that require specific disclosures, but you might also encounter a separate Property Disclosure Form, which sellers typically complete while signing their listing agreement.

Required disclosures range in scope from relatively minimal to very stringent. For example, sellers might have to disclose:

  • Repairs the property needs
  • Details about certain building materials such as stucco
  • The likelihood of natural disasters such as flooding
  • Proximity to (and noise from) nearby agricultural, manufacturing, or military facilities
  • Deaths or crimes that occurred on the premises

Your real estate agent will be able to walk you through any requirements that are specific to your location.

What’s the difference between exclusive agency and exclusive right to sell?

Like exclusive right to sell, an exclusive agency listing agreement guarantees that only one agent (or broker) can market and sell a property.

The big difference is that exclusive agency allows the seller to market and sell the home without their agent. If the seller manages to find the buyer who ultimately closes, they won’t have to pay the listing agent’s commission at all.

This is different from exclusive right to sell, which guarantees the seller’s agent their commission regardless of how the buyer finds the property.

Exclusive agency pros

You retain the right to FSBO

If you find your own buyer, exclusive agency could help you save big. Even if you have to pay a buyer’s agent fee, your total commission would be approximately 2.5-3%, as opposed to the typical 5.5-6%.

In the best case scenario, you’ll find an unrepresented buyer and avoid paying any commission at all. (As with any FSBO sale, keep in mind that you’ll still likely want to hire a transaction coordinator and/or attorney, which may run you a few thousand dollars.)

Exclusive agency cons

Most agents won’t agree to it

In practice, exclusive agency listing agreements are incredibly rare. Most agents simply aren’t comfortable with the reality that they could pour effort into a deal, only to be cut out by the seller.

Your agent may deprioritize your sale

Given the option, agents are likely to prioritize any exclusive right to sell listings they’re simultaneously managing. After all, they want to put their effort where they have the best chance of earning a commission.

Exclusive agency agreements can get very messy

Even if you enter an exclusive agency arrangement and find your own buyer, the complications may continue. It can actually be very difficult to definitively prove that one party found the buyer, with no help from the other.

For example, let’s say you end up selling your home to your neighbor. Will you be able to prove that it was solely thanks to your efforts — and not the For Sale sign your agent set up in the yard?

With so much room for ambiguity, it’s no wonder most agents prefer exclusive right to sell listing agreements.

How to terminate an exclusive right to sell listing agreement

Although exclusive right to sell listing agreements include an expiration date, sellers occasionally want to back out earlier.

To terminate the listing agreement, your agent will need to release you from the contract, typically in writing.

Possible complications

If your agent doesn’t agree to release you from your listing agreement — or if you don’t get their release in writing — you may encounter complications.

In particular, make sure you understand exactly when you’ll owe your agent their commission. Under some exclusive right to sell listing agreements, your agent will be legally entitled to collect commission, even if your property sells after your listing agreement ends.

Some contracts also require sellers who terminate early to pay a cancellation fee, which covers the upfront costs an agent may have incurred.

Sellers who aren’t legally released from a listing agreement may end up having to pay double commission — once to their original agent, and once to the agent who ultimately sells their property.

If you attempt to back out after accepting an offer on the property, your agent may even have grounds for a lawsuit.

» MORE: Can a Seller Back Out of an Accepted Offer on a House?

How to back out the right way

To back out with minimal complications, you’ll need to have a valid reason for terminating the agreement.

The most common scenarios include:

  • Evidence that your agent isn’t fulfilling their contractual obligations — e.g., spotty communication or insufficient marketing
  • A sudden life change, such as a divorce, death, or other situation that would prevent you from selling

In practice, many agents are willing to allow a frustrated seller to walk away. Their priorities are to close deals quickly and protect their reputations— two things that are incompatible with hanging onto unhappy clients.

Your agent may also propose that you work with a colleague within their brokerage. This can provide a fresh start without breaching the original contract.

Other types of listing agreements

Open listing agreement

Unlike an exclusive right to sell agreement, an open listing is essentially a marketing tactic used in FSBO transactions. The seller signs a nonexclusive contract with local buyer’s agents, promising to pay a commission to the agent who produces a buyer.

» MORE: What is an open listing agreement?

Net listing agreement

Most exclusive right to sell listing agreements define commission as a percentage of the final sale price. By contrast, a seller who opts for a net listing agrees to pay their agent any profit that exceeds their listing price. This arrangement is very uncommon — it’s illegal in many states and banned by the National Association of Realtors.

» MORE: What is a net listing agreement?