Selling FSBO? Here’s How an Open Listing Agreement Can Help

By 

Michelle Delgado

Updated 

February 26th, 2021

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Benefits | Limitations | Example contract | Typical clauses | How to terminate | Alternatives

What is an open listing agreement?

An open listing is a non-exclusive contract between a seller and a real estate agent (or several agents). It stipulates that the seller will pay an agent’s commission if the agent introduces them to a buyer who ultimately closes on the home.

Unlike other listing agreements, an open listing lets the seller retain the right to pursue a for sale by owner (FSBO) transaction. If the seller finds the buyer who closes, they won’t have to pay commission at all.

In practice, a FSBO seller may sign multiple open listing agreements with different agents as a low-risk way to attract more prospective buyers for their home.

Open listings help FSBO sellers market their homes

One of the biggest challenges for FSBO sellers is connecting with qualified buyers — and open listings can help them do just that.

When you sign an open listing agreement with an agent, they’ll actively look for buyers whose criteria match your home in the hope that their connection will lead to a commission.

Local agents offer a pretty powerful advantage, considering nearly 90% of home buyers work with real estate agents.[1] They’re ideally positioned to help sellers find a motivated buyer and close fast.

In fact, nearly one-third of buyers (29%) find their home directly from their agent — compared to just 2% of buyers discover their home directly from the seller.

Why FSBO sellers should always offer a buyer’s agent fee

Buyer’s agent commission adds a major incentive for agents who can help maximize your audience of potential buyers.Rates vary by state, but the national average is 2.68%. For a home that sells at $250,000, that translates to between $6,215 and $7,200.
It’s an investment — but it could make the difference between a quick sale and watching your home sit on the market for months at a time.

Key benefits of open listings for FSBO sellers

Open listings are non-exclusive

You can sign open listing agreements with multiple agents, which increases your home’s visibility at zero upfront cost or additional time commitment.

You only pay if and when an agent’s buyer closes on the home

Unlike some other FSBO marketing tactics — namely flat-fee MLS services, which charge a flat fee upfront for a limited set of services — agents will proactively pitch your home to motivated buyers at no out-of-pocket cost to you.

You retain the right to FSBO

To reiterate, you only pay an agent’s commission if they bring the buyer who ultimately closes on the home. If you find your own buyer, you can avoid paying realtor commissions entirely.

What you won’t get from an open listing agreement

When you sign an open listing agreement, the agent is not agreeing to represent you in the transaction.

Open listings simply stipulate payment terms if the agent finds your eventual buyer.

In other words, the agent will be solely supporting their client and looking out for their interests in the sale. You will still have to manage your side of the transaction and look out for your own interests, as is the case with any FSBO sale.

» READ: How to Sell Your House For Sale By Owner

Example: Open listing agreement

As with any legally binding contract, you should carefully review the terms of an open listing agreement before signing.

The terms of your open listing agreement will define your relationship with each agent:

TERM OF THIS LISTING:This Listing Agreement will take effect on _______________ , ____, and will remain in effect through and including _______________ , ____, provided however that this Listing Agreement shall terminate sooner if I/We notify You that I/We have entered into an Exclusive Agency or an Exclusive Right to Sell Listing Agreement for the Listed Property and You have not yet earned a commission as provided in this Agreement. Upon full execution of an agreement for the sale of the Listed Property, all rights and obligations concerning the payment of fees under this Listing Agreement will extend through the date of the actual closing of the Listed Property and may not be revoked or canceled.

These terms will cover all the basics, including:

  • Details about your property (i.e. address, listing price, etc.)
  • When the contract begins and ends
  • The agent’s commission rate
  • When you’ll be obligated to pay commission

The contract should also note that your relationship with any given agent is non-exclusive:

Pursuant to this Limited Service Open Listing Agreement (“Authorization”), _______________(“Client”) hereby irrevocably grants to _______________ (“Listing Broker”) (BRE No. ______ )
the non-exclusive right to negotiate a sale with respect to certain real property located at
_________________________________________ (the “Property”). This Authorization shall be for a period commencing on ___________ and ending at midnight on _____________ (“Agency Period”) under the terms and conditions set forth herein.

This means you’re free to enter as many open listing agreements as you please, or find a buyer yourself, without facing legal repercussions.

Common clauses in open listing agreements

Cancellation

Establishes a procedure for terminating the contract.

Criteria for screening offers

Outlines specific requirements for screening buyers, including things like a minimum offer price or deposit, closing timeline, or contingencies.

Dual agency

If your state allows dual or designated agency, it might be mentioned in your contract; if you plan to sell FSBO, just make sure you’re not agreeing to dual agency, in which the buyer’s agent would represent you. (Learn more.)

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.

Listing price

The price you’re asking for, based on your home’s condition and similar properties in the area.

Non-exclusivity

Allows you to sign open listing agreements with other agents, or find your own buyer.

Payment terms

The commission structure and rate/fee to be paid if the agent introduces you to the buyer who ultimately purchases your home; note that this could be a percentage of the sale price, a flat fee, or an hourly or retainer rate.

Permission to market on your behalf

Allows the agent to market and show your home, possibly including a lockbox or yard sign.

Seller’s disclosures

Required disclosures vary by location, but typically include material defects and any potential financial issues that would impact the sale, such as bankruptcy, back taxes, or loan defaults.

Timeline

A fill-in-the-blank section that defines when your contract begins and ends; most listing agreements last three to six months.

Backing out of an open listing

When you sign an open listing agreement with an agent, you’re only obligated to pay commission if you accept an offer from their buyer — so you probably won’t need to terminate the contract.

The most important thing to remember is that open listing agreements are legally binding. That means you can’t try to back out while secretly working with a buyer behind their agent’s back.

Doing so would open you up to a world of legal trouble, including the possibility of a lawsuit.

Still, your open listing agreement should include a clause about cancellation:

CANCELLATION: This Agreement may be canceled by written consent of both Seller(s) and REALTOR Firm. Also, REALTOR Firm reserves the right to terminate this Agreement by written notice to Seller(s) if REALTOR Firm has cause to believe that REALTOR Firm may be unable to consummate a sale of the Listed Property for the sales price set forth below by reason of liens, encumbrances, disputes or other matters affecting title to the Listed Property, or if Seller(s) are unable to pay monies due REALTOR Firm under the terms of this Agreement.

Typically, cancelling your open listing agreement will need to happen in writing.

If you decide not to sell FSBO and opt to proceed with an agent, signing an exclusive contract may render your open listing agreements null and void. Be sure to check the fine print!

Alternatives for FSBO sellers

Limited service: Work with a flat-fee MLS company

Even if you sign an open listing agreement (or several), it’s still a good idea to list your home on the MLS — regional databases that agents rely on to scout homes for their clients.

Popular home search websites such as Zillow and Realtor.com also draw on the MLS, so it’s one of the best ways to market your property.

Only licensed real estate agents can list homes on the MLS, so FSBO sellers will need to enlist someone to do this on their behalf. Flat-fee MLS companies offer an affordable solution.

These companies charge a set fee — usually $100-500 — which is far less expensive than hiring a full service real estate agent.

» READ: What You Need to Know About Flat-Fee MLS Listings

Full service: Agent-matching service or discount real estate broker

Attempting a FSBO sale is no easy feat — but if you decide you need a full service agent, you may not have to pay full price.

Discount real estate brokers

Discount brokers like Redfin offer low listing fees that could help you save up to 20-30% on total commissions.

However, because most of these companies use an in-house agent team and handle a high volume of customers to offset their low rates, there are some significant service-level risks to consider.

» LEARN: What is a discount real estate broker?

Agent-matching services

Another way to save is finding your agent through an agent-matching service that negotiates low rates on your behalf, like Clever Real Estate.

The best agent-matching services:

  • Are 100% free to use
  • Only work with top-rated, full-service agents
  • Negotiate built-in savings
  • Offer ongoing Concierge support throughout your entire sale

Importantly, not all agent-matching services offer built-in savings for home sellers. When evaluating services, make sure you understand exactly what you’re getting — and what you’re not.

Try Clever’s free agent-matching service!

Interview top agents, find the perfect fit, save thousands.

ARTICLE SOURCES
[1]

National Association of Realtors. "Quick Real Estate Statistics." Page(s) page numbers. Updated November 11, 2020.