Why use an exclusive agency agreement? | Pros & cons | Exclusive agency vs. exclusive right to sell | FAQs
🔑 Key takeaways:
An exclusive agency listing gives home sellers the opportunity to find a buyer on their own, much like a typical for sale by owner (FSBO) sale, or with the help of a listing agent.
Exclusive agency agreements can benefit the agent's brokerage because it means the home seller can't be represented by any other brokerage — but there's still no guarantee they'll get the sale.
A home seller who signs an exclusive agency agreement only pays their listing agent's fee if the agent sources a buyer who ultimately closes on the property. If the seller finds the buyer on their own, the listing agent doesn't get any commission.
In contrast, in an exclusive right to sell agreement (the most common type of listing agreement) the listing agent gets paid regardless of who finds the buyer.
Exclusive agency listings offer a chance to save on realtor fees, but no guarantees. Discount real estate companies like Clever pre-negotiate lower listing fees with their nationwide network of partner agents. You'll get the support of a full-service realtor for a fraction of their typical rate, and avoid the hassle and uncertainty of an exclusive agency listing.
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Why would you use an exclusive agency listing?
You might request an exclusive agency listing agreement for a couple of reasons:
- You're trying to find a buyer on your own, but you'd like to solicit backup offers via a listing agent.
- You have a buyer in mind, but might drive up their price with offers your agent sources.
In reality, it's unlikely an exclusive agency listing will be the best option when you're ready to sell your house — especially because most agents won't agree to one.
Most home sellers avoid exclusive agency agreements since they can get messy and end in disputes over who sourced the buyer when the home sells.
Does exclusive agency make sense for FSBO sellers?
If you're looking to sell your home FSBO, an exclusive agency listing agreement doesn't make a lot of sense since you'll risk having to pay 3% listing commission if the agent secures a buyer. The whole point of a FSBO sale, for most home sellers, is to save money on listing commission, so why put yourself in that precarious position?
One reason: An agent might be able to sell your home for more than you'd get in a FSBO sale, which could offset some of the listing commission cost.
For a home that sells for $300,000, here's how much the two possible outcomes of an exclusive agency listing could cost.
If you find a buyer (FSBO)
If your agent finds a buyer
Buyer's agent commission
Listing agent commission
Total realtor commission
» MORE: How To Sell Your House For Sale By Owner.
Exclusive agency listings also pose a risk for real estate agents — the risk of not getting paid!
Agents don't have a strong incentive to market your property when there's a chance they could spend months trying to find a buyer, only to walk away with no commission.
In fact, this is why most agents won't sign an exclusive agency agreement, and some brokerages won't even allow it.
✍️ Editor's take
If you're set on trying to sell FSBO because you don't want to pay commission to a listing agent, it makes sense to try FSBO before you enter into a legally binding listing agreement.
If your FSBO sale fails, enter into a standard right to sell listing agreement with an agent afterwards — skipping the exclusive agency listing option.
You'll have to pay the agent's commission, but this way your agent has the incentive to market your home and sell it quickly.
Find out how much you could save with a Clever partner agent!
Pros and cons of an exclusive agency listing for home sellers
Exclusive agency agreements can lead to confusion
Exclusive agency agreements attempt to spell out explicit, legally binding terms, but they can still lead to confusion about who actually sourced the buyer.
For example, say you end up selling your house to your neighbor after a chat in your backyard.
As the seller, you argue your conversation sparked your neighbor's interest and led them to purchase your home.
But, from your listing agent's perspective, the sign they placed in your front yard made your neighbor come over to talk to you about the property.
Given the subjective nature of whose efforts initiated the buyer's interest, it's easy to see you could get into a messy dispute over whether you should have to pay any commission to your agent.
By contrast, a cut and dried exclusive right to sell agreement decreases the chance of a dispute when the home sells.
Sample exclusive agency agreement
Exclusive agency listing agreements won't necessarily have a title that says "Exclusive Agency Agreement."
Most brokerages use a standard listing agreement template and modify the language as needed, noting exclusive agency details in the terms of the agreement (see example below).
Language like this — specifying a homeowner's right to sell their property without compensating the brokerage/listing agent — indicates an exclusive agency agreement.
✍️ Editor's note
Whether you're signing an exclusive agency agreement or a more typical exclusive right to sell agreement, always read the terms and conditions carefully. Most listing agreements include a duration of contract, which specifies how long you're bound by the terms laid out in the document.
What is the difference between exclusive agency and exclusive right to sell?
The main difference between exclusive agency and exclusive right to sell agreements is that, in an exclusive agency agreement, home sellers don't have to pay their listing agent if they find a buyer on their own.
However, exclusive agency agreements are rare.
Most home sellers sign an exclusive right to sell agreement with their listing agent — a legally binding contract that ensures the listing agent will be paid commission regardless of who sources the buyer.
Many agents hesitate to sign an exclusive agency listing agreement because it could prevent them from earning commission when you sell your home.
Pros and cons of an exclusive agency listing for real estate agents
Exclusive agency listings are rare, so even experienced real estate agents might not know how to react to one.
While an exclusive agency agreement can represent a possible sale for an agent, there are some downsides — particularly if the home seller doesn't actually have any intentions of selling to one of their buyers.
FAQs about exclusive agency listings
An exclusive agency listing agreement allows a homeowner to sell for sale by owner (FSBO) if they're able to find a buyer, while still giving a listing agent the chance to market the home. The agent gets paid a commission only if they find a buyer who ultimately closes on the home, but they won't earn anything if the home seller finds the buyer.
Yes. According to National Association of Realtors guidelines, no MLS can prevent a broker from listing an exclusive agency listing on the MLS. However, some brokerages may prohibit their agents from signing an exclusive agency listing agreement. Only an agent or brokerage can list a property on the MLS.
It might make sense in the rare circumstance you want to solicit offers via an agent as a backup option.
But if you want to try selling FSBO, you should do it before you enter into a listing agreement.
Signing an exclusive agency listing agreement essentially puts you in a race with your agent to source a buyer. Instead, you could just sign a traditional listing agreement if your FSBO sale fails.