After interviewing several real estate agents, you might be considering what type of listing contract to enter into. Your real estate agent might want to go with an exclusive right to sell listing agreement, but should you? In this article, we'll explore the different listing types and when you should use the exclusive listing agreement.
Types of Listings
There are three main listing agreements: exclusive right to sell, exclusive agency listing, and open listings.
There are several different listings because each listing agreement carries a different level of service and pay structure. This allows the seller more options to be hands-on during the transaction while using a real estate agent.
What is an exclusive right to sell agreement?
Also known as an exclusive listing, the exclusive right to sell listing agreement guarantees the listing broker a commission if they are able to sell the property within the period of time outlined in the listing agreement.
Signing the exclusive agreement form helps to motivate the listing agent to do everything in their power to make sure the property is sold. The agent will stick the home on the multiple listing service (MLS). They will also typically market the home through other means.
The exclusive right-to-sell listing means that even if a buyer is brought in through an ad that the seller placed or through word-of-mouth, the seller must still pay commission to the listing agent.
There are exemptions that are often placed in the contract, however. These exemptions typically say if a family member buys the house, then the listing agent is not entitled to a commission.
Exclusive Right to Sell vs. Exclusive Agency Listing
In an exclusive agency listing, the real estate broker will still represent the buyer—assuming the broker can sell the house. If the seller brings a buyer to the table, they do not have to pay the listing agent's commission.
The listing agent may cooperate with another brokerage to bring a buyer for the house. In cases like that, the seller will typically pay the buyer agent's commission as well.
Exclusive Right to Sell vs. Open Listings
Open listings are the most beneficial to the seller and riskiest to the real estate agent. While exclusive right to sell agreements mean the seller uses only one agent, in an open listing agreement, the seller can work with as many real estate brokers as they want.
The caveat is only the broker who brings the buyer will get the commission. If the seller brings the buyer, no commission will be given.
In an open listing, the seller's house is not listed on the MLS. Rather, they rely on the real estate brokers they have contracted with to search the real estate market and bring them a buyer.
When should you employ an exclusive right to sell agreement?
You should employ an exclusive right to sell agreement when you don't have a buyer lined up for your house and you have some sort of time-sensitive goal with selling your house.
Pros of an Exclusive Right to Sell Agreement
The exclusive right to sell agreement is the most common type of real estate agreement. When sellers chose an exclusive listing, it's because they want the best chance of getting their home sold.
In an exclusive listing, the seller's house gets listed on the MLS. The MLS is accessed by thousands upon thousands of real estate agents every year and is the primary database where buyers search for houses.
Highly Motivated Agent
Listing agents who sign an exclusive right to sell agreement with the seller are highly motivated because they have a timeline in the contract. Because of this, the agent will usually market the home as effectively as they can and be strategic with the pricing.
In an exclusive right to sell agreement, the seller doesn't have to do any marketing whatsoever on their house. If the seller chooses to spend their time and money marketing and finds a buyer, they still owe the listing agent a commission. So why bother? This allows the seller to sit back, relax, and focus on the other aspects of selling their home.
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Exclusive Right to Sell Listing Set-Up
The listing agent will typically supply the contract. In the contract, both parties must agree to the terms. Some of those terms are:
Typically the timeline is 60-90 day terms with the option to renew. That option to renew motivates the agent, even if the house hasn't gotten any bites.
Size of the Commission
The commission structure and amount is also in the contract. While the typical real estate commission lands between 2.5% and 3% of the sale price, you may be able to negotiate it down.
The contract will also exclude parties who the seller requests remain out, such as a neighbor or family member.
Disadvantages of Exclusive Right to Sell Agreements
Canceling the Contract
Does the contract allow you to cancel the listing at any time? Some listing contracts do not allow you to cancel until you fulfill the contract or it expires. You'll want to make sure you can cancel at any time if the agent's service isn't up to par.
If the contract expires and the listing agent and seller do not agree to renew it or they cancel the contract, the agent may provide the seller with a list of prospective buyers. If at any time a buyer on that list decides to purchase the house, you may still owe the listing agent a commission.
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