Updated July 20th, 2019
When working with a realtor, you must enter a listing agreement. Although there are six different types, most sellers will enter an exclusive right to sell agreement with their agent. This is the most popular and appealing option for talented real estate agents.
Some of the other listing agreements types cater towards For Sale By Owner Listing (FSBO), which have infamously poor outcomes, while others are illegal in certain states.
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Let’s look at how each of the six different types of listing agreements compare to each other, and what they mean for you as a seller.
What is a real estate listing agreement?
A real estate listing agreement is an agreement that a seller enters with a real estate agent or broker which grants them permission to act as their agent throughout the home sale. The agreement outlines several details, such as:
- The dates of service
- The agent or broker’s commission fees
- Payment terms
- Authorization to market the property with signage
- Authorization to put a lockbox on the door
In most cases, commission fees will come out to 3% for the listing agent, but there are some flat-fee and discount agents who charge lower rates. The contract will also usually provide certain protections to the agent to ensure they receive compensation for their work.
The Six Types of Real Estate Listing Agreements
Let’s take a look at the six types of real estate listing agreements:
1. Open Listing
An open listing is a non-exclusive listing agreement that is typically used by FSBO sellers. Open listings don’t guarantee one specific agent a commission. Instead, the seller works with multiple agents who bring buyers to the property, but only the agent whose buyer’s offer is accepted by the seller will receive the commission. In this way, agents need to directly compete with each other for compensation.
Overall, open listings are not preferred by real estate agents. A realtor could easily end up spending hours bringing potential buyers to the property, only to have another agent walk in one day, make a sale in fifteen minutes, and take the commission fee the original agent had been working so hard for.
Sellers usually don’t benefit from this type of listing either, as FSBO homes historically sell for significantly less than homes represented by an exclusive agent. Most sellers need the range of services such as comparative market analyses, negotiation help, and marketing that a full-service agent provides to make a successful sale.
2. One-Time Show
A one-time showing agreement is typically associated with FSBO properties. If a real estate agent shows one particular buyer a FSBO home that isn’t listed in the MLS, they will enter this type of agreement with the seller. If the buyer makes a purchase, the realtor will receive a commission fee.
To better understand the agreement, imagine this: a buyer is driving down the street and sees a house that’s marked as a FSBO listing. They call up their realtor, who then schedules a viewing with the seller. Before the viewing occurs, they sign a one-time showing agreement. If the buyer purchases the property, the agent receives a commission.
Typically, the fee for a one-time showing agreement is half of the traditional 6% commission fee. Sellers do save money in commission, but as noted above, FSBO listings tend to have poor selling outcomes, so they may also miss out on some profits.
3. Exclusive Agency Listing
In an exclusive agency listing agreement, a seller grants an agent or broker the right to be the only agent or broker marketing the property. However, the seller can continue marketing the property on their own, and if they find a buyer through their own efforts, they don’t have to pay a commission fee.
This type of listing agreement is unpopular as it’s easy for agents to spend time and money marketing a home only to get nothing in return. It’s rare for agents to accept this kind of agreement, but if they do, they will usually take a very hands-off approach to marketing — they may just put the property on the MLS and nothing more.
4. Exclusive Right to Sell Listing
When most people think of a listing agreement, this is what they’re picturing. When an agent signs an exclusive right to sell listing agreement, they have exclusive rights to work as the seller’s agent and are guaranteed a commission fee if the house sells, no matter who found the buyer.
This last part is important. While other listing types give sellers the chance to forego compensating their agent if they find a buyer themselves, this agreement guarantees the agent compensation even if the seller finds a buyer without their help.
They act as the seller’s sole agent and develop a close working relationship with them because of this. Out of all the listing agreement types, this one provides agents with the most incentive to work hard and make a sale.
5. Multiple Listing
A multiple listing will get properties featured in the MLS (multiple listing service), but nothing more. The MLS is an important tool that real estate agents use to find properties for their buyers. Most exclusive right to sell and exclusive agency listings are put on the MLS.
FSBO listings have a huge disadvantage as they can’t get their property on the MLS by themselves. That said, they can use a flat-fee MLS service to list on the MLS, but they still miss out on the many benefits of working with a skilled agent. In general, FSBO listings sell for far less than properties represented by an agent — if they sell at all, that is.
6. Net Listings
In a net listing, a seller or their agent sets a price, and the agent can keep all proceeds over that price point. For example, if a seller agrees to a selling price of $500,000 and their agent manages to sell it for $800,000, the seller will pocket $800,000.
Usually, the seller recommends the asking price, which makes it very easy for agents to exploit sellers. Agents can recommend asking prices far below fair market value and then pocket the difference. Net listings are illegal in many states because of this.
How do you terminate a real estate listing agreement?
The cancellation terms should be outlined in the contract you sign. In most cases, you can simply tell your agent that you want to terminate your agreement, and they will let you go. Occasionally, there may be cancellation fees, but these would be spelled out in your contract if there are any.
Next Steps: Find a Top Real Estate Agent
Working with a great real estate agent is the best investment you can make in the success of your home sale. Experienced real estate agents can help sellers time the market, competitively price their homes, and negotiate a better deal.
It’s no surprise that 91% of home sellers work with a real estate agent: the outcomes simply can’t be beat.
Clever connects sellers with top-rated local agents from major brands like Keller Williams, Century 21, and RE/MAX. All Clever Partner Agents have agreed to charge a flat fee of $3,000 for Clever referrals. If your home sells for more than $350,000, you pay only 1% — that’s 2% less than the traditional listing agent commission fee.
Working with a Clever Partner Agent can save you thousands in commission fees and net you a higher profit.
Want to learn more? Fill out this form to set up a free, no-obligation consultation with one of our Partner Agents to learn how they can help you.
Top FAQs About Real Estate Listing Agreements
Can you sell your house without a realtor?
Selling your house without a realtor is called listing your house For Sale By Owner, or FSBO. While it’s entirely possible to sell your house on your own, 91% of home sellers work with a realtor — and for good reason.
Most home sellers simply don’t have enough real estate experience to successfully execute a home sale, let alone net a decent profit from it. In fact, most FSBO sellers struggle to get any offers all and end up working with a realtor anyway.
Unless you’re an experienced real estate professional who’s well versed in property taxes, real estate law, market trends, competitive pricing, and negotiations, it’s best to work with an agent.
Can a broker cancel a listing agreement?
Generally, a broker can only cancel a listing agreement if there is sufficient cause or the seller agrees to cancel. What constitutes sufficient cause is usually laid out in the listing contract that the broker and seller both signed. In most cases, the seller will have no problem releasing a broker from their contract.
Can one person sell jointly-owned property?
One person cannot sell a jointly-owned property. Each owner can sell their portion of the property equity, but they cannot sell another owner’s equity. In certain cases, a partition lawsuit will force a co-owner to sell their piece of the property.
How long are most realtor contracts?
There is no agreed upon length for the average realtor contract. However, since most homes take 65 days from listing to sale, realtors work with clients through that entire time period, and 91% of home sellers work with realtors, it’s safe to assume that most realtor contracts last for around two months.
Do you have to pay a realtor if the house doesn’t sell?
Generally, realtors operate on a commission-based model and don’t charge any fees. However, in lieu of a sale, some real estate agents may charge fees for marketing work or other services they performed. The details of this would be set out in your listing contract.