Wondering about the different types of listing agreements? There are six in total, but certain types are definitely more common than others. It’s important to understand the pros and cons of each so you can make an informed choice when deciding how to list your home.
The Six Types of Real Estate Listing Agreements
Here are the six types of real estate listing agreements:
There is nothing exclusive about an open listing. Typically, this type of listing agreement is used by homes that are for sale by owner, but the owner doesn’t have any aversions to working with real estate agents in some capacity.
An open listing gives Realtors permission to bring clients to the property for showings, but does not grant exclusive rights for viewings to a certain Realtor, meaning that multiple agents could be conducting showings on any one home. If one of her clients purchases your property, the agent will earn a commission.
For an open listing to be successful, the seller of the home should be well connected to agents in the area, or at least be able to reach out to them, as the home will typically only sell if an agent already has a client in mind for it.
It is also worthwhile to note that few agents will be willing to work on an open listing, except for a very unique property or during a sales “dry spell” because of the uncertain nature of a payout for them.
Open Listings do not get a place in Multiple Listing Services.
This type of listing agreement is very similar to an open listing in that agents who are showing “for sale by owner homes” to their clients typically use it. Unlike the informal Open Listing, however, in a One-Time Show, the seller of the home signs a contract with the Realtor before any potential buyers come in.
Why do they do this?
This contract states that the agent will receive a guaranteed commission if they introduce the eventual buyer of the home. This step prevents the buyer and the seller from negotiating privately later in an effort to avoid paying the Realtor’s commission later on.
Similar to Open Listings, One-Time Shows do not get a place in Multiple Listing Services.
Exclusive Agency Listing
This is one of the least popular types of listing agreements because there is not much incentive for a Realtor to spend money or time on marketing your home.
Because while an Exclusive Agency Listing guarantees an agent can receive a commission from selling your home, it also allows sellers to continue to seek out buyers on their own. See the problem? If you, as the seller, find your own buyer, then any money the agent has invested into the listing will see no return.
Some past buyers try and go over the head of the real estate agent and will negotiate better terms directly with the seller.
In the unlikely event that an agent accepts this type of listing, he will probably post it in a Multiple Listing Service and just wait around to see if he gets any bites.
Exclusive Right to Sell Listing
This can be one of the confusing types of listing agreements because it is a bit of a misnomer.
When you give a real estate agent the exclusive right to sell your home, this doesn’t mean that there won’t be any other agents involved in the process. Your agent is the listing agent, which means that it’s her job to let other agents know about your property, so they, in turn, can showcase it to their clients.
What the name does mean is that whoever ends up selling the home, whether it be to a client your Realtor found or to someone you discovered yourself, the agent still earns a commission on the sale.
Because of this, this is the most common type of listing agreement, and often the only kind of competent listing agent will accept because there is a reasonable expectation of profit on the time and effort she puts into marketing and selling your home.
A quick note:
In most markets, an Exclusive Right to Sell listing lasts either 90 or 120 days, at the end of which if the property hasn’t sold, the seller has a choice of relisting with the same agent or collaborating with a different one for the sale. A third option would be to enter into a 180-day listing with an unconditional cancellation clause after 90 or 120 days.
A Multiple Listing Service is one of the essential types of marketing for listing agents and their access to it should be a real incentive for participating in one. The service, sometimes known as an MLS, sends out listing information and property photos to members working with compatible buyers. MLS members can submit Exclusive Agency and Exclusive Right to Sell listings.
FSBO listings have a huge handicap on the market because those with an MLS membership have hundreds of homes to show, while “for sale by owner” sellers only have one.
Net listings are a very uncommon type of listing agreement because they are actually illegal in some states and can be very dangerous to participate in others. When entering into a Net Listing, the seller tells the agent the “net price” that they are willing to accept for their home, hence the name.
What then typically happens is that an agent would market the home for far above the seller’s net asking price in order to dramatically increase his commission.
This can have two negative outcomes:
The first is that the seller might end up feeling cheated if his home does sell for what the agent lists it for, as it’s obvious he “went too low” and should have asked for a better net price, thus leaving quite a bit of money on the table.
The second is that if the agent isn’t receiving any offers that accommodate his excessive commission, the agent might be tempted not to inform the sellers about any offers made, significantly extending the purchase process.
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