People who are selling their homes on their own will often use an open listing agreement. This means that more than one agent can work on the listing and try to introduce a buyer into the equation. But, if the seller finds someone first, they don’t actually have to pay any commission.
When it’s a buyer’s market out there, sellers need to do everything they can to make sure that they can get the best sales price for their home. Sometimes to achieve this sellers might choose to put their house on the market in a few non-traditional ways.
One of these is an open listing agreement.
How does it work? Here’s how:
What is an open listing agreement?
If you decide to sell your home, “for sale by owner,” then you will likely use an open listing agreement. Essentially, an open listing agreement lets sellers negotiate deals with multiple different real estate agents at the same time.
If one of these brokers is the one who finally brings in the buyer (while the seller stills searches for one of their own, of course), then the seller only has to pay commission to the one broker.
It differs from traditional listing agreements in that the seller only has to pay about half of the usual fees involved in a real estate transfer. This is because currently, the national average for Realtor’s commission is 6% of the final sales price. So, since the seller is unrepresented in this transaction, they would only need to pay commission to the buyer’s agent, a price of about 3%.
However, it’s important to keep in the mind that if the seller finds a buyer all on their own, then they do not end up needing to pay commission to anyone.
What are the benefits of an open listing agreement?
The real reason that most people who sell their homes on their own use an open listing agreement is because it’s essentially a “backup” to their own efforts. They think, “I’m going to find a buyer on my own, but just in case, I’ll ask these real estate brokers to have a look on the market for me as well.”
Depending on the listing age, independent home sellers might also feel a little bit of a push to bring in reinforcements if they have not had any luck securing offers after a certain period, say 30 days on the market.
As mentioned, it is also significantly cheaper to use an open listing agreement than a traditional listing (known as an exclusive right to sell) in which both the buyer and seller have their own agent. In this kind of listing, these are the only agents allowed to work on the listing, at least for a predetermined period of time. This is because when you use an open listing, you only have to pay half of the commission.
What are the drawbacks of an open listing agreement?
Real estate agents do more than just introduce a buyer into a deal. They have years of experience to bring to the table and can help sellers from making careless mistakes. Even if an independent seller truly does their homework, their lack of background in real estate could still hurt them in the process.
A good alternative to an open listing agreement would simply be to use a flat fee agent like Clever. These organizations sell your home for just one small, flat fee and can save you thousands on commission.