Did you know that there are different types of real estate listing agreements? If you are nodding your head no, you're not alone. Most people have do idea that there are different options.
When selling a home, it’s essential to know the different listing agreement options that are available to you. Understanding the various listing agreement contracts can help you strike the best deal for your home and protect your rights.
When you meet with a real estate agent you probably won't be presented with different listing agreement options.
The reason being is there is one type of real estate listing agreement that is far more common than any other. It is an exclusive right to sell. Maximum Real Estate Exposure has covered exclusive right to sell listing contracts in depth.
Let's go over each of the three types of listing agreements, so you are more familiar with the choices.
Keep in mind most real estate agents may not agree to anything but an exclusive right to sell listing agreement.
An exclusive right to sell real estate contract is by far the most common agreement in use today.
The exclusive right to sell agreement gives one real estate brokerage complete control over the process of selling a home.
The chosen exclusive right to sell listing agreement says that a real estate agent will represent a seller and earn a commission for successfully completing the sale.
The buyer who purchases the home can be procured from an outside brokerage bringing the buyer or in-house through the listing brokerage's efforts.
Home sellers will pay a commission to both the listing and selling agents. The total commission in the sale is typically split equally, although another arrangement is possible.
With an exclusive right to sell listing contract, the owner of a property cannot sell it on their own without paying their agent the commission.
Sometimes a real estate brokerage may allow exclusions for certain parties such as family members or close friends.
However, the exclusion will usually last for only a small window of time. A real estate agent doesn't want to spend months of time and marketing dollars, only to find out someone the seller knows is purchasing the house.
The exclusive right for selling is the gold standard in real estate contracts.
An exclusive agency agreement is similar to an exclusive right to sell. The primary difference is the exclusive agency gives the seller the right to find their own buyer without paying a commission.
For a seller it is the best of both worlds. They get a real estate agent working hard for them but they are also able to market and find a buyer on their own.
With an exclusive agency agreement an outside brokerage can still bring a buyer and the seller would pay a full commission just like an exclusive right to sell agreement.
Sometimes with an exclusive agency or exclusive right to sell, a real estate agent may negotiate a commission split with the seller if they procure their own buyer.
A real estate agent could treat the seller as a co-broke and still provide all the normal marketing services and representation. An arrangement such as this can keep an agent motivated to sell.
It's a win-win for the seller because they potentially will be paying a much lower fee. Typically, it will be as much as only a half commission.
Open listings are the least common real estate agreement. They are frowned upon by most agents and for good reason.
An open listing means that the home is available to be sold to anyone who is interested. There is no allegiance to any particular real estate agent.
An open listing is also referred to an a non-exclusive agreement. With open listings a home seller can hire more than one real estate broker.
They will only pay a commission to the agency that procures a buyer. The only advantage to an open listing for a seller is they will usually only pay half of a commission.
So, if the normal commission rate for the area is five percent, a seller might only have to pay an agent 2.5%.
In addition, if the seller finds their own buyer they will not owe anyone a commission.
Open listings are not that common in real estate. Very few agents want to waste their time with this scenario.
Some of the most crucial terms in a real estate listing contract is the length and the commission rate. You will also want to know if the agent offers a cancellation policy.
Usually the contract length is negotiable. You can expect most real estate agents to look for somewhere to be between three to six months.
It is essential to pay a Realtor commission rate that is the same as your competition. Thinking a lower commission will put more money in your pocket is usually not true.
You want to ensure the buyer's agents sell your home. Paying them less than what other sellers are doing will not accomplish that.
When you want to sell your home for the most money possible, going with an exclusive right to sell agreement is the best way to go.
However, picking the right real estate agent becomes crucial. The agent you choose will be in charge of pricing, marketing, putting the home in the multiple listing service, and representing your best interests.
The agent a seller chooses and their strategies to sell the house can have a significant impact on what ends up in a seller's pocket.
A careful interview of multiple agents is always wise.
You are now up to speed on the types of listing agreements for a home seller. Your best bet is likely going to be with an exclusive right to sell agreement.
If you have any questions about the contract you are signing, you can always consult with a real estate attorney. Most of the time listing contracts are boilerplate. The terms you usually need to be concerned with are the one's an agent fills into the agreement.