If you’re thinking about putting your house on the market and planning to hire a real estate agent to help you with the sale, you’ll sign a listing agreement. That is a legally binding contract that establishes a formal relationship between a seller and a real estate agent. A party who violates the terms of a listing agreement can face legal consequences.
Exclusive Right-to-Sell
This is the most common type of listing agreement. An exclusive right-to-sell agreement means the listing agent has the exclusive right to market your home for a period of time stated in the contract, either directly or with the assistance of another broker.
If your house is sold during that time frame, you will have to pay a commission to the broker, even if the house is ultimately sold through the efforts of you or someone else. This type of agreement helps prevent disputes between agents and sellers about who was the procuring cause of a sale (i.e., who found the buyer).
The contract might include an exception that will let you find a buyer yourself. You may be able to name an individual or entity as a potential buyer. If you reach an agreement with that party, you won’t owe a commission to the agent.
Exclusive Agency Listing
Under an exclusive agency agreement, the listing broker will act as your agent. The broker may work with another brokerage to find you a buyer. You will have to pay a commission if your house is sold through the listing broker’s efforts or through the efforts of the broker’s authorized agent or subagent.
You will also have the option to find a buyer yourself. If your house is sold solely through your own efforts, you won’t be required to pay a commission.
Open Listing
An open listing agreement is a non-exclusive arrangement. It means that the listing broker will act as your agent, but you will also have the right to work with one or more additional brokers. They can all try to find someone to buy your house, and you will only have to pay a commission to the agent who finds a buyer who makes an offer that you are willing to accept.
You will also have the option to find a buyer on your own. If you sell the house yourself, you won’t have to pay a commission. Since real estate agents rely on commissions, and since an agent may put in a lot of work and not get compensated, open listings are rare.
Understand What You’re Signing
A listing agreement is a legally binding contract. Before you sign an agreement, review it carefully. Make sure that you understand your rights and obligations, the length of the contract and whether you have the right to withdraw from the agreement if you aren’t pleased with the service the agent provides.
