✏️ Editor’s Note: Realtor Associations, agents, and MLS’ have started implementing changes related to the NAR’s $418 million settlement. While home-sellers will likely save thousands in commission, compliance and litigation risks have significantly increased for sellers throughout the nation. Learn how NAR’s settlement affects home sellers.
86% of home sellers used real estate agents to sell their homes. When you work with a real estate agent both parties have to undergo a contract. A listing agreement is a contract that binds you as a home seller to the real estate agent.
However, there are different types of listing agreements. So before you list your property with an agent you need to understand which type of agreement you are entering into. Here’s how an exclusive agency listing works.
What is an Exclusive Agency Listing?
It is a contract between you as a home seller and your agent. Through this contract, one specific agent becomes your sole representative. Typically, the contract duration is from 1 month to 6 months.
The exclusivity of the agreement does not allow you to hire any other agents until the contract is active. Whereas, in a non-exclusive agreement you can employ multiple real estate agents.
Under an exclusive agency listing agreement your agent is responsible for listing, marketing, managing showings, and selling your property. If the agent successfully sells your home, you pay the agreed commission.
However, the exclusive agency listing agreement permits you to list your house For Sale By Owner. According to NAR, 77% of FSBO homes sold within 2 weeks.
- ✍️ Since you enter into a contract with the agent we recommend you hire an attorney to go through your contract thoroughly.
How Does Exclusive Agency Listing Work?
If you are looking to sell a house, you approach a real estate agent to list and sell it on your behalf. After finalizing an agent, you enter into a contract with them.
Once you are under a contract, the agent is solely responsible for listing, marketing, showing, and selling your property. Moreover, an exclusive agency agreement allows you to look for a buyer yourself.
If your real estate agent successfully sells your property, you are liable to pay the decided commission. This commission can be anywhere between 3% and 6%.
On the other hand, you can save thousands in commissions by selling your property yourself. You can sell with an FSBO website like Houzeo. With Houzeo you can list your house on the MLS at a flat rate.
Houzeo provides maximum exposure to your property by syndicating your listing on real estate websites like Zillow, Redfin, Realtor.com, etc. If you find a buyer before the agent you need not pay any commission to the agent.
Exclusive Agency vs. Exclusive Right to Sell
Homeowners are often confused among the terms “Exclusive Agency Listing” and “Exclusive Right to Sell Listing”. These are two different types of real estate listing agreements.
Exclusive Agency
In an exclusive agency listing agreement, a sole agent is entitled to a commission only when they sell your house. If you find a buyer yourself, you do not pay the agent any commissions.
Exclusive Right-to-Sell
Under an exclusive right-to-sell contract, you can appoint multiple agents to sell the property on your behalf. However, you have to pay the commission to the agency regardless of who sells the property.
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How Common is Exclusive Agency Listing?
An exclusive agency listing agreement is less common.
Most real estate agents will recommend an exclusive right-to-sell agreement. This is beneficial for the agents as it gives them complete control over your property. Moreover, you are liable to pay the commissions even if you find a buyer yourself.
But, we recommend you go for an exclusive agency listing agreement. It gives you access to a real estate agent and the liberty to find a buyer yourself. Therefore, you could potentially save on agent commissions as well.
Alternative to Exclusive Agency Listing Agreement
Here are a few alternatives for an exclusive agency listing agreement:
Multiple Listing Service
In this day and age, MLS is a crucial marketing tool to sell your home. MLS listings result in 17% higher selling prices for homes. It provides maximum exposure to your property to potential buyers.
MLS listings are syndicated on websites like Houzeo.com, Zillow, Realtor, etc. Houzeo is a top alternative to get on the MLS. Listing with Houzeo saves you thousands of dollars of listing agent’s commissions.
Additionally, Houzeo’s advanced tech tools like Lead Management, Houzeo Showings, and Houzeo Mobile App help you manage your property listing efficiently.
Open Listing
This is an agreement under which a listing agent becomes a non-agency representative broker. In an Open Listing, you as the home seller can hire multiple agents. The commission is only paid to the agent who sells your property.
Net Listing
In Net Listing, you can set a desired sale price for your property. You can share this information with multiple agents to begin the sale process. The agents add up a commission to your price and present it to buyers. Any amount exceeding your asking price goes to the agent as a commission.
In such a situation, the agents can hide low-price offers from you that undercut their commission. Therefore, net listings are very uncommon as they can lead to conflicts of interest between you and the agent.
- 👉 Are Net Listings legal? Net listings are legal only in 3 states: Florida, Texas, and California.
Pros and Cons of Exclusive Agency Listing Agreement
Here are some advantages and disadvantages of an exclusive agency listing agreement.
Pros
- Agent’s Expert Assistance: You get the assistance of a dedicated agent. The agent negotiates the best possible terms for you to sell your property.
- No Interference From Other Agents: You employ a particular agent to list, market, and sell your property. No other agent can intervene till the agreement is active.
- Sell as FSBO: Under an exclusive agency listing agreement, you can sell your home yourself and save on agent commissions.
Cons
- Limited access to Agents: You cannot work with other agents while you are in an exclusive contract.
- Lack of Exposure: You are dependent on a single agent to generate leads. This results in less exposure and fewer potential buyers for your property.
- Long-term Commitment: The agreement binds you to the agent for a certain time period which can be as long as 6 months.
Should You Sign an Exclusive Agency Listing Agreement?
Signing an exclusive agency listing contract can be a good option if you are a first-time home seller. Once you sign the contract, your chosen agent will execute the sale.
Additionally, an exclusive agency agreement allows you to sell FSBO. If you find a buyer yourself you need not pay the agent’s commissions.
But before signing an exclusive agency agreement, you must consult with an attorney. You must review the contract’s terms and conditions and opt for an alternative that best serves your interest.
Frequently Asked Questions
Which listing agreement is most commonly used?
An exclusive right-to-sell listing agreement is the most commonly used contract. Under this contract, a single agent represents the seller and gets paid regardless of whether the property is sold by them. Here's how an exclusive agency listing can help you save commissions.
What is the difference between an Open Listing and Exclusive Agency Listing?
Under an open listing, multiple agents actively represent you to sell your home. Whereas, in an exclusive agency listing a sole agent is the seller's representative through the sale. You pay the commission only if the agent sells your house.
Is a pocket listing the same as an exclusive listing?
Yes, A pocket listing can be referred to as a private or an off-market listing. Under the pocket listing, sellers sell homes using their extensive connections within the community.
