✏️ 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.
89% of homeowners sold their property using a real estate agent. However, entering into an exclusive rights agreement locks you into a contract and specific commission rate with your agent. You must pay the agent a commission even if you find the buyer yourself.
In an exclusive rights contract you pay a 3% to 6% commission to your agent. On the median home sale price of $432,903, this translates to $25,974 in commissions. This impacts your overall profit from the home sale.
On average a listing agent can earn about $12,930 from your property. With a Flat Fee MLS company like Houzeo, you can save this amount. For a flat fee of $399 you can get your house listed on the MLS giving your property maximum exposure.
What Is an Exclusive Right-To-Sell Agreement?
It’s a contract where you grant one real estate agent the sole right to sell your home. You give the broker the exclusive right to list, market, and negotiate on your behalf. As per this agreement, you cannot work with any other agents for the duration of the contract.
You pay a commission to the agent if the property sells during the contract period. Additionally, during this period, the agent is bound to receive the commission even if you bring the buyer.
How to Get Into an Exclusive Rights Agreement?
Here is how you can enter into an exclusive right to sell contract:
- Choose the Right Agent: Consider the agent’s experience, market knowledge, and track record before you hire one. Discuss contract terms with the real estate agent before you sign the deal.
- Negotiate Terms: The agreement outlines terms like commission rates, duration, and cancelation policy. You’ll have to negotiate all of these individually with the agent.
- Sign the Contract: If both the parties agree with the terms of the contract you can sign the agreement.
Once you sign the agreement, it’s on the agent how they wish to sell your property. They can either list your home on the MLS or reach out to contacts to get you the best price.
- ✍️ Should I hire an attorney? When you enter into a new contract it’s recommended that you get in touch with a real estate attorney to go through the contractual details.
How Does an Exclusive Right-To-Sell Compare to Other Agreements?
» Jump to: Exclusive Agency | Open Listing | Net Listing
There are other types of listing agreements such as exclusive agency listing, open listing, and net listing. Let’s see how they differ from the right to sell agreement:
1. Exclusive Agency vs. Exclusive Right-To-Sell Agreement
Under exclusive agency agreement you hire agents to find a buyer. If they’re successful in bringing sales you pay them a commission. Unlike exclusive right to sell, the agents are entitled for a commission only if they bring a buyer.
2. Open Listing vs. Exclusive Right-To-Sell Agreement
In an open listing agreement, multiple real estate agents are allowed to market your property. You pay a commission only to the one who brings the buyer. In this listing, you are also allowed to look for buyers yourself.
Open listings offer more flexibility because you are not bound to one agent contractually. So, you can even market your home yourself for sale.
3. Net Listing vs. Exclusive Right-To-Sell Agreement
In a net listing agreement, if the home sells above the list price, the extra income goes to the agent. These listings are legal only in Florida, Texas, and California.
Since net listings monetarily incentivize agents, they might try to sell the house for a higher price. However, this can delay the sale of your property.
Pros and Cons of an Exclusive Right-To-Sell Contract
Here are some pros and cons of an exclusive right to sell agreement:
✅ Pros
- Dedicated Service: Since you work with full-service agents, they assist you throughout the home sale process.
- Expertise and Experience: You can benefit from the agent’s guidance in pricing, negotiation, and understanding of the market.
- Property Exposure: Agents often have a network of potential buyers and fellow brokers. This increases your property’s exposure resulting in a quicker sale.
Hence look for an experienced real estate agent to offer you a suitable deal.
❌ Cons
- Higher Commission Cost: The agent’s commission is usually 2.5-3% of the home’s sale price. This means you pay a larger commission for a high-value property.
- Less Control: You are bound to a contract. As a result, you cannot sell the property on your own or hire another agent.
- Potential for Conflict: If you find the buyer yourself, you still owe a commission to the real estate agent. This often leads to conflicts.
- Long Locking Period: The contract binds you to a single agent for 3-6 months. This makes it hard to switch agents for that period.
How to Cancel an Exclusive Rights Agreement?
Cancelation of an exclusive rights agreement depends on the terms of the real estate contract. If a cancelation clause is in your contract, then you have to provide a notice period of 7 days to 3 months.
If the agreement doesn’t have a cancelation clause then it has to be mutually agreed upon. Therefore, it’s better to get everything in writing to avoid a conflict later.
What Happens After an Exclusive Rights Agreement Expires?
Once the contract ends, you can choose to work with the same agent or hire another one. Alternatively, you can consider selling your home on your own. Some exclusive right-to-sell agreements have a protection clause. This entitles the agent to a commission even after the contract ends.
Consider a scenario where your agent introduces a buyer during the contract period. But the buyer decides to purchase your house after the term ends. In this case, you still have to pay the agent’s commission. However, the specifics depend on the terms outlined in the agreement.
Should You Sign an Exclusive Right-To-Sell Agreement?
If you want a streamlined, and easy-to-manage process, then an exclusive right-to-sell agreement is good for you. With this agreement, you can benefit from the agent’s undivided attention and commitment to selling your property.
However, remember you will be contractually bounded for 3-6 months with the same agent. You may not have control over the sale of your home. Furthermore, you would have to pay a significant amount in commissions.
Flat Fee MLS can help you save on hefty agent commissions giving your home the same amount of exposure. Houzeo is the top alternative when you want to list and sell your property fast. You can skip the 3% listing agent commission and sell for a flat fee of $399.
Eager to Know More?
We’ve got you covered. Check out the following video to understand how Houzeo works and why it is one of the best MLS listing websites in the U.S.
How to List on MLS With Houzeo?
5 Easy Steps to List on MLS with Houzeo by owner
» Need More Clarity? Read these exclusive Houzeo reviews and learn why it is one of the best website For Sale By Owner in America.
Frequently Asked Questions
What is exclusive right to sell?
It's a listing agreement between the property owner and a real estate agent. In this, you give a broker the sole right to sell your property on your behalf. The contract is drafted with clauses beneficial to both the parties.
What happens when an exclusive right to sell agreement expires?
When your exclusive rights agreement expires, you can either continue working with the same agent or choose another one. However, each agreement will have unique terms and conditions regarding what happens after it expires.
Can you cancel an exclusive right to sell agreement?
Yes, you can cancel an exclusive right to sell agreement, but it typically involves negotiation with your real estate agent. The process and potential consequences, like paying a cancelation fee, depend on the specific cancelation terms of your contract. Always review your contract carefully and consider legal advice.
