In real estate transactions, it is the main job of a certified listing broker or a real estate firm to be in charge of the sale of a property. This agent represents the seller in a real estate transaction since there is authorization to act on behalf of the estate. This creates a special legal relationship called agency, which is defined, within real estate law, by a body of laws called agency law. This unit will outline what an exclusive agency listing means, who they are, the different types of exclusive agency listings available, and how they work. We go further to explain the relationship between the agency and seller, what benefits are entitled, the purpose of an exclusive agency listing agreement, and how it relates to the real estate world.
Definition of Exclusive Agency Listing
Exclusive Agency Listing is a legal agreement made between a homeowner who wants to sell and a listing broker. The broker serves as the agent or as the legally recognized representative granting the firm or agent the right to be the only agency to list and sell a property except the homeowner decides to sell his or her property without paying commission to the listing broker, in a case where the seller finds a buyer independently of the firm.
What Is an Exclusive Agency Listing Agreement?
An exclusive agency listing agreement is a legal agreement between a real estate firm and a home seller that allows the firm to be the sole entity responsible for advertising and selling the property. In other words, this contract gives the real estate agent the right to be the only representative to sell the property. For further clarification, anyone who hires a real estate agent signs an agreement. In the case of sellers, it is the exclusive agency listing. It is the other way around from the buyer’s perspective.
In an exclusive agency listing, the seller still retains the right to advertise and sell the home independently, without paying any charges to the real estate agent.
How Exclusive Agency Agreement Works
There are key elements in any exclusive agency agreement.
#1. Term of contract
A contract is the first part of an exclusive agency agreement where conditions are outlined. The term could be weeks, months, or years and can be negotiable if you feel that the term is too long or perhaps too short.
There should be a document that clarifies what the seller pays as compensation out of the proceeds of the sale and then the buyer’s obligation to pay anything extra. So it is the amount of commission the agent will earn if the sale happens. Commission ranges between 5-6% of the sale price although this is negotiable.
#3. Buyer-broker exclusive
Buyer-broker exclusivity in an exclusive agency agreement detailing the buyer will only work with the firm or agent the buyer chose. Here, the buyer will not be able to change or look for another agency and agent to work with.
#4. Description of property in the contract
The agreement should define the property in question. It is binding the contract if this description matches the actual property in case you are the buyer. This would also include the type of listing.
#5. Listing price
In the case of an exclusive agency listing, the document should state the listing price. The exclusive right to sell: If the agreement is between a seller and a broker, it could include the exclusive right to sell, thereby giving the listing firm or agent the sole right to sell the property.
The points to consider in an exclusive agency listing agreement
Before signing an exclusive agency listing agreement, they are important points you should fully understand:
- Life of Agreement: As in an exclusive agency listing, the seller requires to pay a broker commission in every situation. You can include language in the agreement that solidifies that no payment of commission to the broker regardless of the time it takes to find a buyer. You could also include language noting that you can switch brokers if the broker hasn’t found a buyer by a certain date.
- Property Description: It is better to include a property description in an exclusive agency agreement. Always make sure that the description of the property is accurate.
- Clarity: An exclusive agency agreement is allowed in most states, but some base agreement terms vary from state to state.
Let’s see the different types of exclusive agency listing contract.
Types of Exclusive Agency Listing Contract
There are five different types of exclusive agency listing agreements with different options available whenever a property is on the list for sale with the real estate broker.
#1. Open listing
This type of listing agreement is an offer made by a homeowner who wants to sell his/her property through one or more real estate agents or agencies, to pay a commission to whoever brings an acceptable purchase deal to the table. However, there would be no payment of commission made to any agency, if the seller finds a buyer on his own, without the assistance of the agencies.
In this situation, some agent(s) will spend less time or money working on an open listing except if the property in question is worth a great value or if the stock on the property is low, therefore, would not take such a type of listing since the property owner can sell the home alone or withdraw the listing made without giving notice. For example, a builder may enter into open listings with brokerage firms in the area where they bring their buyers, and if their buyer buys, then they get their payment.
#2. Exclusive agency listing
In this type of listing contract, the exclusive agency listings hire one agent or agency to sell the property. In cases where the contracted agent or agency finds an acceptable buyer, the property seller must pay the agency a sales commission. Due to the level of control by the homes seller in the open listing, no commission is owed if the home seller finds the buyer independently, as with exclusive agency listing where there is
#3. Exclusive right to sell listing
A large part of the property agency prefers this type of listing, where the listing agent has full control of the transaction. In the exclusive right to sell a listing, whether it is the property owner, the listing agent, or the corporate agency who finds the buyer, the listing agent or corporate agency will get the sales commission. However, the listing agent or agency can renew the contract if there was a perfect job the first time and the contract duration expires.
It possibly takes, between 90 to 120 days exclusive right to sell, giving the certified listing agency time to advertise and sell the property. On the other hand, an alternative is a 180-day listing with an unconditional cancellation clause after the first 90 to 20 days.
#4. Multiple listing
Multiple Listing distributes vital information and photos via the computer to members who are working with the buyers. Most multiple listings are also available on the Internet at sites, therefore allowing home buyers to research what they want on their own. Multiple listings members can submit exclusive agency and exclusive rights to sell listings to the listing agent. Without the benefit of the Multiple Listing, “for sale by owners” are at a huge loss.
#5. Net listing
The net listing is a type of listing that is preferable by some agencies since it gives them what they want on a platter of gold. Under this type, the property seller informs the agent or listing agency of the net price they desire for their own while the agent or listing agency adds a commission to the net price while presenting it to the potential buyer. Net listings can be illegal in some states.
A better alternative to a net listing is an exclusive right to sell with a listing price at the amount the seller wants to net plus the listing agent’s sales commission. For example, a property owner wants to obtain $1,100,000 for their property. If the agent sells it for $1,100,000, they make $100,000. In this case, the problem is that if the agent sells it for $1,000,000, the agent will make it.
Why Would a Seller Want an Exclusive Agency Listing?
There are several advantages to choosing an exclusive agency listing agreement instead of an exclusive right-to-sell agreement:
#1. Potential buyers
In an exclusive agency listing, the agent only considers potential buyers who are ready to buy the property. Exclusive agency listings lead sellers to potential buyers, simply because the real estate agent spends extra time finding people who are most likely to purchase. You may have to show your home daily to prospective buyers in an open listing, some of whom aren’t seriously considering buying the home
#2. Easy negotiations
As discussed above, exclusive listing agents reduce long conversations on a property deal. The major reason lies in the level of trust the homeowner has in the agent or listing agent when it comes to finding likely buyers. Home buyers may also come independently as a result of previous deals and the respect they have, for an agency or agent about a property.
#3. Good relationship with agent
Exclusive agent listings mean you get an exclusive agent who will give extra attention to you and your mission of selling your property. The seller and the agent have a shared interest in selling the property; the owner wants to earn a good profit from the sale and have buyers relatively quickly, and the agent wants to earn compensation.
Some persons don’t appreciate disclosing their sales plan for one reason or another. Exclusive listings keep details confidential, and agents can proceed with the sale of homes without giving off any traces to neighbours.
Read Also: Letters Of Testamentary: What Are They?
How Do You Get Out of an Exclusive Right To Sell Agreement?
For an exclusive right-to-sell agreement to be put to a conclusion, there must be uniform consent from both the property seller and the listing agency or agent.
However, if there is a dissolution clause in the agreement, you may have to pay a dissolution fee.
What Can Cause an Exclusive Right To Sell Agreement To Be Cancelled?
There should be valid reasons behind cancelling an exclusive right-to-sell agreement. Reasons such as:
- Communication factor.
- The inability of Listing the Property.
- Unethical Behavior.
How to Get Out of an Exclusive Agreement?
- Check the contract carefully and check for language around the conditions under which you can cancel the agreement.
- Discuss with your Agent and state your reason for wanting to cancel the agreement. Both may reach an agreeable solution for cancelling the agreement.
- Reach out to your contracted agency or agent with respect to the termination of the agreement. In the document tell the brokerage why the contract should be dissolved, so that it will be in writing and made available, should any questions arise later.
- Lastly, also wait for the contract to come to an end naturally (expire) If you are unable to cancel the agreement.
Difference Between Exclusive Rights and Exclusive Agency
In an exclusive right agreement, the agency will receive a commission from the seller irrespective. After signing the agreement, the homeowner will also have to pay a commission to the agency or listing agent if they find a buyer and sell the house.
Under an exclusive agency agreement, the seller holds this right. The main difference between the former and the latter is commission. An exclusive agency will not guarantee to pay the commission, but an exclusive right will.
Exclusive Agency Listing Pros
#1. Have the Potential to Save Money.
This form of listing agreement gives you the opportunity to potentially save money. You will not have to pay any commission fees if you locate the buyer for your home. If you have someone in mind who you know adores your property and is seeking to buy, this could be the listing agreement you need.
#2. More command.
You may bring in buyers you already know and trust by using an exclusive agency listing. This increases your privacy and control over the sale of your home.
Cons of Exclusive Agency Listing
#1. Agent Motivation is lower.
If an agent is not guaranteed a commission, they may not put forth as much effort in marketing your home. Some agents may refuse to list your home on the multiple listing service at all. This would place the majority of the responsibility for marketing and selling your home on you.
#2. You’ll have more work to do.
You pick up a lot of work since there is a chance that your agent will be less motivated to work hard to sell your house. While you may be looking forward to the task ahead, make sure you do your homework so you are prepared.
Exclusive Right to Sell Pros
#1. Motivated Agent.
An exclusive right to sell agreement, like most contracts, has an expiration date. Because of this, and the certainty that they will earn a fee if your home sells, agents will do everything possible to sell your home quickly and at the best price.
#2. Multiple Listing Service.
Your agent will work hard to sell your home as quickly as possible. To accomplish this, they will put your home on the multiple listing service. Your home will be exposed to thousands of buyers and buyer agents who may be interested in purchasing it.
Exclusive Right to Sell Cons
#1. Cancellation Policy
Make certain that you thoroughly read your listing agreement and review the cancellation policy. Some contracts do not enable you to cancel until the contract’s time frame has expired. This can be a problem if your agent is not giving satisfactory service.
#2. Commission Policy
As previously stated, the agent in this form of listing agreement will receive a commission on your home whether they or you find the buyer. While this is not the most appealing feature of this form of listing agreement, it is industry standard. It is critical to assess what your chances are of finding a buyer if you do not already have one lined up when deciding to sell your house.
Why Would a Seller Want an Exclusive Listing?
The Exclusive Listing Agreement establishes a ground for honesty, trust, and confidence between the seller and broker. Such a relationship is important during the marketing process and through the closing of the sale or lease. We require this foundation for every property we sell or lease.
Is Exclusive Listing Good?
An exclusive listing is a good option as it gives an advantage for a property available to lots of buyers (s) with different pricing where your realtor chooses the best deal within a period.
Which is better: exclusive right to sell or exclusive agency?
The exclusive right to sell is better and is common in real estate contracts for home sellers and agents, as it gives the agent a guarantee to put in the effort necessary to get their sales compensation as contracting comes with an expiration date.
Is an Exclusive Agency Listing Going to Be on the MLS?
Even if you have an exclusive agency agreement with your Realtor, your property will still be listed on the MLS. The National Association of Realtors has a rule that multiple listing services are not permitted to limit or adopt policies against properties engaged into this agreement. It is, nonetheless, a legally binding contract. As a result, it is eligible for inclusion in the MLS alongside other listing types.
It is pertinent to note that whichever agreement you choose as a property owner, seller, listing agent, or real estate firm, you should always review the agreement’s terms and conditions before signing it.