If you're looking to sell your house, one of the first decisions you'll have to make is whether or not to list it for sale. The majority of people hire a real estate agent and entrust them with the task. You have many choices regarding the type of agent you work with, how your home is listed, and the terms you agree to follow during the sale. You could also go the "for sale by owner" route, which does not require you to list with a specific company. There are numerous reasons for choosing an exclusive real estate listing, as well as numerous methods for doing so. We'll start with the basics.
Important Points to Remember
- An open listing differs from an exclusive listing in that the latter involves a broker acting on behalf of the seller.
- The seller is not required to pay a commission to the listing broker if the house is fully sold through the seller's efforts.
- To demonstrate that the future buyer came about as a result of the brokerage firm's efforts, the firm will try to manage all contact with other brokers and buyers.
Listings are divided into two types.
Listings in the Public Domain
An "open listing" occurs when a homeowner sells their home without the assistance of a real estate agent or on their own behalf. The house is on the market and open to the public, and the owner may have met a number of real estate agents or brokers while placing ads, showing the house, and receiving offers, but they are in charge of the process. A contract may follow if an agent or broker assists them in selling their home (for example, if a real estate agent comes for a showing with their buyer). Even so, there are no contracts in place with agents that guarantee them the exclusive right to show the home or with brokerage firms that guarantee them the exclusive right to list the home for sale.Listings from Exclusive Agencies
An exclusive agency listing differs from an open listing in that the broker is automatically assigned to represent the seller. This contract can be set up in a variety of ways. The seller may still reserve the right to sell the house themselves and avoid paying a commission in that case. The broker may also be free to work with other firms, which means a second or third firm could bring a qualified buyer whose offer is accepted by the seller. In most cases, the seller pays both sides of the commission because the broker is paid a listing commission that is shared with the selling broker (listing and selling).Who Would Benefit from Working with an Exclusive Agency?
An exclusive agency listing can serve as a kind of middle ground between a broker and a seller in some situations. It could be as simple as having a claim for the broker's sale (rather than no claim at all). There's a good chance that the seller won't be able to sell the house on their own. A seller will gain traffic in this case in exchange for the promise of a fee. It's ideal for a For Sale by Owner (FSBO) seller who tells a broker that if they hired a real estate agent, the property would be theirs. Both parties get a little of what they want with exclusive agency listings. Perhaps the seller believes they will be able to sell the house on their own. Perhaps the company fully expects to be granted an exclusive right to sell and wishes to be compensated for its efforts. It's not unusual for a real estate firm to want an exclusive listing agreement, a contract that pays them only, and a broker who won't compete. The party with the exclusivity agreement will pay that broker if a rival broker brings the buyer. Note: The number of homes for sale by owner (FSBO) was at an all-time low of 8% in both 2019 and 2020, the lowest rate since 1981. These FSBO sales occur much more quickly than sales facilitated by agents, which may be due to the fact that 77 percent of FSBO sellers report selling to a friend or acquaintance.The Insider's Guide to Exclusive Agency Agreements
An exclusive agency listing means that the seller can only be represented by one brokerage firm, and the home cannot be listed elsewhere. That is a win for the brokerage in and of itself. However, by allowing the seller to sell the home on their own, the FSBO seller is able to avoid paying a commission if they find a buyer on their own. As a result, the seller also comes out on top. In that case, the firm would provide no assistance or representation to the seller. (It's also common for buyers to go without an agent here.) Because they each receive perks and payoffs based on their own perspectives, this trade forms the basis of a contract that feels fair to both parties. As a bonus, it encourages both parties to compete to sell the house on their terms and as quickly as possible. An exclusive listing entails behind-the-scenes work, such as keeping meticulous records, checking in with the other party, and keeping track of events. The firm prefers to handle all contact with other brokers and home buyers in this type of listing so that when a buyer is found, they can prove that the buyer came from their efforts. This is part of the terms of their payment claim, and it raises questions. Note: Because it's not always clear how a buyer shows up, many mainstream brokerage firms insist on an additional clause to protect their profits. This clause guarantees that the seller will compensate the listing broker regardless of how the buyer learned about the sale.How Exclusive Agency Listings Are Seen by Agents
One of the reasons why so few exclusive listings are signed is because of detailed monitoring. Many real estate agents would be stumped if you asked them to explain what an exclusive agency is (or perhaps would prefer not to). An exclusive agency listing exposes an agent to the possibility of putting in a lot of effort for no pay. Setting a time frame to try a standard listing first is one way some agents have been able to work with firms that use exclusive listings. Suppose the seller is unable to find a buyer through their own efforts within 30 days. In that case, the listing will enter a second phase (as specified in the sales contract), during which the parties will have the option to convert the listing to an exclusive right to sell listing.