Types of Listing Contracts
Agents use three basic types of listing agreements, and each one comes with a different set of pros and cons. Real-estate agencies might only offer you one choice when you decide to list, but if you understand the variations, you can negotiate for an alternate agreement when it seems more appropriate for the property you are selling.
Exclusive Right-to-Sell Agreement
This is the type of contract that nearly every agency offers its sellers. The agreement states that the agency will receive a commission no matter who buys the property. It's up to the agency to actively market the property and work to get a sales contract to the closing table. In a multiple listing situation, the listing agency shares its commission with another member agency that produces a buyer.
Exclusive Agency Agreement
This agreement is similar because it gives a specific real-estate agency the right to sell the property. If another agency has a buyer, it must come through the listing agency for its share of the commission. This listing differs from an exclusive right-to-sell because it allows the seller to sell the property without paying a commission if he finds a buyer who has not been introduced to the property by the agency.
Open Listing Agreement
A seller can sign this type of agreement with multiple agencies. No individual agency has an exclusive on selling the property, and the seller can sell it himself without paying a commission to anyone. The agreement says that the seller will pay an agency a specified commission at closing if they find a buyer.
Why do some properties for sale have advertising signs from many agencies in their yards?
They're probably open listings, and each sign represents one of the agencies that has a contract with the seller. You can call any of those agencies — or the seller — for information about the property.
Which Listing Agreement Is Best?
Agencies prefer to use an exclusive right-to-sell agreement because it protects their interests. Good real-estate agencies spend a great deal of time and money to market each of their listed properties. It isn't worthwhile for them to sign an exclusive agency agreement — and then move forward with their regular marketing plan — if you retain the right to sell the property without paying a commission.
Many agencies will sign open listings, but that's often the end of their true involvement with the property. If a buyer wants to see it, they'll comply, but they certainly won't spend dollars to promote a property that's listed with multiple agencies.
Getting Out of the Listing Agreement
Some agencies provide sellers with a written promise that says you can cancel the contract if they do not follow through on their marketing plan. If they do not offer such a promise, ask for it. This addition to your contract should outline the actions or omissions that would allow you to cancel the contract. It should be signed by you, the agent, and the agency's broker in charge.