Articles and Advice

Choosing the Right Listing Agreement

If you're thinking about selling your home, finding a real estate agent you trust is a major first step. Once you're comfortable and ready to move forward, you'll need to sign a listing agreement.

This is the legal contract that outlines the engagement between you and your real estate agent. It also explains each party's rights and responsibilities regarding selling your home.

There are several different types of listing agreements. Depending on the firm you're working with, you may have options. Following, you'll find a brief explanation of the most common types of listing agreements you're likely to encounter.

1. Open Listing
An open listing gives you the most flexibility for selling your home. A homeowner can sign open listing agreements with multiple agents and only pay a commission to the agent who brings the buyer to the table. It also gives homeowners the option to find a buyer themselves and avoid paying a commission at all.

The drawback to this is that real estate agents are often hesitant to enter into open listing contracts. After all, a good agent will invest time and money into marketing your house. Under an open listing agreement, there's nothing to protect them from having another agent swoop in and take the commission.

If you choose this option, there's a chance that you'll end up doing most of the work yourself. You may also end up selling your home for less than you would if you had a dedicated agent working on your behalf.

2. Exclusive Agency Listing
With this type of listing agreement, you'll sign a contract with only one real estate agent. However, you'll still retain the right to find your own buyer. If you end up selling your home yourself, you won't have to pay the agent a commission.

This plan allows you to fall back on your agent if you can't sell the house on your own. However, some agents will still hesitate to enter into this type of agreement since they're not guaranteed a commission. There's also a chance that the agent will request a higher commission rate in exchange for the inherent uncertainty.

3. Exclusive Rights-to-Sell Listing
Selling your home under an exclusive rights-to-sell listing is the most common option. This gives the real estate agent the exclusive rights to market your home and list it on MLS. They will receive the full commission as long the home is sold within the designated timeframe.

This is the preferred agreement for most real estate agents. Under this agreement, the agent is also more likely to put all of their resources into selling your home. They don't have to worry about someone else taking the commission, so they're more willing to commit the time and effort to ensure you sell your home quickly and for the best possible price.

Since the agent will lose the commission if the home isn't sold within the designated time frame, it also encourages them to aggressively market your home. This time frame is included in the listing agreement and can range from 30 to 365 days. Most agents consider 90 to 120 days to be the most realistic.

Properly marketing and selling your home takes time, so you don't want to push your agent too much. However, keeping the time frame relatively short will also protect you from being locked into an agreement for too long if they fail to perform.

Which is Right for You?
If you're not in a hurry to sell your home and feel confident in your ability to find a buyer on your own, then one of the first two options may be right for you. However, if you want the best chances of selling your home quickly and easily, consider choosing an exclusive rights-to-sell agreement. Although you'll end up paying a real estate commission, most homeowners agree that the cost is well worth it!

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Choosing the Right Listing Agreement

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