Table Of Contents
- What is an Exclusive Agency Listing?
- How Does an Exclusive Agency Listing Agreement Work?
- What to Keep in Mind Before Getting Into an Exclusive Agency Listing?
- 1. Risk vs. Reward
- 2. Duration of the Agreement
- 3. Commission Fees
- 4. Marketing Efforts
- 5. Legal Terms
- Other Types of Listing Agreements in Real Estate
- Exclusive Right to Sell Listing
- Open Listing
- Net Listing
- Your Exclusive Rights in Real Estate Agreements
Exclusive Agency Listing: What Is It & What to Keep in Mind?
If selling a property is on your mind, you need to choose the listing agreement. One of the most widely used listing agreements is an Exclusive Agency Listing. It simply allows the agent to sell your property and get them the commission.
However, you are also free to find the buyer yourself. In this manner, if you manage to sell it independently, you will be free of paying any fees to the agent.
As per the reports of the National Association of Realtors (NAR), 92% of home sellers prefer hiring the services of agents. On the other hand, the remaining tend to do it on their own using the help of agency agreements.
Such an agreement qualifies as a middle ground. That’s because the agent takes an organizing role in facilitating professional help. But at the same time, it gives the seller an opportunity to save some commission.
While it is popular, let me tell you something! It is not as popular as the Exclusive Right-to-Sell listings, which make up about 80% of US house transactions.
So, what are some of the things that you need to know? Keep reading to learn it all…
What is an Exclusive Agency Listing?
An Exclusive Agency Listing refers to an agreement between a property owner (the seller) and a real estate agent (the broker).
It authorizes the agent to market and sell the property while also allowing the seller to sell the property without paying a commission to the agent.
The difference between an Exclusive Agency Listing and other listing agreements is in the seller’s right to sell the property independently.
The agent earns a commission if they find the buyer. However, if the seller finds the buyer, the agent earns nothing. Let me explain it a little with a hypothetical situation.
For example, suppose you are selling your home for $500,000. So the seller agrees to an Exclusive Agency Listing with a real estate agent. The agent markets the home, lists it online, and begins showing it to potential buyers.
If the agent finds a buyer who wants to buy your home for $500,000, the agent handles all the paperwork and negotiations. All you have to do is pay the agent their commission (approximately 5-6% of the sale price).
If you find a buyer on your own for your home (possibly a friend or neighbor), you do not owe the agent anything
How Does an Exclusive Agency Listing Agreement Work?
An Exclusive Agency Listing Agreement is a legally binding document between a homeowner and a real estate agent stipulating the party’s responsibilities.
Here’s how the Exclusive Agency Listing Agreement works:
- Signing the Agreement: The seller and the agent decide to work together under certain specified conditions, which include the percentage of commission paid to the agent, the length of time the agreement is in effect, and the price listing of the home.
- Marketing the Home: The agent will list the home on real estate advertising websites, run ads, schedule open houses, and generally stimulate buyer enthusiasm.
- Finding a Buyer: In the event the agent finds a buyer, the seller is required to pay the agreed upon commission. However, if the seller finds their own buyer, no commission is due.
- Closing the Deal: After a buyer is located, the agent or seller will negotiate the final purchase price, prepare the paperwork, and transfer ownership.
Key Features of an Exclusive Agency Listing Agreement:
- Flexibility of Commission: The agent receives a commission only if they find a buyer.
- Marketing Assistance: The agent provides valuable marketing support to get the home more exposure to buyers.
- Seller Independence: The seller can independently locate a buyer for the home and not pay a commission.
An Exclusive Agency Listing Agreement works best for sellers who believe they can find a buyer for their home but still wish for professional marketing services.
What to Keep in Mind Before Getting Into an Exclusive Agency Listing?
There are several things that you should keep in mind before you get into a, exclusive agency contract, right? Before signing an Exclusive Agency Listing agreement, consider these important points:
1. Risk vs. Reward
This type of agreement can be favorable for you, particularly if you think you can find a buyer for your home without the help of a real estate agent.
However, an agent may not feel as motivated to sell your home because if they don’t find the buyer themselves, they will not see a commission. This may mean less aggressive marketing to sell your home.
2. Duration of the Agreement
Most agreements can last anywhere from 3 to 6 months. However, be absolutely certain you know how long you will be locked into the agreement.
If you obtain a buyer after the letter of agreement has expired, the agent may still be entitled to the commission to pay for assisting you prior to the buyer purchasing.
3. Commission Fees
You will want to be certain you understand how much commission they intend to charge you if they secure a buyer.
Generally, the commission for real estate agents is between 5-6% of the expected selling price of the home.
This commission fee typically will have to be shared between your listing agent and the buyer’s agent.
4. Marketing Efforts
Because the agents will never see a commission until they secure the buyer, some agents may opt not to really spend their time putting together an aggressive marketing plan.
Be sure to ask the agent, prior to you signing, the following questions:
- Where are they going to list the property?
- Will they be placing ads online and/or through social media marketing?
- Will they host an open house and/or virtual tours?
5. Legal Terms
Finally, it is important to read the contract carefully! Some agreements have clauses that require you to pay a partial commission even if you find a buyer yourself. Always check for hidden conditions and ask a lawyer if needed.
Other Types of Listing Agreements in Real Estate
Real estate transactions can involve other types of agreements besides Exclusive Agency Listings. The most common ones are listed below:
Exclusive Right to Sell Listing
An exclusive right to sell is the most common agreement in real estate. No matter who finds a buyer, if you have this agreement, the agent will receive a commission.
The agent is fully committed and guaranteed that he’ll get paid for his time and effort. Additionally, he cannot find a buyer for you if he’s not doing the work.
Open Listing
This allows the seller to have multiple agents marketing the property simultaneously. The agent that produces the buyer is the one who receives payment.
There is no assurance of timetables and effort because each agent will be fighting for the sale.
Net Listing
In this case, the seller sets a minimum price, and the agent keeps anything above that. This can be risky to sellers since the agent now has an incentive to sell the home for as high a price as possible.
There are times when this leads to agents pocketing far more than the seller realized. This type of listing is illegal in some states because of ethics in doing business.
Just like with any of these agreements, they come with benefits and disadvantages. Your choice depends on how much control you want over the sale, and how much commission you are willing to pay.
Your Exclusive Rights in Real Estate Agreements
The listing agreement you select is key to determining how much control you have and how much commission you will pay when selling a home.
Exclusive Agency Listings allow sellers the flexibility to seek their own buyers while receiving professional assistance from an agent.
However, if there is no promise of a commission then the agent has less motivation to put large amounts of marketing money.
Before signing any agreement, be certain to:
- Understand how commission works.
- Understand the length of the contract.
- Ask about marketing expenses.
- Fully read any legal terms.
Choosing an appropriate real estate listing agreement can save thousands of dollars and ensure you get a good deal when selling your property.
It’s important to your leverage in negotiations to know your rights whether you’re using an agent or selling the property on your own.
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