A listing agreement is a contract between a broker or real estate agent and the property owner that allows the broker to find a buyer for the owner’s property. This is essentially an employment contract whereby the broker is hired by the owner to act as owner’s agent for the sale of his property. According to the National Association of Realtors, a listing agreement must include:
- A beginning date and a termination date.
- The listing price of the property
- Amount of commission to be paid to the broker upon a successful sale
There are mainly three types of listing agreements as defined by the National Associate of Realtors and it up to the seller to choose the one they deem fit for the situation. Each of these listing agreements comes with a different level of services, responsibilities and rights for both parties. It is, therefore, important to get a knowhow of all these before deciding which one suits you best.
Types of Real Estate Listing Contracts
The following include the top three types of listing agreements in detail:
Exclusive Right to Sell
The exclusive right to sell is the most common type of listing agreement used in the industry. This gives the agent exclusive rights to sell your property. If you have an exclusive right to sell agreement in place with your agent or broker and you manage to find a buyer on your own, you are still bound to pay the broker or agent his commission. In case another agency or broker finds a buyer for you, the listing agency will share the commission in most cases.
Exclusive Agency Listing
Under the exclusive agency listing agreement, the listing broker acts as the agent or as the legally recognized representative of the seller and the seller agrees to pay a commission to the listing broker if the property is sold through his efforts. In this case, you have the right to sell on your own and not be bound to pay a commission to the agency. This type of listing agreement is the second most common type being used in the real estate industry at present.
Open Listing Agreement
An open listing agreement is the most flexible type of listing agreement. It gives the owner the right to sell on their own and have agreements with as many brokers as they like. A commission is only paid if a broker under agreement brings a buyer. Commissions paid under open listing agreements are typically half of what is paid in other types of listings. It should be noted that even though many agencies will sign an open listing agreement, they will not necessarily spend any effort on marketing since they do not stand a guaranteed chance of getting a commission.
Choosing the Right Listing Agreement
All three types of listing agreements have their own pros and cons and it is entirely dependent on the seller to determine which one suits them best. The expected amount of money and time required to sell a particular property can help make a decision on which type of listing to choose in each case. If you have any questions regarding listing agreements, contact our real estate professionals today for more information.