When it’s time to sell your home and have found the right real estate agent for the job, you’re probably wondering, what’s next? Once the right realtor is in place, you’ll need to finalize a property listing agreement. There are several types available, so it’s important to choose the one that makes the most sense for you and your situation.
Types of Property Listing Agreements
While there are many nuances to a property listing, a great deal of knowledge can be ascertained by understanding the three main types of property listing agreements that may be offered to you:
- Exclusive Right to Sell Listing Agreement: This is the most common of the three listing agreements. The real estate broker has the exclusive right to sell your home for a fixed period of time (6 months is a popular term). The owner cannot sell on their own, or enter into an agreement with any other agent, broker, or otherwise. If the home is sold through any means other than the listing broker, the full commission is still due to the listing broker. With this type of listing, agencies will usually work their hardest.
- Exclusive Agency Listing Agreement: This type of agreement commits you to work with only one broker who will represent you (again, for a fixed period of time); however, it also leaves you with the ability to sell your house on your own. This is a very valuable type of listing for sellers that are interested in selling their own home and avoiding the cost of commission, yet willing to pay the commission to an agency that is able to sell their house either more quickly or at a higher price than they themselves can. Although it is not usually their first choice, confident agents and agencies will generally agree to this arrangement and work hard to prove their worth.
- Open Listing Agreement: This is a non-exclusive agreement, meaning that you are not tied to one particular agent or firm. With an open listing agreement, you may work with more than one agent or firm at the same time and if you sell your house on your own, you do not have to any commission to anyone! Although this is the most advantageous listing type for sellers, it is important to look at this type of agreement from the broker’s perspective. Brokers will be hesitant to invest time and money into marketing your property if they are unsure about the situation. The result may be a limited effort or low budget approach to your marketing plan. It is up to you to determine if you want multiple but lower quality efforts or one high quality full effort. This is the least popular choice since it is non-committal on both sides. Most sellers instead opt with options 1 or 2 above then, if the listing doesn’t sell, renew with a new agent/agency with a fresh agreement.
Before deciding which type of property listing agreement works for you and finalizing it, you should also consider the following: Commission Rates and Agreement Length and Cancellation Clauses.
- Commission Rates: Know your market! If there is a shortage of inventory, you have the advantage to negotiate a lower commission.
- Agreement Length and Cancellation Clauses: Shorter listing agreement time frames provide the flexibility to change listing agents if you are dissatisfied with their marketing efforts. Even more powerful than a short time frame is the right to cancel. If you experience a life change, or are not satisfied with the listing broker, the cancellation clause can immediately be put into effect.
Selling your home is a big decision, so take the time to evaluate which agreement is best suited for you. An experienced real estate attorney is a valuable asset to have by your side to guide you and ensure a smooth transaction. Located in Royal Palm Beach and servicing the South Florida Region, contact The Law Office of Donna Hearne-Gousse, P.A. for your title, escrow, and real estate closing needs.
The Law Office of Donna Hearne-Gousse, P.A.