When you want to sell your home and hire a real estate agent or broker, you will sign a listing agreement with them. The most common type of listing contract is an exclusive right to sell.
But there isn’t only one type of listing contract that the broker will require you to sign before they will list your home.
We look at listing agreements and the different types you might encounter.
What is a real estate listing agreement?
The homeowner signs the listing agreement to give the real estate broker authority to sell their home. The contract gives the real estate broker the authority to represent the seller and their interests.
The agreement also sets out the Realtor commission that the homeowner will pay for the service provided by the broker.
Sometimes the term “listing agreement” can also refer to a contract between a company and a financial exchange like the New York Stock Exchange, but we are looking at the use of the term in real estate.
How does a listing agreement work?
Once the seller has signed the listing agreement, the broker has the green light to market their property to potential buyers.
It is one of the tasks a seller’s agent is responsible for when working with a seller.
This agreement is like an employment contract instead of a real estate contract where the property is transferred.
Real estate licenses and laws mean that only a broker can list and sell someone else’s real estate. These laws also mean that the listing agreement must be written down in most states.
As you might expect, these contracts are legally binding but can be terminated early under certain circumstances.
If the broker doesn’t do anything to find a buyer, they haven’t stuck to their side of the agreement, and the contract can be terminated. The contract will also be terminated should the home be destroyed or when either the owner or the broker dies, becomes bankrupt, or becomes insane.
The listing contract will include similar information regardless of the agreement type. Details of the property, including the address and a description, will be written into the agreement.
The contract will also detail items the owner will leave on the property when sold. Things that the owner wants to remove from the home and not include in the sale will also be mentioned. This might include window treatments, appliances, and other items often part of a property sale.
As with other types of contracts, listing agreements also detail the responsibilities of the broker and the seller under the arrangement. It will state the listing price and the commission paid to the broker when the home is sold.
The agreement will also limit the time the broker has to sell the property. It will include an automatic termination date ending the seller’s and broker’s agreement.
Should there be problems in the relationship between the seller and the broker, the mediation terms in the agreement can be used to resolve the situation.
There can also be other terms and conditions included in the contract for the benefit of the broker or the seller.
The different types of listing agreements
An exclusive right to sell listing
The most common that type of listing agreement is the exclusive right to sell listing contract. Under this contract, one broker is given the right to sell the homeowner’s property.
While this is similar to an exclusive agency listing, it differs because the broker will be owed a commission when the home is sold, regardless of whether they helped in the process.
So even if the seller finds their buyer independently of the real estate broker, they will still need to pay a commission to the broker.
Choosing the right listing agent is essential regardless of the type of contract.
An exclusive agency listing
An exclusive listing means that only one broker is given the right by the seller to market the property. The seller can still find a buyer without the broker’s help and pay them a commission.
If the broker plays a part in selling the home, they will be due a commission under this agreement.
An open listing
If the seller wants to employ multiple brokers to help sell their home, an open listing can allow this. This non-exclusive listing means the seller only has to pay a commission to a broker when they successfully help sell the property.
This type of agreement means that the seller can still sell their property without the help of a real estate agent and pay their commission.
While there are several real estate contracts, an exclusive right-to-sell agreement is the most common. Always carefully read the terms before signing on the dotted line.