Which Estate Agent Listing Should You Use in Selling Your House?
One of the first steps in selling your house is selecting the right real estate agent. Once you’ve found the right agent, you need to decide on what mandate or listing agreement to enter into with your estate agent. Deciding on the type of listing agreement is a significant decision in your home selling process.
What is a listing agreement?
A listing agreement is a legal contract between you and your real estate agent that gives the agent the right to sell your house. It will set out all the terms of what the agent can do to market and sell your house, as well as what your obligations will be in the process. This is also where you agree on the commission to be paid at the successful sale of your home.
There are different types of listing agreements and you have the right to choose which one you want to use. You could also negotiate your own agreement. At the end of the day, the type of listing agreement you choose will depend on how much of the marketing and selling duties you are prepared to take on yourself in the selling and closing process. Deciding on which listing agreement to choose can be intimidating, but it needn’t be. Everything can be negotiated. You can negotiate the time frame of the listing agreement, the agent’s commission, the type of listing, your selling price and the duties of your estate agent.
The most commonly used listing agreements
There are many types of listing agreements, but the three most commonly used ones are:
Exclusive right-to-sell listing
An exclusive right-to-sell listing is the most commonly used type of listing and the one that most agents prefer. It gives your agent the exclusive right to represent you and to bring potential buyers to your home (directly or through a buyer’s agent). It gives your real estate agent full control over the transaction and the exclusive right to earn the agreed-upon commission if the transaction is concluded in the specified time frame. The agent is responsible for everything to conclude the transaction right up to the real estate closing phase. In this type of listing, you need to pay the agent no matter who sells your house. You cannot sell the property yourself without paying the agent’s commission; regardless of where the buyer comes from, you need to pay the agent’s commission.
Exclusive agency listing
With this listing type, you give one agent the right to sell your home, but you reserve the right to sell your home independently if you find a buyer on your own.
The agent only gets paid if he or she finds the buyer who buys your house. If you end up selling your home alone, no fee is paid to the agent. For the seller, this might sound like the best of both worlds, but for the real estate agent, there is no guarantee that they will receive any commission if you sell your own house.
An open listing is a non-exclusive listing. You can have open listing agreements with as many agents as you want, or you can sell your home yourself. You only pay a commission to the agent that brings the buyer whose offer you accept. If you find a buyer without any agent’s help, you do not have to pay any commission to any of them.
It speaks for itself that this type of listing is not very popular with most real estate agents. They may spend days or weeks marketing your house, only to walk away empty-handed when you or another agent sells your house.
Which listing is best for you?
An open listing can be attractive for the seller, with very little commitment and many agents “selling” your house. However, with very little guarantees for the agent, they might not spend a great deal of time or effort marketing your house. They know that any effort on their part may end up being unrewarded. The possibility of no commission also means that they might have less money to spend on marketing your house. More agents do not necessarily mean more marketing exposure to potential buyers. But, if there are more buyers than sellers in the market when you want to sell your home, an open listing might be a good option. An agent who works with a lot of buyers might be happy to accept an open listing.
As a seller, an exclusive right to sell agreement might feel very restrictive, and you might think that it would be very unfair to pay a commission if you find a buyer yourself; and that is all true. However, the agent will certainly invest more time and money into marketing your property when commission is guaranteed. The agent will also have all the responsibility of controlling the transaction from listing to closing and everything in-between, making the process a lot less stressful for the seller. Plus, in most instances, the better the offer, the better the commission, which means the agent will push to get the best possible offer for your house. In practice, this is the most used type of listing.
An exclusive agency listing could sound like to best option for both the seller and the chosen agent. In some instances an exclusive agency listing can be a good compromise – for the agent, it might be better than no listing at all, and the seller feels that if he finds his own buyer, he does not have to pay commission. There are, however, definite disadvantages as well. The offer from the buyer that the agent brings might not be the best offer, but since earning commission depends on closing with that buyer, the agent might be tempted to get you to accept the offer. The time and money spent on marketing your home might also be influenced by the possibility that you might find a buyer yourself and the agent will be left unrewarded for any time and effort spent on marketing your home.
The listing agreement you choose will depend on how much time and effort you want to put into selling your home, the state of the property market when you want to sell your home and your personal circumstances. The listing agreement will determine the entire process of selling your home, from putting your home on the market all the way through to paying your agent’s commission. If you are uncomfortable with any terms, negotiate. If you need assistance, consult with a real estate attorney with experience in listing agreements and real estate closing.
A listing agreement is a contract like any other legal contract – you need to understand your rights and obligations before you sign. If you are unsure about which listing type you should go with, properly educating yourself and speaking with and getting the advice of several knowledgeable people will take you a long way.