Real Estate Witch

  • Sell FSBO
    • How to Sell a House Without a Realtor
    • Best Flat Fee MLS Companies
    • FSBO Zillow Listings
    • Best FSBO Websites
    • Best Flat Fee MLS Companies in Florida
    • Companies That Buy Houses for Cash
  • Save When You Sell
    • Low Commission Real Estate Companies
    • 1% Commission Realtors
    • 2% Commission Realtors
    • Discount Real Estate Brokers
    • How to Find a Realtor
    • Realtor Fees
    • How to Negotiate Realtor Fees
  • Reviews
    • Clever Real Estate Review
    • Redfin Review
    • Redfin vs. Realtor
    • Ideal Agent Review
    • HomeLight Review
    • Opendoor Review
  • Blog
  • About
  • 808-213-6770
Find Agents

June 20, 2022 by Andrew Whytock Leave a Comment

What is a Listing Agreement (and How Does it Work?)

real-estate-listing-agreement

Types of Listing Agreements | Details to Look For | When to Sign | How to Cancel

A listing agreement is a contract authorizing a real estate agent or broker to represent a home seller to find a buyer for the property.

There are various types of listing agreements, including: An exclusive right to sell listing, exclusive agency listing, a net listing, and an open listing.

The most commonly used listing agreement is an exclusive right to sell. But the best option for you depends on your situation and goals as a seller.

Find a real estate agent for more specific listing agreement or real estate contract advice tailored to your area, or read on for more information.

πŸ”‘ Key Takeaways:

  • A real estate listing agreement gives a realtor the power to represent you and sell your home.Β 
  • An exclusive right to sell listing agreement is the most common agreement home sellers sign with realtors.Β 
  • A typical listing agreement lasts 3-6 months, but the length of time can be negotiated.
  • The agreements are legally binding, but your agent might be willing to terminate the agreement before it expires if you aren’t satisfied with their service.

Types of Real Estate Listing Agreements

Exclusive Right to SellExclusive AgencyOpen ListingNet Listing
πŸ† Best forSellers who don't feel comfortable selling their home without a professionalSellers who want to try selling FSBO, while getting backup offers via an agentSellers who want to try selling FSBO and solicit offers via multiple agentsSellers in hot markets where net listings are legal
How often is it used?Almost alwaysNot oftenRarelyVery rarely
Work with one agent exclusivelyβœ…βœ…βŒβœ…
Option to sell FSBOβŒβœ…βœ…βŒ
Pay % commissionβœ…βœ…βœ…βŒ
Potential for disputes over who sourced the buyer❌ βœ…βœ…βŒ

1. Exclusive right to sell listing agreements

Most real estate agents use exclusive right to sell listing agreements. It guarantees that the agent is paid a commission fee when the sale closes, regardless of who finds the buyer. 

The promise of compensation is important because agents have upfront costs β€” like paying for photography and staging β€” when they’re marketing a home. 

An exclusive right to sell agreement also sets up an exclusive relationship, so the home seller can’t work with any other agent for the duration of the contract.

Home sellers benefit from an exclusive right to sell agreement because it clearly lays out the agent’s responsibilities and establishes a timeline (typically 3-6 months), which can motivate the agent to sell your house before they lose your business.

Β» MORE: Everything you need to know about exclusive right to sell listing agreements.

2. Exclusive agency agreements

An exclusive agency agreement is only signed with one agent, just like an exclusive right to sell. But there’s a twist.

If you sign an exclusive agency agreement, you still have the right to sell for sale by owner (FSBO) without paying any commission to your agent β€” provided you find a buyer on your own.

Exclusive agency agreements are risky for agents because there’s no guarantee that they’ll be compensated for the time and effort they put into selling your home.

As a home seller, an exclusive agency agreement might be beneficial if you want an agent as a backup option while trying to sell FSBO.

Exclusive agency agreements, however, can lead to disputes over who found the buyer. At the end of sale, you and your agent might disagree over who sourced the buyer and, thus, whether or not you owe the agent commission β€” which could get messy.

Most agents won’t sign an exclusive agency agreement because they aren’t as clear-cut as an exclusive right to sell.

3. Open listing agreements

If a property owner is selling without an agent, they can still contact local realtors and agree to pay a buyer’s agent commission if the agent finds a buyer.

This type of agreement (open listing) differs from other types of listing agreements because it isn’t exclusive β€” a home seller can sign one with multiple real estate agents. 

Open listings allow the seller to retain the right to sell FSBO, so they might be able to avoid paying commission if they can find a buyer on their own.

Β» MORE: Everything you need to know about open listing agreements.

4. Net listing agreements

Net listing agreements don’t have a set commission rate for the real estate agent, like exclusive right to sell or exclusive agency agreements. Instead, the agent keeps the difference between the listing price and the sale price β€” if they’re able to sell the home for more money than the listing price.

For example, if the seller and the agent agree to list the home for $200,000, but the home sells for $225,000, the agent gets to keep $25,000.

Net listings are illegal in most states, so they’re very rare. In fact, the National Association of Realtors (NAR) has banned net listings for its 1.5 million realtor members.

Β» MORE: Everything you need to know about net listing agreements.

Listing Agreement: What’s Included?

The legal jargon contained in listing agreements doesn’t vary much, but you should take note of the following details:

  • Length of the contract. 3-6 months is standard, although some agents may push for up 12 months. 
  • Listing price. The initial price that the home is listed for.
  • Commission rate. How much is paid to the listing agent and buyer’s agent when the home sells. Each agent usually earns between 2.5% to 3% each, although actual rates vary by market. 
  • Cancellation policy. The process for terminating the agreement, and the associated cancellation fees.
  • Protection period. A period of time after the agreement expires when an agent remains eligible for commission if the home sells to a buyer who the agent found.
  • Services. What the agent does to market the home. Includes things like photographing the home, posting the home on the multiple listing service (MLS), and scheduling showings.
  • Owner permissions. Actions you’re required to take to market and sell the property. For example, you may need to give your agent permission to put a lockbox on your front door to provide access for showings.

Real estate agents usually use a listing agreement template from their brokerage or their state’s real estate association.

When Do You Sign a Listing Agreement?

You need to sign a listing agreement as soon as you’ve selected a real estate agent to represent you. An agent can’t legally represent you and start marketing your house without signing a contract first. 

Listing agreements are legally binding, so make sure that you’re confident in the agent you’ve selected before you commit to one.

How To Terminate a Listing Agreement

Every listing agreement has an official start and end date. An agent isn’t required to cancel the agreement before the end date if you want to terminate your listing. Cancellation is probably only necessary if you have an exclusive right to sell agreement, since these are the most restrictive.

However, your agent might agree to terminate your listing agreement if you submit a written request. Real estate agents need a good reputation to grow their business. Keeping a client locked into an agreement that they don’t want anymore could lead to bad reviews and lost business.

Speak to your agent about canceling if you have any concerns about your agreement. Some brokerages even have a cancellation form to make your request official.

You may be charged a cancellation fee if you decide to terminate your listing agreement before it expires. If there’s a fee, it will be noted in your listing agreement.

Next steps

Listing agreements are often complicated and full of industry jargon. We recommend connecting with a knowledgeable, local realtor to better understand the various types of listing agreements and what’s included.

Our friends at Clever can connect you to experienced local agents who can walk you through the agreements, and answer any concerns or questions you may have. 

Related Links

How to Find a Realtor. Learn how to find the best realtor for your situation, including options that can potentially save you thousands on commission and fees. 

What is an Exclusive Right to Sell Listing Agreement? Learn more about the most common type of listing agreement, and why it’s preferred by realtors

Role of the Real Estate Agent. Find out what real estate agents do for home buyers and home sellers, and how they’re paid.

How To Sell Your House. Your house is probably the largest asset that you’ll ever sell. Learn more about one of the most important transactions of your life.

Listing agreement FAQs

What is the most common type of listing agreement?

Most real estate agents provide home sellers with an exclusive right to sell agreement. With an exclusive right to sell, the agent is guaranteed to be paid a commission when your home sells, provided they find a buyer before the agreement expires. Exclusive right to sell agreements prohibit home sellers from working with multiple agents at the same time.

Can I cancel my listing agreement?

Maybe! If you want to cancel your listing agreement, speak to your agent. Listing agreements are legally binding, but your agent may agree to cancel if you're unsatisfied with their service.

Filed Under: Sellers

About Andrew Whytock

Andrew Whytock is a Content Team Lead at Clever Real Estate. He writes articles that educate readers about every aspect of the home buying and selling process. He also reviews emerging real estate tech companies.

Andrew's writing has been published in the Huffington Post and a wide variety of regional news outlets.

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

four × five =

Need an Agent?

Connect with top-rated agents near you and save thousands on commission fees.

I Want to Learn More

How To Sell Your Home

  • What Companies Offer the Lowest Real Estate Fees?
  • Read This Before You Pay For a Flat Fee MLS Service

Real Estate Reviews

  • Clever: Are Those Commission Savings Legit?
  • Redfin: What It Really Charges Sellers
  • Ideal Agent: Learn the Truth About Its 2% Fees
  • Opendoor: How Much Will It Pay For My Home?

Categories

  • For Home Buyers
  • For Home Sellers
  • Save When You Sell Your Home
  • Costs to Sell a House
  • Sell a House Without an Agent
  • Sell Your House Quickly
  • Real Estate Company Reviews

Real Estate Witch
  • Home
  • Blog
  • About
  • Sitemap

Copyright © 2023 Real Estate Witch | All rights reserved.
Privacy Policy | Terms of Service