When home sellers who are selling “for sale by owner” (FSBO) want to market their home, they can reach out to local real estate agents and promise to pay them a set commission if the agent can find a buyer.
This way, sellers don’t have to work with a listing agent but they can get extra exposure from buyer’s agents. This process is known as an open listing.
Calling an open listing a “listing agreement,” however, is misleading because the agent isn’t agreeing to represent the seller. The agreement is really an upfront promise from the seller that they’ll pay the buyer’s agent commission if the agent is able to find a buyer.
Open listing agreements give sellers the opportunity to:
- Get exposure through one or multiple agents
- Simultaneously attempt to sell their home “for sale by owner” (FSBO)
- Sell to a buyer an agent finds
🔑 Key Takeaways
- Open listing agreements are non-exclusive, so home sellers can sign more than one if they want to source buyers from multiple agents.
- An open listing might make sense if you have an unusual home — like a ten-bedroom — that’s difficult to sell and you want to increase your chances of finding a buyer.
- Home sellers using an open listing agreement with an agent can still sell FSBO without paying any commission. Agents only get commission from an open listing agreement if they source a buyer.
- An open listing agreement doesn’t guarantee an agent will get paid, so some agents won’t sign one, or they might limit the scope of their services.
How Open Listings Work
An open listing differs from other types of listing agreements because the agent doesn’t actually represent the seller — the agent only agrees to be paid commission (as a buyer’s agent) if they’re able to find a buyer for the home.
Here’s an example of how an open listing works:
- The homeowner signs an open listing agreement with one or several real estate agents. They agree upon a sale price of $250,000.
- The agent presents the home to prospective buyers they might already know or be working with. The agent may also list the home on a multiple listing service (MLS).
- If one of the agent’s buyers purchases the home, the seller pays the agent’s commission. The commission for the buyer’s agent is typically 3%, which in this case equals $7,500.
- If the home seller finds a buyer on their own without the help of an agent, they don’t pay any of the agents they signed an open listing agreement with.
✍️ Editor’s Note
Finding a buyer without the help of an agent doesn’t necessarily mean you’ll avoid paying 3% commission, whether you have an open listing agreement in place or not.
Only 3% of home buyers make a purchase directly from a home seller because most buyers are represented by an agent.
If you’re selling FSBO, you’ll probably have to offer commission to encourage buyers’ agents to show your home to their clients. Without this incentive, you may have a difficult time finding a buyer.
The good news about the commission for the buyer’s agent: It’s deducted from the proceeds of the sale at closing, so it isn’t an out-of-pocket expense.
Open Listing Pros and Cons
- You can enlist the help of multiple agents to find a buyer for your home.
- Local agents might have contacts in their network who are interested in the home you’re selling.
- You have the opportunity to sell FSBO if you can find a buyer on your own.
- You don’t need to pay an agent — unless they find the buyer of the house.
- You might pay the buyer’s agent commission either way, whether it’s to the agent you signed an open listing agreement with, or to the agent of a buyer who you found on your own.
- Agents won’t work as hard to market an open listing because there’s no guarantee they’ll be compensated.
- The agent doesn’t represent you, so when it’s time to negotiate there’s no one in your corner to give you their advice and expertise.
- Many agents won’t sign an open listing agreement — they would rather have the exclusive right to sell your home.
Open Listing Sample
Open listing agreements, like this one from the California Association of Realtors, always include language that identifies that agreement as “non-exclusive.” This means the home seller can sign the same agreement with other agents.
The agreement also includes pertinent details about the sale, like:
- The purchase price
- The commission that the agent will be paid if they find a buyer
- The duration of the agreement
Agents who sign open listing agreements represent the buyer in a home sale, not the seller. This could lead to a conflict since the agent has an informal relationship with you and might have knowledge about the circumstances surrounding your home sale.
Open listing agreements include restrictions that prohibit the agent from communicating with the buyer about things like:
- The home owner’s motivation for selling
- The lowest price that the buyer is willing to accept
- Circumstances that limit the seller’s ability to negotiate
Other Types of Listing Agreements
Home sellers can sign three other types of listing agreements. Unlike an open listing agreement, each of these options is exclusive.
- Exclusive right to sell: The most common type of listing agreement. An exclusive right to sell means that the agent gets paid a listing commission regardless of who finds a buyer.
- Exclusive agency: An exclusive listing agreement with one agent, but that still gives the home seller the option of selling FSBO.
- Net listing: A rare type of listing agreement that allows the agent to keep any sale proceeds in excess of the listing price. Net listings are illegal in some states.
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