Types of Listing Agreements
In nearly every part of the United States, sellers who contract with an agent to sell their residential real estate sign one of three types of listing agreements: (1) the exclusive listing (2) the exclusive agency listing, and (3) an open listing.
Home sellers are obligated to pay listing agent after their home is sold. However, questions arise when the seller finds a buyer on their own and then wonders of their agent deserves the commission. Home sellers must first understand what type of listing agreement he or she signed with their agent. In most cases, home listings are signed under exclusive listing agreement, explained below, so the listing agent is paid even if the seller sources a buyer.
Another question comes up about the compensation, which can differ when the buyer is represented by one another agent or when the buyer is dually represented by the listing agent. Unless all parties are okay with such dual representation arrangement, listing agents should tell the buyer to find a buyer’s agent, who will paid out of the listing agent’s commission. Either way, under the exclusive listing agreement, sellers must pay the listing agent the full commission agreed and the listing agent needs to split the commission if the buyer is represented by an another agent. Because most listing agents spend a lot of time and money marketing the property, they will be unwilling to accept any other listing agreements such as exclusive agency listing or open listing where the agent may not get paid and could result in a legal dispute.
The most common listing agreement is the exclusive listing. Under an exclusive listing, the broker is entitled to a commission for any sale of the listed property during the listing period, whether the prospect is procured by the owner, the listing broker, another broker, or someone else. Exclusive listings are beneficial to brokers because they eliminate disputes about whose efforts resulted in selling the property. They are beneficial to sellers because under them brokers are more willing to make serious efforts and expend advertising money to market the property, and they are willing to expose the property to other brokers.
Exclusive Agency Listing
Exclusive agency listings are listings under which the owner agrees not to list the property with any other broker. However, the owner reserves the right to find a buyer and avoid paying a commission. Occasionally an owner may have one or two potential buyers in mind. The owner may want to list the property with the broker immediately in case the owner’s prospects do not materialize. Some brokers will take an exclusive listing excepting a limited number of identified buyers for a limited time, in order to accommodate the owner’s wishes. Such a listing is a compromise between an exclusive listing and an exclusive agency listing.
An open listing is a commitment to pay a commission to the broker if the broker finds a buyer for the property. It does not preclude the owner from avoiding a commission by selling the property without the broker’s involvement, or from listing the property with another broker or brokers (except on an exclusive basis). A single-party listing is a common form of open listing. Under a single-party listing, the owner agrees to pay a commission if the owner sells the property to the prospect identified in the listing agreement.