Real Estate Agent and Trainer, Robert Rico, explains the 3 most common Real Estate Agent Listing Agreements. Do you want to see more video blogs? Subscribe here!
Listing agreements are the contractual document that binds a real estate agent with a home owner. This agreement outlines terms in which the agent helps the home owner find a buyer to purchase their property.
In real estate, there are three (3) common types of listing agreements. This article will hep you become more familiar with the three different listing agreements and how they function in your career as a listing agent. So, let’s get started.
3 Common Real Estate Listing Agreements
The following are the three most common types of listing agreements in real estate:
#1. The Exclusive Authorization and Right To Sell Agreement
First is the “exclusive authorization and right to sell” agreement – by far the best and most secure one. With this agreement, you’re the only one who has the right to sell this property and you are guaranteed compensation when the property sells. As long as there is someone ready, willing, and able to buy the house – you’re guaranteed commission! This scenario forms the strongest bond between the seller and agent, because the sellers are guaranteed to pay you, and you are also guaranteed to put in the most effort possible to get the home sold in a reasonable timeframe.
So, how do you sell this house if you have the exclusive listing? Well, the most common step is to put it on the MLS (Multiple Listing Service, if you recall) and offer to split your commission with the buyer’s agent. That way, the buyer’s agent becomes the cooperating broker and YOU have made the choice to share your commission with them. They have no right to it, but you have offered to share it with them, so that they will bring you an appropriate buyer. This is by far the most common scenario, and the one that forms the strongest bond between the seller and agent.
With an “exclusive authorization and right to sell”, there is no getting around the agent’s commission – the seller has signed it into writing with their signature on the listing agreement. If a random buyer knocks on the seller’s door, or contacts them on Facebook, you’re still the only person who can sell this property – so you earn your commission by default.
#2. The Exclusive Agency Agreement
The second type of listing also has the word “exclusive” in it, but don’t get confused! It’s called the “exclusive agency” agreement. This way, you are the only agent who has the right to sell the property – but you are not the only person with this right! In this scenario, the seller actually has a financial incentive to find a buyer that DOESN’T know you, because the seller does NOT have to compensate you if you don’t bring the buyer to the table! This way, if someone walks by the house and sees a “for sale” sign on it, but doesn’t call you, the sellers can actually get out of paying you.
With “exclusive agency”, as long as you’re the only agent involved, you can actually be pushed out of the deal and lose out on all your time/effort expended in the listing. That’s why it’s a little riskier, and involves a slight amount less commitment than the first type we discussed.
#3. The Open Listing Agreement
Another type of listing is called “open listing”, and it’s a kind of dicey proposition for both seller and agent alike. In this arrangement, it’s somewhat of a free-for-all because the seller is negotiating with many different agents and only the one that brings the winning offer ends up getting compensated. However, who would want to put in the time and effort for a commission that’s hopeful, at best? Not many agents, and certainly not you, if you’re following our advice and succeeding!
Final Thoughts on Listing Agreements
All in all, we vouch for the “exclusive authorization and right to sell” agreement, and this type will most likely be the one your brokerage will give you to sign with your clients. The other ones, while valid, are not the best… as discussed above, there are some definite drawbacks to the competition aspect. You want to ensure that you get your commission if the house sells!
If you’re going to be putting in your time, effort, and especially money, it’s definitely best to make sure you’re going to be rewarded for your expenditures. Learn from the mistakes that other agents have made, listen to the prevailing wisdom, and use the best listing form whenever possible.
Be smart, be wise, and keep it REal – subscribe to our YouTube channel, leave us a comment, and come back next week!