Types of Real Estate Listing Agreements
No matter if you're considering making a career out of real estate or if you're a seasoned real estate pro, it's always a good idea to learn more about the ins and outs of real estate—including listing agreements. Understanding listing agreements is especially crucial if you're entering the real estate industry as they will largely determine how you get paid. To make sure you understand the different listing agreements available, we've put together this guide. You'll learn about three listing agreements and their similarities and differences.
What is a Listing Agreement?
First things first, let's answer the question, "What is a listing agreement?". In short, a listing agreement is a legally binding contract that gives the real estate agent, agency, or broker the right to sell the home. The contract covers the basics. For instance, what is included in the sale (appliances, above ground pools, etc.) and real estate agent compensation. It also touches on the agreed-upon marketing methods for the home and how photos, videos, and descriptions will be used. Because the agreement is legally binding, both parties must thoroughly understand the terms and conditions.
Types of Listing Agreements
Now that you understand the basics of a listing agreement, we're going to review the three most commonly used listing agreement variations, and the pros and cons of each type.
1. Exclusive Right to Sell Listing
As the most commonly used listing agreement, the Exclusive Right to Sell Listing's name pretty much says it all. With an Exclusive Right to Sell Listing Agreement, the real estate agent or broker has total control over the transaction. Additionally, there is no room to allow multiple agents to work on the deal. With this contract type, the agent is given exclusive rights to market the home, post it on the MLS, and receive the selling commission. Because this contract favors the agent, it's no surprise that most realtors prefer this type of agreement.
2. Open Listing
An Open Listing Agreement is the exact opposite of an Exclusive Right to Sell Listing Agreement. An Open Listing Agreement allows the owner to execute multiple listings with multiple real estate agents. The agent that brings an offer to the owners for the highest amount will then receive the commission. With an Open Listing Agreement, the owner is only responsible for paying the selling broker's commission. They are not accountable for the seller-agent commission on top of that. This makes the cost of an Open Listing Agreement about half as expensive as an Exclusive Agency Listing Agreement. Of course, since an Open Listing Agreement doesn't guarantee a commission, most realtors don't accept home listings with this type of contract.
3. Exclusive Agency Listing
Similar to an Open Listing Agreement, with an Exclusive Agency Listing Agreement, the owners reserve the right to sell the home themselves. Additionally, they can have multiple realtors compete to sell the house for the highest price. However, with an Exclusive Agency Listing, the homeowner is represented by a broker; in an Open Listing Agreement, the homeowner is representing themself. With this type of contract, the buyer broker is paid a listing commission that is split with the selling broker. The homeowner should expect to pay a higher amount in commission fees than if they were to go with an Open Listing Agreement.
Do You Have to Sign a Listing Agreement?
If a homeowner is using a real estate agent to sell their home, they absolutely have to sign a listing agreement. The only instance they wouldn't have to sign a listing agreement is if they list the house themselves and don't use a real estate agent at all.
Learn More About Listing Agreements with Training
While we hope this blog has helped you understand the differences between real estate listing agreements. However, it's not a substitution for formal training. Luckily, you don't have to look too far to find the appropriate real estate training for your situation! If you're interested in getting your real estate license, take our pre-license course. On the other hand, if you're already practicing real estate, take your knowledge to the next level with our real estate continuing education courses. Sign up for your training today!