An exclusive right-to-sell listing agreement is a real estate contract that gives an agent or broker the sole right to sell their client’s home for a set length of time.
It establishes the property’s asking price, the agent’s commission, the term of the agreement (often between 1 and 12 months), and the duties both the agent and seller will be bound to uphold. Unlike other listing agreement types, the agent is guaranteed a commission if the property is sold, regardless if they found the buyer or not.
- The most popular type of listing agreement.
- Describes how the agent will be compensated if the property sells.
- Seller cannot work with anyone other than their agent for the listing period.
The following are the pros and cons of an exclusive right-to-sell agreement compared to other listing types.
|(+ Agent) The listing agent doesn’t have to worry about competition.||(– Seller) The owner of the property can be left stuck with an unfavorable agent until the end of the listing period.|
|(+ Agent) The agent is guaranteed a commission should the property sell.||(– Seller) If the seller finds their own buyer, they still have to pay the agent their commission.|
|(+ Seller) The agent will often be more motivated to market the property and find leads.|
|(+ Seller) Encourages the agent to stage the property with furniture in order to make it more desirable to potential buyers.|
While very similar, the two (2) types mainly differ in regards to how the commission is paid out to the listing agent. With an exclusive right to sell, the agent will receive their commission so long the property sells, regardless of who was responsible for finding the buyer. With an exclusive agency, the seller can only work with one (1) agent, but can still sell the property on their own. This gives the seller the ability to be more “hands-on” with the selling process. Should the seller find a buyer without any help from their agent, they do not have to pay their agent a commission.
Prior to signing the listing agreement, the seller and their potential agent will often negotiate certain aspects of the contract. The most commonly negotiated conditions include:
- Listing term – This is the length of time the listing agent will have to sell the property. The average term is between 1 to 12 months (although any length of time can be negotiated). Generally, agents favor a longer listing period (to ensure they have ample time to find a buyer, for example), whereas sellers will opt for a shorter listing period to give them a means of “backing out” or to renegotiate the contract.
- Protection period – Also known as the “Extension” or the “Tail”, this is a type of safety clause that guarantees the broker a commission should the property sell after the listing term expires. It mainly applies to prospective buyers the listing agent previously engaged with (whether by showing the property or by providing them information). The parties can often negotiate the length of the protection period, as well as what constitutes a “prospective buyer” in the first place.
- Commission – The average commission a listing agent receives is between five and six percent (5-6%), a portion of which will be paid to the buyer’s agent (unless the agent acts as a “dual agent”). Negotiating for a lower commission could result in decreasing the level of motivation and marketing efforts the agent will provide, and isn’t recommended unless the seller has every reason to believe their home will sell quickly, and with little effort on behalf of their agent.
- Agent Services / Duties – Agents will provide a host of services in order to find prospective buyers for their client’s property. Some of these services include placing “for sale” signs on the property, having professional photos taken of the interior and exterior, staging the property with rented or owned furniture, uploading the property to various listing sites, conducting “open houses” to give passerby an option to view the home, and much more. Should a client not want one (1) or several of these services, they can “negotiate” to have them removed.
- Property List Price – The agent will conduct research by comparing similar properties that were recently sold in the area, the current market, as well as the condition of the property. The agent will inform the seller of the price they recommend the property be sold for. While sellers will often go with their agent’s suggestion, the price that is set is ultimately up to them.
At the expiration of the listing period, the seller has three (3) options:
- Re-negotiate and sign a new listing contract;
- Attempt to sell the home on their own (FSBO);
- Find a new agent.
However, the seller’s options may be limited depending on the exact terms in their original listing contract. If there was a safety clause, which is a period of time after the agreement ends in which the agent is still guaranteed a commission if the property sells, the seller may need to wait until the clause expires (if they don’t want to renew the contract).
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