Understanding an Exclusive Right-to-Sell Listing Agreement

An exclusive-right-to-sell agreement is a type of real estate listing agreement between a home seller and a broker or real estate agent. This type of listing agreement gives the broker or real estate agent exclusive rights to earn a commission for the sale of a property by representing the homeowner and finding an able buyer for the home. It is the most commonly-used agreement used when selling and listing a home. Even if the homeowner finds their own buyer, the broker still collects a commission on the sale. In addition to covering the commission, the owner also covers the costs of the listing fees.

There are several elements to consider when negotiating an exclusive-right-to-sell listing contract.

1. 1. Commission: In an exclusive right-to-sell agreement, the broker will collect a negotiable commission fee when the house is sold. The parties will usually discuss the commission fee before signing the agreement.
2. 2. Fees: Aside from the sales commission, there may be other fees connected with the selling of the home that you could be contractually obligated to cover. This may include fixing an infrastructural issue found in a home inspection or covering listing fees.
3. 3. Contingencies: Many home buyers will make contingent offers on a home, putting the seller in limbo until the contingency is met or is not met. For instance, if your buyer has an appraisal contingency—which means that a house must be appraised at a higher or equal value to the listing price in order to secure financing—you may need to lower the price of the home in order to attract buyers. This further diminishes the amount of money you’d walk away with after your seller’s commission.
4. 4. Duration of contract: The duration of your exclusive-right-to-sell listing agreement outlines how long you are financially obligated to pay your broker a commission on the sale of your home, even if they had no role in finding the buyer. If your broker is not able to find your home an able buyer within the amount of time stipulated in the contract, you may be entitled to sell the home on your own without paying the broker a commission. Check to ensure what your rights of cancellation are within the agreement.

Exclusive-right-to-sell listings are just one of the types of listing agreements. Other types of agreements include:

1. 1. Open listing: An open listing agreement grants a homeowner the right to sell their home on their own. Sellers can work with several real estate brokers and agents at the same time and are only obligated to pay the broker who brings them the buyer whose offer is accepted. If the seller finds the buyer themselves, they are not obligated to pay any brokerage fees.
2. 2. Exclusive agency listing: An exclusive agency listing limits a homeowner to working with one broker. However, the seller is not obligated to pay their broker a commission if they find the final buyer themselves.
3. 3. Net listing: In a net listing agreement, the broker reserves the right to keep the difference between what the homeowner wanted to sell the home for and the actual price the house sells for. This is a risk for the broker who may not receive any commission if the home sells below the asking price.
4. 4. Multiple listing: A multiple listing agreement is a “for sale by owner” (or FSBO) agreement in which an owner pays a fee to place their home on a multiple listing service (MLS). An MLS is a digital database where brokers and buyers can find homes that are currently for sale. Beyond that, the seller is responsible for selling the house without a broker, relieving them of broker fees but making them responsible for the duties that an agent or broker would usually cover. Houses that are listed through exclusive agency listings and exclusive right-to-sell listings are usually placed on an MLS.

Exclusive right-to-sell listings and exclusive agency listings confine a seller to working with one agent or broker, but a right-to-sell agreement is prospectively better for the broker and an exclusive agency listing is prospectively better for the buyer. In an exclusive-right-to-sell agreement, the broker earns commission from the sale of the property, even if the homeowner finds a buyer for the home themselves. In an exclusive agency listing, the homeowner is free to find a buyer for the home with no financial obligation to the broker.

The reason that exclusive-right-to-sell agreements are the most common is that exclusive agency agreements are riskier for brokers. In an exclusive agency agreement, there is more of an onus on the broker to prove their role in finding an able buyer for the home. The broker also runs the risk of spending time and money in finding potential buyers, only to have the homeowner find a buyer themselves.

All investments, including real estate investments, come with inherent financial and legal risk which may involve depreciation of assets or loss of money. The information presented in this article is for educational, informational, and referential purposes only. Consult a licensed real estate or financial professional before making any legal or financial commitments or investments.

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