If you are ready to learn about listing agreements, you have most likely found a real estate agent and had a discussion with the agent about listing your home in the Bay Area. Many sellers are surprised to learn there are several types of listing agreements. These are the most common:
- Open Listing,
- Exclusive Agency Listing,
- Exclusive Right-to-Sell Listing
The best option for you will depend on your ability to handle some selling duties and the overall climate of your local market.
An open listing allows an owner to sell his home on his own. This type of listing is a non-exclusive agreement, which means the owner can execute open listings with more than one real estate broker and pay only the broker who brings the buyer whose offer is accepted.
An open listing is a bit like a For Sale By Owner listing. If the owner finds a seller on his own, without an agent’s help, no commission is paid. Most agents with full-service real estate brokers do not take open listings because the seller has the ability to sell the home alone or withdraw the listing with no notice.
Because the owner is unrepresented, he pays only a selling broker’s commission, which is typically half of the usual fees. This means the seller will only pay the agent who represents the buyer.
Exclusive Agency Listing
An exclusive agency listing puts one agent under contract to sell the home. If this agent, or any other cooperating agent, finds the buyer, the seller pays a commission. As with an open listing, no commission is owed if the seller finds a buyer on their own.
The owner reserves the right to sell the property themselves and avoid a commission, while the broker is free to cooperate with another brokerage.
In most cases, the broker is paid a listing commission that is shared with the selling broker, and the seller pays for both fees.
The vast majority of real estate listings are exclusive right-to-sell listings, in which the listing agent has complete control of the transaction. Whether the seller, listing agent or a cooperating selling agent finds the buyer, the listing agent earns a commission. If another agent is involved, the commission is split between the agents.
In most market climates, a 90- or 120-day exclusive right-to-sell gives an experienced agent the time necessary to market the home. If the listing expires and the agent isn’t doing well, the seller has the right to move on to a new agent. If the agent is doing well when the listing expires, the listing may be renewed.
There are exceptions to the contract, however. If the seller finds someone who wants to purchase the home, the listing agent will often give the seller a certain number of days to produce a contract without owing a sales commission.
Other Aspects to Consider
The type of listing you choose isn’t the only important thing to consider in the Bay Area.
Other important things to consider include:
Many sellers don’t realize that the commission paid to their agent is negotiable. In markets with a lot of inventory and few buyers, you may want to pay the agent more than you would in a seller’s market.
Will you be allowed to cancel the listing agreement in the Bay Area? Think about whether you want to work with a broker who will not release you from the contract if you aren’t happy with the service.
Length of listing
Don’t forget the duration of the agreement is negotiable! Common terms are 30 days, 90 days and 6 months.
Finally, keep in mind the contract should expire without mutual renewal from you and the agent.