Exclusive Right to Sell vs. Exclusive Agency Listing Agreements – Here’s What You Need to Know
By: ROS Team
Exclusive right to sell and exclusive agency listing are two important agreements for those looking to sell their property. These agreements are property listings between real estate owners and the real estate brokers who are helping owners sell their properties. These agreements outline what each party is entitled to and what both are responsible for.
What is the Exclusive Right to Sell Agreement?
An exclusive right to sell agreement is an agreement between a homeowner and a real estate agent or broker. This type of real estate listing allows the homeowner to give exclusive rights to a broker to sell the home and earn a commission.
According to this agreement, the owner cannot hire other brokers. Even if the owner finds a buyer on his own, the broker will earn a commission. In short, every transaction related to the purchase of the home will go through a real estate agent or broker. Interestingly, an exclusive right to sell agreement is the most common type of listing contract. This agreement also binds the owner to bear the listing expenses.
Points to Consider Before Signing an Exclusive Right to Sell Agreement
Before completing any paperwork, you should be familiar with every aspect of the agreement. To help you with that, we’ve listed some of the key elements of the agreement below:
- Life of Agreement: This addresses how long the parties must abide by the agreement terms. If a broker hasn’t found potential buyers or cannot sell the home by an agreed-upon time, you may be free to sell your home independently without paying the broker a commission. You’ll also want to carefully read and understand any cancellation provisions included in the agreement.
- Commission: Before signing the agreement, both parties should determine the commission fee. This will help to prevent disputes over commission in the future.
- Other Fees: Besides the commission, there will likely be additional fees that must be paid such as a maintenance fee and listing fee.
Exclusive Agency Listing Agreement
An exclusive agency listing agreement is another type of real estate listing agreement. In this type of agreement, the homeowner gives the real estate agent exclusive right to sell the home by representing himself as a selling agent. But, in an exclusive agency agreement, the broker only gets a commission if they bring buyers. In an exclusive agency listing agreement, the broker can also engage with another broker and buyer’s agent for better results.
If the broker can’t bring buyers and the homeowner sells the home without the broker’s help. The homeowner is not required to pay the broker a commission. This agreement mainly favors homeowners and is not used as often.
Points to Consider in an Exclusive Agency Listing Agreement
Before signing an exclusive agency listing agreement, you’ll want to be sure you fully understand the following:
- Life of Agreement: As in an exclusive agency listing, the seller is not required to pay a broker commission in every situation. You can include language in the agreement that solidifies that the broker will not be paid a commission regardless of the time it takes to find a buyer. You could also include language noting that you can switch brokers if the broker hasn’t found a buyer by a certain date.
- Property Description: It is better to include a property description in an exclusive agency agreement. Always make sure that the description of the property is accurate.
- Clarity: An exclusive agency agreement is allowed in most states, but some base agreement terms vary from state to state. So, state-specific terms must be explained if a party is from out of state.
What is the Difference Between An Exclusive Right to Sell and An Exclusive Agency Listing?
In both types of real estate listings, homeowners hire an agent exclusively sell a home. These two agreements have several similarities and differences; we’ve listed some of the primary ones in the table below:
Exclusive Right to Sell Vs. Exclusive Agency
Exclusive Right to Sell
Exclusive Agency Listing
- The homeowner is required to pay the agent a commission whether or not the agent brings a buyer.
- Agents only earn a commission only when they sell the home.
- Owners are not allowed to sell the property themselves.
- Owners can sell the property themselves and are not required to pay the agent a commission if the agent wasn’t involved in the sale.
- Every deal will go through the agent even if the seller sells the property to family or loved ones.
- The agent will only be involved if the agent brings the buyers.
- Primarily benefits agents or brokers.
- Primarily benefits owners or sellers.
- It is the most commonly used real estate listing agreement.
- It is not a joint real estate listing.
Why would a Seller want an Exclusive Agency Listing?
There are several advantages to choosing an exclusive agency listing agreement instead of an exclusive right to sell agreement:
- Potential Buyers: Exclusive agency listings lead sellers to potential buyers, mainly because the real estate agent spends extra time finding people who are most likely to buy. You may have to show your home daily to prospective buyers in an open listing. Some of whom aren’t seriously considering buying the home. But, in an exclusive agency listing, the agent only considers potential buyers who are ready to move on to buying the property. This means another advantage: no long price negotiations. Since an exclusive agent represents the seller, they’ve likely already engaged in initial negotiations and bring only high-quality offers.
- Easy Negotiations: As discussed above, exclusive listing and exclusive agents cut down on long negotiations. The main reason behind this lies in the trust the owner has in the agent when it comes to finding likely buyers. Buyers may also come to respect that trust and may feel more comfortable talking with an agent about the property. In contrast, with open listings, buyers may be reluctant to discuss matters with an agent because they know he/she is not representing the owner.
- Good Relationship with Agent: Exclusive agent listings mean you get an exclusive agent who will give extra attention to you and your mission of selling your home. The owner and the agent have a shared interest in selling the property. The owner wants to earn a good profit from the sale and have buyers relatively quick, and the agent wants to earn a commission. In an open listing, agents essentially compete with themselves.
- Privacy: Some people don’t want to disclose their sales plan for one reason or another. Exclusive listings keep details confidential, and agents can pursue the sale of homes without giving off any clues to neighbors.
How do you Get Out of an Exclusive Right to Sell Agreement?
An exclusive right to sell agreement is a contract between a homeowner and a real estate agent. For this reason, canceling this agreement requires the consent of both. However, if there is a cancellation clause in the agreement, you may have to pay a cancellation fee.
Reasons to Cancel an Exclusive Right to Sell Agreement
There should be valid reasons behind canceling an exclusive right to sell agreement. Some valid reasons include:
- Lack of Communication: If your agent is not giving you daily or weekly updates and ignoring you, this is a valid reason to cancel the agreement. Of course, it is always a good idea to give your agent a chance to improve their communication skills before canceling.
- Not Properly Listing the Property: Real estate websites and search engines like Google are of great worth when trying to sell a house; it’s a great way to display your house to a large population. If you find that the agent hasn’t made much effort to maximize the listing, be it on the internet or elsewhere, you have a good reason to cancel the agreement.
- Unethical Behavior: Unethical behavior may be the most compelling reason for canceling an exclusive right to sell agreement. Agents should always engage in professional and upstanding business practices. If you find out otherwise, you have a reason to cancel your agreement with them.
How to Get Out of an Exclusive Agreement?
- Check the Contract: Read the contract and check for language around the conditions under which you can cancel the agreement.
- Communicate with your Agent: Share your concerns with the agent and your reason for wanting to cancel the agreement. You may reach an amicable solution for terminating the agreement.
- Put it in Writing: Send an email or draft a letter to the agent immediately after you have decided to terminate the agreement. In the document, tell the brokerage why you are canceling the contract so that it’s memorialized in writing should any questions arise later.
- Wait for Contract to Expire: If you are unable to cancel the agreement early, then wait for it to end naturally.
The main difference between exclusive right to sell and exclusive agency listing comes down to the agent’s commission. If you are solely dependent on the broker to find potential buyers, it is better to go with an exclusive right to sell agreement. Whichever agreement you choose, always review the agreement’s terms and conditions before signing it.