Everything You Need to Decipher the Real Estate Agent’s Listing Agreement

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Preparing to sell your house is a big undertaking. Congratulations! Before you do, if you hire an agent, one document you’ll want to carefully review is the listing agreement. According to Investopedia, the listing agreement is a contract that authorizes your agent to sell your home and earn a commission if the transaction is successful. Contracts can last as little as three months and extend to a year or more. You will negotiate the duration with your agent.

In this article, we’ll help you decipher the various parts of the listing agreement so you can feel confident moving forward with the home selling process.

Contract Information

Information you can expect to see in the contract includes:

  • Listing agreement type
  • Your home’s listing price
  • Your home’s listing date
  • The agreed-upon commission percentage
  • The agreement expiration date
  • Your agent’s selling or marketing strategy

Common Types of Listing Agreements

There are multiple types of listing agreements, but we’ll cover the main ones here.

Exclusive Right to Sell Listing

In this type of agreement, the agent you choose markets your home and receives a commission if he or she closes the transaction before the contract expires. As the seller, you pay the broker the agreed-upon commission percentage when your home sells. The broker splits the commission, usually 6%, with the seller’s and buyer’s agents. For this reason, you’ll want to choose an agent with local expertise and a track record of selling similar homes. While under an existing contract, you cannot hire another agent to complete the sale.

Exclusive Agency Listing

One agent or broker can try to sell your home, and you also have the option to search for a buyer yourself. If you bring in the buyer, the broker will not receive any commission. 

“Think of it as a contract where the agent agrees to promote your interests in a real estate transaction,” says Greg Hawkins, a Realtor® with Silvercreek Realty Group. “Some of the additional duties afforded someone in an agency contract may include maintaining the confidentiality and negotiating on your behalf.”

Open Listing

An open listing is non-exclusive and allows you to sell your home as “For Sale by Owner.” If a broker finds a buyer for your home he or she can earn the commission, but If you bring in a buyer you won’t pay the broker anything.

Negotiation is Possible

Are you worried about what is negotiable? You can bring up the list price, commission, the selling strategy, the timeline of your contract, and even the possibility of early cancellation. Make sure to address concerns with your agent before anyone signs—you should set up a meeting to resolve them. It’s best to sign the agreement once expectations are clear and both parties are happy with the terms.

Hawkins says, “A good agent should build trust with you and have the heart of a teacher surrounding the things you may need to follow up on. Great agents want you to fully understand the contract, as it helps diffuse misunderstandings down the road.”

Common Protections

In your research, you might have read about contract protections. Here are the ones you should know about.

Protection Clause

You will owe a commission to your agent if he or she finds you a buyer after your agreement expires (typically within 30 to 90 days).

Exclusion Clause

If you know someone who might be able to buy your home you can list his or her name. If they purchase your home your real estate agent will not collect a commission.

Early Cancellation

While a cancellation clause may not appear on your contract, communicate with your agent if you want to cancel the agreement early. Before going straight to a cancellation, resolve any miscommunications or issues with the agent. Typically, agents want the process to go smoothly and will keep your best interests in mind.

The Bottom Line

The contract between you and your agent is one of the most important documents you will sign when your home goes on the market. It’s the basis of communication that enables you to set expectations for your home’s sale while ensuring there’s a mutual benefit. It’s not immutable; in fact, you can negotiate the contract terms and even ask for a cancellation if you aren’t seeing satisfactory results. Remember that when you hire an agent to trust that he or she will want to sell your home for a competitive price and receive future referrals from you.

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