A listing agreement is a contract between a property owner and a real estate agent for the sale of a property. There are three types of agency: exclusive right to sell, exclusive agency, and open agency. Exclusive right to sell is the most secure for brokers, while open agency offers little protection. Staging is recommended for a higher price and quicker sale.
A listing agreement is a contract between a property owner and a real estate agent that employs the broker as the owner’s agent for a specific purpose. The most common use of a listing agreement is for the sale of a property. Real estate laws vary from place to place, so there are differences in the details of contracts. Most jurisdictions require contracts involving real estate to be in writing.
Listing agreements have three main variants or levels of agency: the exclusive right to sell, the exclusive agency and the open agency. The exclusive right to sell means that the broker gets paid for his work regardless of who sells the property. Exclusive agency means that the broker gets paid if a broker sells the property, but not if the owner sells the property. Open agency means that any broker who sells the property gets paid and the owner can sell the property himself without paying any broker.
The exclusive right to sell the listing contract gives a broker the security he needs to invest his time and money in getting the highest possible offer for the owner. A broker will know that he will recoup his advertising and marketing costs, which could include hiring a specialist to stage the house. Most real estate experts agree that staging is a proven method of getting a higher price and quicker sale for the owner, resulting in a win-win situation for everyone.
A broker will worry about recovering his costs if the owner insists on an exclusive agency listing agreement. For example, a broker may have invested in both staging and a widespread marketing campaign. Then, as a result of the broker’s efforts, a prospective buyer contacts the owner directly and signs a contract, bypassing the broker completely. The broker gets no compensation, not even the amount needed to recoup his staging and marketing costs.
An open agency listing agreement pits all sales brokers against each other, but with little protection for their work. In this scenario, many different brokers as well as the homeowner can profit from the sale, even if the selling broker isn’t the one who put the resources into preparing the property for sale. A buyer can make a deal directly with the owner, or they can also work with another broker to complete the sale, usually whoever will offer the lowest price. Most sales brokers avoid this situation by not showing open agency property to prospective buyers.
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