When selling a home for the first time, it’s best to treat the process very carefully. The first step is properly understanding what your real estate agent agreement contains. Listing documents can be quite complicated, especially because they are legal documents. But, knowing the main elements contained in it can help you quickly recognize if there are missing portions or if there are fraudulent looking bits in it.
Listing Agreement
A listing agreement is also known as a listing agent contract. It is a document that is legally binding between a real estate agent representing a person wanting to sell their home and a seller. There are different aspects of a listing agreement and they can be modified to fit a particular situation.
Types of Listing Agreements
Exclusive Right To Sell
This is the most popular type of listing agreement. In this agreement, the listing agent has exclusive rights to earn a commission if they bring the buyer. This agreement prevents you from working with another agent during the period. Offers go through the listing agent, protecting the real estate agent from losing time and money when they won’t get a commission. Also, agents work hard to get a buyer because that’s the only way they get a commission.
Exclusive Agency
This is a less common type of listing agreement. Here, you hire a listing agent but if you find a buyer yourself, you get to keep the commission. That way, you avoid paying the commission fee. If you are comfortable investing in your own marketing, then this is a good plan for you. In this agreement, you also have an agent working for you, although they might not provide the full support as in the case of having a full-service agent.
Open Listing Agreement
Unlike other types of listing agreements, the open listing agreement is not a formal contract. A seller does not engage a listing agent, rather, they allow local buyer’s agents to market the listing. This listing agreement gives 3% buyers agent commission. An interested buyer’s agent may want the agreement in writing before bringing in potential buyers. This listing is flexible and you can take the house off the market when you want without any penalty. You also only pay half the commission fee.
Net Listing Agreement
This is the least common type of listing agreement. In a net listing agreement, a listing agent would sell your house at a particular set price. The catch here is that if they sell the house for a higher price, they get to keep the excess. Net listing is illegal in many states and in the few places where they are legal, there are clauses to protect the seller. To use this type of listing agreement, be sure to engage an agent you trust. It is illegal because it is financially risky as an agent might try to take advantage of the process by not showing you lower offers.
Before choosing a listing agreement, ensure you know all the pros and cons. Pick the one that will be suitable for your current needs.