TYPES OF LISTING AGREEMENTS SELLERS SHOULD BE AWARE OF

When you’re about to sell your home, you should be aware that there are different types of listing agreements you can use. Regardless of what type it is, each listing agreement outlines the payment terms, commission fees and authorization to market the property. Review the different agreements, so you know what fits your needs. By doing so, you will find the best one for you, and what are the expectations.

OPEN LISTING

This is a common agreement utilized by a lot of sellers, especially FSBO (for-sale-by-owner) sellers. This is a non-exclusive listing agreement, meaning it doesn’t guarantee working with any one agent for a commission. Instead the seller works with multiple realtors who showcase the property for sale. In this case, the agent who brings a buyer’s offer, which is accepted by the seller, will be the one to receive the commission.

As you can guess, an open listing is not preferred by most agents. It’s easy for a realtor to invest time and money, by spending hours bringing potential buyers to the property, only to be turned down in the end. The drawback is evident when it comes to sellers as well, especially when selling FSBO homes. For a lot of sellers, especially those who list their property for the first time, they need a wide range of services such as a comprehensive market analysis, negotiation skills and marketing expertise from professionals in order to make a successful sale.

EXCLUSIVE AGENCY LISTING

With this type of listing, a single broker represents the seller. However, being the homeowner, the seller still has the right to sell their own property. If the seller brings the buyer, then they do not have to pay their broker a commission.

It’s uncommon for brokers to accept this type of agreement, since they could spend a lot of time marketing the property only to get nothing in return. In cases where they would agree to one, they usually take a hands-free approach to the sales process. They may just list the property up on the MLS and not much more.

EXCLUSIVE RIGHT TO SELL LISTING

This is the most popular listing agreement. With an Exclusive Right to Sell listing agreement, an agent has the exclusive right to sell the property, for the seller. The agent will receive a commision, even if the seller brings the buyer.

This agreement protects the agent, and guarantees they get paid for their time and money invested in getting the house sold. There are also advantages for the seller. Being the only agent, the agent is more likely to put all their energy into getting the house sold. The seller will have a professional to help with the negotiations, setting up the proper, and necessary services that need to be completed and have someone to explain the process. These agreements will list out the commission amount, the listing agreement expiration date and any other terms the seller and agent want to include.

MULTIPLE LISTING

You probably have heard of the Multiple Listing Service (MLS), especially if you’ve sold a house before. This is an important tool for a lot of realtors to list properties for sale on, and to find properties for their buyers. A property listed on the MLS gets accessed by all the realtors who are part of the MLS. This provides exposure of your listed home to most of the agents out there looking for homes for their buyers.

FSBO sellers can’t list their property on the MLS, not unless they enlist an agent to represent them. However, a flat-fee MLS service can still be used by these sellers.

ONE-TIME SHOW

This agreement is utilized by FSBO sellers. If a realtor shows their buyer a FSBO home that isn’t on the MLS, they enter this type of agreement with the seller. Once the seller agrees to the purchase, the realtor gets to have a commission fee.

The commission fee in this case is usually half of the traditional amount (6% of the sales price). The problem with most FSBO listings is, they tend to have poor outcomes, making sellers miss out on a lot of profit.

NET LISTING

Like other listing agreements, in a net listing agreement, the seller and agent set the sales price. In other listing agreements, the agent receives a commission as a percentage of the sales price. With a net listing agreement, the agent receives the difference between the actual sales price, and the net agreed upon list price as a commission (as long as the actual sales price is larger) For example: seller agrees to a sales price of $150,000 and their agent manages to sell the property for $170,000... the agent gets a $20,000 commission.

This could motivate the agent to push for a higher sales price for their seller. The problem here, though, is when the seller and agent are discussing the listing price, it's easy for agents to take advantage of their sellers. Agents can suggest prices that are way below the market value, so they can receive a much larger commission. This is why net listings are illegal in most states including Michigan.

Before signing any type of listing agreement, it’s best to be fully aware of what you’re signing, and what are the expectations. You do not want surprises and disputes to arise during, or after the sale.

Signing a listing agreement should always exhibit a mutual relationship with all parties involved. Working with the right professionals in the field ensures success over the sales transaction with as much ease as possible. Our team of licensed agents at SellUsHomes aims to work with our clients providing transparency throughout the sales process. We purchase homes in As-Is condition in Detroit and Southeast Michigan. To learn more about our services, contact us at (734) 224-5947 or you can reach out to us via email at [email protected].