What is an exclusive right to sell a listing?
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In the digital age, home sellers have more channels to promote their property than ever before. Given these options, signing an exclusive agreement with just one real estate brokerage may seem counterintuitive. However, some instances exist in which the exclusive right to sell a listing can benefit both you and the agent.
For starters, it’s common for the more established, successful real estate agents to require these agreements. In addition, having an exclusive right to sell in place can motivate your agent to work hard to sell your house before the agreement expires.
That said, these types of contracts won’t always be the right fit for all home sellers. To help you determine if you agree to one, here are a few considerations to keep in mind.
What is an exclusive right to sell a listing in real estate?
As its name suggests, an exclusive-right-to-sell agreement gives the agent you choose (and their brokerage – i.e., the company for which they work) the unique, unshared capacity to obtain a buyer for your home. They also get the exclusive right to list and market it.
Once the agreement is in place, all interested buyers and their agents have to go through that specific seller’s agent and brokerage.
If your home sells while the agreement is in place, you will typically be required to pay the agent their commission, regardless of whether the buyer actually was found by the agent or by you in another way.
The main benefits of this type of arrangement is the influence over the agent’s focus and motivation. With an exclusive agreement, your house becomes a priority for them. You benefit from having a single point of contact to manage all of the steps of your selling process and having someone invested in making the sale happen.
Exclusive right to sell vs exclusive agency
Exclusive right to sell is somewhat different from a soundalike term, exclusive agency.
With the exclusive right to sell, the agent and their brokerage make a commission no matter who finds the buyer. With an exclusive agency agreement, on the other hand, you retain the right to market and sell to a buyer yourself without paying a commission to the agent. If you end up selling your home to your coworker, for example, and your listing agent was never involved in the process, you would not have to pay their commission.
To earn a commission under an exclusive agency arrangement, the agent and broker may have to do more work to track leads and ensure they are involved in finding the buyer. Because of this, brokerages may not always agree to exclusive agency arrangements. Ultimately, without the incentive of a guaranteed commission, there is less at stake to motivate the involvement of an agent and broker under exclusive agency agreements compared to exclusive right to sell arrangements.
What are important details of an exclusive right to sell agreement?
As with any contract, the details matter. Here are the following areas that are most important to review.
Duration of agreement
The exclusive right to sell clause in the contract you establish with your real estate agent should have an expiration date. You might give them the exclusive right to your listing for anywhere from 30 days to six months, for example.
This timeline lays out how long this agent and their brokerage are guaranteed a commission, if the sale of the house takes place. Generally, you don’t want the contract duration to be overly long or you could end up paying a real estate agent a commission on a lengthy selling process, instead of having a timeline that encourages a timely and efficient sale.
Because agents put this agreement in place to secure their compensation, the amount should be clearly outlined in the contract. Generally, the contract will stipulate a commission based on a specific percentage of your home’s selling price (typically around 5-6 percent) and how it will be distributed between the agents involved in the transaction (e.g., evenly, between the buying and selling agents).
Cancellation of contract
Your ability to cancel the agreement depends on the contract you sign, so be sure to familiarize yourself with the terms and conditions. You may be able to cancel due to a breach of contract, for example, if the agent doesn’t satisfy the marketing benchmarks outlined in the contract.
If the contract your potential agent brings you doesn’t contain any cancellation options, you may need to discuss revisions. If this fallback plan matters to you, make sure your cancellation rights get captured in writing before signing the exclusive agreement.
Because the agent has a vested interest in making the sale happen — especially within the agreed-upon timeline — they can help you navigate other potentially costly aspects of selling your home.
They may be able to get you a good deal on staging services, for example. They can also help you negotiate any contingencies that come up, to minimize your out-of-pocket cost in readying your home for the seller.
You might have a specific person interested in buying your home but still elect to hire an agent in case that buyer doesn’t work out. To avoid paying the listing agent’s commission, you can include that person by name as an exemption. That way, if they do end up making an offer, you’re not on the hook for compensating the agent, even with the exclusive-right-to-sell agreement in place.
What are the drawbacks of an exclusive right to sell a listing?
The big drawback with an exclusive-right-to-sell agreement comes from the guarantee of commission for the agent. You will be expected to pay the commission even if you happen to find the buyer yourself (see “Exclusive Agency” section, above). Because the agent has the exclusive right to sell your home, they make their commission regardless of how the buyer came to the closing table.
An exclusive-right-to-sell agreement also means that if you aren’t overly happy with the way the agent markets your home or the type of buyers they bring you, you might be stuck without recourse. Signing this type of agreement means you can’t hire another brokerage until the agreement’s term is up, unless circumstances allow for a specific cancellation option outlined in the contract.
Exclusive right to sell FAQs
First, you may find it helpful to verify the agent and their brokerage have experience and are reputable. Ask for testimonials, research their reviews or feedback online and ask people in your community for referrals, if possible.
You should also carefully read the agreement to make sure you understand the terms and conditions, from the duration of the agreement to your ability to cancel if you’re dissatisfied with the agent.
That depends on your agreement. In some cases, you may be able to argue breach of contract if you feel the agent isn’t holding up their end of the contract obligations. You would likely need hard proof to quantify a breach of contract, and may require the assistance or guidance of legal representation.
If the agreement expires, you have a few options to consider. You could:
- stick with the same agent and put another agreement in place
- find a new agent
- opt to pursue for-sale-by-owner (FSBO)
- take your home off the market
Two main groups of sellers may find the most benefit from an exclusive-right-to-sell agreement.
The first are sellers who want to work with a specific agent or brokerage. If an individual or company in your area has made a name for themselves by doing great work, locking in an exclusive agreement with them may be well worth the service you’ll get in return.
The second group consists of sellers who prefer a streamlined selling process. With the exclusive right to sell agreement, you will likely get a motivated agent who will communicate with all buyers and their agents, market your property and negotiate closing in a timely and efficient manner.
If you are comfortable handling this process on your own, or do not want to be restricted to a contractual obligation to pay a commission regardless of who finds the end buyer, an exclusive-right-to-sell agreement may not be an ideal fit.
Bottom line on exclusive-right-to-sell agreements
Many agents operate under exclusive-right-to-sell agreements, which can benefit both the agent and the seller. A guaranteed commission if your house sells within the agreed-upon timeline provides great incentives to the agents.
The sellers benefit from having a representative handle the process from start to finish, within the confines of a specified timeline.
If you want a streamlined, easy-to-manage process, an exclusive-right-to-sell agreement might be right for you. Just make sure you choose a reputable listing agent. And, before you enter into an exclusive agreement, be sure you have reasonable confidence in the agent and/or brokerage, as well as a good understanding of the contract stipulations.