What is exclusive agency?
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In real estate, exclusivity can feel like a big plus. You want to work with the best possible agent and would love it if they give your listing any kind of specialized attention. Be careful, though. Exclusivity can be a two-way street. And if your potential agent requests an exclusive agency agreement, you’ll definitely want to know all that it entails.
With that in mind, let’s dig into the ins and outs of an exclusive agency listing.
What is an exclusive agency listing in real estate?
There are three types of real estate listing arrangements with agents — exclusive right to sell, exclusive agency and open listing. With exclusive right to sell (which we’ll look at more closely later), the real estate agency basically gets a guaranteed commission. With an open listing, you could theoretically hire multiple agents to market your home.
Exclusive agency falls somewhere in the middle.
Exclusive agency means you agree to let one agent and their brokerage (basically, the company they work for) be the only ones to market your home. They get the unique rights to the listing. And if the home sells to a seller they bring forward, the exclusive agency arrangement dictates that you have to pay them the agreed-upon commission.
That doesn’t mean you’ll be liable for commission costs, though. “If the seller ends up finding a buyer without the help of the agent, the buyer does not owe the agent any commissions,” explains Richard Haddad, managing editor of the Seller Resource Center at HomeLight, a platform that matches real estate agencies with buyers and sellers. If, say, you end up selling the house to a colleague from work or a relative, you may not need to pay commission under an exclusive agency listing agreement.
“Exclusive agency is not overly popular with real estate agents because this type of agreement allows the homeowner to retain the right to sell the property themselves,” Haddad notes. Generally, he says, most real estate professionals prefer an exclusive right to sell agreement.
Exclusive agency vs exclusive right to sell
An exclusive right to sell agreement essentially ensures that the real estate agent with whom you list will earn a commission after the home sale closes. The agent receives one no matter how much or how little work they did. (A similar situation exists in show business: Actors have to pay their agents a commission for every gig they get, even if they landed the part on their own.) Exceptions can still exist: As a National Association of Realtors (NAR) spokesperson explains, “An exclusive right to sell agreement more narrowly defines situations where a seller would not be obligated to pay a commission to the listing broker by listing specific individuals or organizations as exemptions.”
In other words, if you sign an exclusive right to sell contract, paying the agent’s fee becomes the default scenario. Even if you arrange to sell your house privately — even if it’s to a friend or family member — you will still have to cough up the commission on closing day, unless they’re specifically listed as an exemption in your agreement with the agent.
How common is exclusive agency?
Because it helps to protect an agent’s compensation, many real estate pros prefer this setup and Haddad says it’s more common than exclusive agency listing arrangements. So common, in fact, that the NAR doesn’t even track the use of exclusive agency at all. While the association doesn’t officially approve or disapprove of any particular business arrangement, it does note that with exclusive agency, “the seller’s and the broker’s efforts could interfere and/or undermine each other’s and negatively affect coordination and efficiency for achieving a successful transaction.”
Pros and cons of exclusive agency
Signing an exclusive agency listing arrangement can come with some definitive perks. It gets an agent in your corner while still giving you an angle to avoid paying the person’s commission.
“If a seller has some prospective buyers in mind that they think would be interested in purchasing their home, then this listing agreement may suit them best,” Haddad says. “The exclusive agency listing option can benefit the seller who wants to invest in their own marketing and sales efforts to possibly avoid paying Realtor fees.”
Of course, for the potentially lower costs, you may get a reduced level of service from the agent. “Oftentimes, this type of listing agreement is less motivating to agents,” explains Haddad. “Because the agent is not guaranteed a commission, it’s possible that they will put ‘less’ effort into marketing the home.”
That said, an exclusive agency listing might land you in the sweet spot. You’re giving your listing to an agent exclusively — rather than bringing in multiple agents like you would with an open listing. This can help to put their attention on selling your home. At the same time, it keeps the option open to sell commission-free if you find the buyer yourself from your own circle.
Final word on exclusive agency
Ultimately, the NAR and Haddad both recommend exploring your choices as far as listing arrangements go before you settle on one.
“The seller should discuss with their agent all available options and choose the one that best serves the seller’s interests,” the NAR spokesperson says. For example, if you’re pretty sure your neighbor wants to buy your home, but would still like to have an agent for professional hand-holding, to read over the contracts, or just in case, you might opt for an exclusive agency arrangement, if they’re willing.
Hadded recommends evaluating several agents, too. “There’s a lot of research and preparedness to be done before finding the right buyer for your home,” he says. “For this reason, it’s important to interview several agents before signing a listing agreement, and look for a proven, top-performing agent in your market.”