Exclusive agency listing: What it is and why you’d use it
The difference between an exclusive agency listing and an open listing lies in the representation. With an exclusive agency agreement, the exclusive agent represents the seller.
The seller can still sell himself, without paying a commission. The exclusive agency can also cooperate with another brokerage, which might bring an offer that the seller would accept. Typically, the seller pays both the listing and the selling commission.
As an agent, why agree to an exclusive seller agency?
The exclusive agency definition, exclusive agent agreement, or exclusive agency contract, however you want to call it, is often a compromise. If a seller who wants to sell themselves, was to hire a real estate agent, why would they hire a specific agency? And why would that agency accept the listing?
First of all, it’s better than no listing. And, there’s a fair chance that the seller won’t sell themselves, and will need a brokerage. Many sellers do give up when their home doesn’t really sell, and they turn to an agent.
In this situation, they both get what they want. The exclusive agency listing definition will mean the seller expects to sell themselves, and the brokerage expects an exclusive listing define situation where they want to be paid for what they do.
A real estate brokerage could commonly require an exclusive listing agreement, which states that the seller won’t pay a competing broker. If it is a competing broker that brings a buyer to the table, the original brokerage would pay them.
What is exclusive agency listing’s inner working situation?
This means that only the specified listing agency can represent the seller. The difference between exclusive right to sell and exclusive agency is that with an exclusive agency, the agency only gets paid if they are the ones to bring a buyer, and not the seller themselves.
This “exclusive agency vs exclusive right to sell” situation might seem tricky, but you do need to understand it well.
This situation is actually a victory for the brokerage. However, if the seller finds their own buyer, they don’t have to pay the commission. In this situation, the seller doesn’t get any representation from that brokerage, and it is the buyer who is often also unrepresented too.
If we take a look at the practical side, you’ll find there’s pretty detailed monitoring here. With this kind of contract, the brokerage tends to manage all contact with the brokers and buyers.
This proves that the buyer came from them, and not someplace else. The listing broker gets paid regardless of how the buyer found out about the specific property, which is a protection that many brokerages will require.
Why isn’t the exclusive agency listing used more often?
The main reason is the need for excessive monitoring. Most agents couldn’t even explain what is exclusive agency even if you asked.
It isn’t because they don’t understand, but instead because they don’t really use it. An agent could go through a lot of effort, without getting any financial award.
Another compromise is to set a time period. For example, if the seller can’t get a buyer within, for example, 30 days, the agreement will convert to an exclusive right to sell at that point.
What are the advantages of an exclusive listing?
At first glance, it might seem like a good idea. You pay a lower commission, and you get to do your own advertising and marketing. And if you sell the home yourself, you don’t have to pay the commission.
This might sound tempting, even though you might have to pay a higher commission at the end, due to the advertising and other fees being higher. However, there are some unique advantages here.
- Your real estate agent will work much harder for you
- You will develop a true working relationship with them
- The agent will try to get the highest possible price for the property
- An exclusive listing commonly attracts better offers
Working with a reputable agent means they will work with you. They might even suggest some modifications that might increase the value of your property beyond what the modifications would cost.
And, they’ll manage to work out a strategy that will get you higher offers. You can discuss some disadvantages or advantages of auction selling with them.
The short version is that with this situation, you get a professional working for you. With an open listing, agents might compete against each other instead of working for you. They may convince you to accept an offer which isn’t in your best interest. Your property isn’t their priority – their exclusives are.
What are some of the disadvantages?
Before choosing an agent, you’ll have to do your homework. Interview at least three, and don’t base your decision just on the commission. Some might give you a lower commission, and rip you off with the fees.
Some might give you a higher fee and include advertising. Are the rates negotiable? Make sure you have everything you need to make an informed decision.
You must read the fine print before you sign the contract. Make sure you pay attention to the period, as some agents might work as much as possible to get you to sign, and then not do their job once you do that.
For example, if the contract is for a year, you won’t be able to find another agent for a year without paying costly fees. Negotiate a period of 30-90 days, this gives you enough time to evaluate how good your agent is. If you aren’t happy, change them.
In a buyer’s market, your agent might not be able to find someone who will pay a good price. This is a disadvantage regardless of whether you have an open listing, or an exclusive one. An exclusive agent might be able to find a buyer sooner, but you might not get the price you wanted.
The agent’s protection period
This agreement might give the agent a protection period. This prevents the seller from abusing the agreement in order not to pay a commission. This protection period lets the agent receive full commission, in case the buyer they brought changes their mind and comes back later, after the agreement has expired.
Ending thoughts on a exclusive agency listing
There are plenty of advantages to an exclusive listing. However, you must be sure that you’ve done your homework, and the agent you chose is working in your best interest.
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