Open listing: What it is and what you should know about it
So, how do you define open listing? What is an open listing in real estate? What does owner agent mean? All questions that you’ll hear at some point if you’re into real estate. An open listing is a situation where you get to sell the home by yourself.
The open listing definition makes it a non-exclusive agreement, which means that the open listing agreement form can be signed by multiple brokers, but only the one who brings a buyer with a valid offer will get paid. This is a great choice of a listing agreement California can offer, among other countries.
The difference between an open listing agreement and a regular one is that the owner typically pays just the selling broker’s commission, making it about one half of what they’d usually pay. Why would you opt for an open listing real estate sale?
Well, the owner is unrepresented. Therefore, they just pay the broker to represent the buyer of the residential listing. And, if the owner finds a buyer that agrees to the residential listing agreement and buys it, all by themselves, the owner doesn’t owe a commission to the brokers.
Why would a seller opt for an open listing contract?
For example, if there are plenty of buyers, the seller might opt for an open listing definition real estate sale. You can negotiate this kind of listing with each broker, and you can do either identical or completely different commission. The seller gets more flexibility, at the expense of being limited by the number of potential buyers.
If there are more buyers than sellers with attractive listings, the risk is minimal. The main risk is actually exposure, or lack thereof, to all buyers. Some sellers though, think that they can adequately advertise their home, and would rather not hire an agent.
However, agents don’t just bring the ability to find a buyer. An experienced agent will save you from mistakes, and sellers might not recognize that until they actually make that mistake. At that point, it’s too late.
Why would an agent agree to open listing?
If an agent works with a lot of buyers, they might agree if they are certain they will get paid for bringing a buyer. They don’t advertise the property or spend any money on promotion unless they’re sure that the potential buyers will go through them.
We might be discussing a special property, highly unique, and it might appeal to a lot of buyers. If the seller doesn’t want to agree to an exclusive right-to-sell listing, the agent might see an open listing as the only solution. Open listings are a fairly uncommon sight, but they are far from impossible.
For example, in a rural setting where you don’t want to commit to a single brokerage, this might be an option. A rural listing commonly covers a large area, where word of mouth travels fast. Sellers can list with every broker if they’re willing, and only pay the brokerage that gets them the winning offer.
However, the seller doesn’t have any representation. There’s no agent to help them with the negotiations, disclosures or inspection. There are no fancy photos, professional marketing or negotiations. The seller is, in fact, only paying another agent to negotiate with the buyer.
What are the pros and cons?
- Agencies that compete with each other speeds things up.
- Unless the property is sold, you don’t pay fees.
- The agent is only working for the buyer, so the commission is halved.
- You don’t have to sell through an agent – sell it by yourself and don’t pay any fees.
- You need to market the property by yourself, which can be tricky unless you’re an expert.
- Agents are competing for the commission, and their main goal is for you to accept the offer. That offer isn’t necessarily what’s best for you.
- If a buyer sees your property listed with multiple agents, they might be inclined to think there’s something wrong, and you’re having a hard time selling it.
- Multiple agents will be listing your property, but the priority will be given to their exclusive listings, as they’re easier to sell.
How about the pros and cons of an exclusive listing?
In this situation, you only list your property with one agency. This way, they will try to get you the best possible price, as this means they get a higher commission. You also set a length of time, after which, if the property isn’t sold, you can cancel the contract without any penalty fees.
- You develop trust with your agent, knowing they’re working in your interest.
- Information exchange and viewings arrangements are much easier with a single point of contact.
- Everything necessary to sell the property is done by the agent.
- They will dedicate more time because they get a commission if they sell it.
- The agent won’t push you into taking the first offer, and your property might get a better price.
- The agent will be more selective with the offers they bring to you, as they have more time to find a sale.
- Commission rates are higher when compared to open listings.
- If the market isn’t doing well, a single agent might have problems with bringing in strong offers.
- If you don’t really get along with the agent, changing it without paying a fee means you’ll have to wait for the contract to expire.
What other listing agreement could you go for?
“Just you and me” means that agent activity is exclusive to the broker that signs the agreement, but the seller keeps the right to sell by themselves. The broker might work with other brokers and split the commission, but you will only work with them.
“An exclusive address” is a fairly common option. The real estate broker gets the sole right to sell, and the seller is responsible for paying the commission, even if they sell the home themselves. There are, however, exceptions to the agreement.
What kind of items could a listing agreement include?
There should be a time clause which limits the agreement’s length. In a weak market, the agent should have more time to sell. However, in a strong market, if things aren’t working out after two or three months, it’s time to change course.
The listing agreement should also clearly define the commission. The usual range is from 3% to 8%, but the average is around 6%. And, you should specify when that commission is being paid, where the usual situation is after closing.
There should be a language which forces the broker to inform you of any offers they might receive. Some brokers, for example, might hold back on offers that don’t really benefit them. When you’re a seller, you need to know about all offers, and having this in writing gives you confidence.
The Multiple Listing Service lets your home be seen by the widest possible audience unless you’ve got privacy issues. If you don’t have this clause in the agreement, you should know why.
There’s also the lock box option, where a safe with your house key hangs on the front door. Real estate agents have access to the safe and might show the home even if you, or your broker, aren’t present. If you’re concerned about privacy and safety, you should avoid this.
Ending thoughts on a open listing
If you want to get the property sold quickly, go for an open listing. However, rushing to sell it will most likely have an impact on the price. If you do have the time, find an agent you trust, and you’ll most likely get a much more dedicated service, as well as a better price.
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