Types of Listing Contracts
A listing contract is an agreement between a seller and a licensed real estate broker that authorizes the broker to represent the seller in the process of selling his home. There are several different types of listing contracts, but very few of them are used. The most common one used is the “Exclusive Right to Sell” listing. But you will find that there are a lot more types, allowing you to choose the level of services authorization to give to your agent. Here are some of them:
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This type of listing contract is in effect for one showing to one prospect. Otherwise the owner is free to sell the house themselves and pay no commission. This relationship only makes sense if the house is not listed, and not in the MLS. The listing contract identifies the potential buyer and guarantees the agent a commission if that buyer buys the home. Just like open listings and some exclusive agency listings, this type may lack marketing efforts on the part of the agent.
The commission the seller will spend is negotiable, with negation made prior to the showing, and may cost as much as the buying and selling side of a traditional listing, payable at closing- transactionally funded.
Exclusive Agency Listing
This one involves a broker, who, therefore makes it possible to have the house in the MLS for the exposure. An exclusive agency listing will give sellers the right to sell their own home, without paying commission unless the house is sold through a licensed real estate professional. Should the house be sold without any help of agents, the contract allows homeowners to pay no commission at all. The reason why this type of listing contract is widely used is the temptation of not having to pay a broker.
The expense to the seller may be that of the buyer’s agent side of a traditional sale, payable at closing, and a smaller, flat-fee to the agent who gets the house in the MLS, usually payable in advance.
Exclusive Right to Sell Listing
The most popular type of listing with some sellers and all brokers, this contract gives the full right for your broker to do whatever it takes to sell your house. For obvious reasons, this is probably the type of contract where you can expect the most incentive from the agent – a good marketing effort can take place here, and the homeowners’ work is much reduced.
The cost to the seller is the most of these three, but it is usually paid out of the proceeds at closing.
Any of these listing relationships can involve different levels of service. Before you choose your contract, always make sure you know every type of listing available to you. Take in mind how much effort you would like to contribute to the home selling – this is often what distinguishes the types. Discuss the possibilities and disadvantages of each type. Remember, a listing contract is your first legal step in selling your house – take that step carefully and have it in writing exactly what you are expecting from the agent. The best surprise is NO surprise!
Broker Don Martin, founder and CEO of Martin Properties, besides helping hundreds of FSBOs save thousands of dollars, also delivers seminars, keynotes and motivational messages to real estate and sales professionals. His 30+ years of experience in sales, marketing, real estate, promotion, management and technology has empowered thousands to expand their knowledge and achieve their goals. Connect with Martin Properties on Facebook, TheReasonableRealtor.com, MLS-TODAY.com or Amazon.com.