Contract Tips

Understanding the Types of Listings

There are several different types of listing contracts, but very few of them are used. The "Exclusive Right to Sell" is the most common, but there is the "open listing," the "exclusive agency listing," and the "one-time show."

Open Listing

The "open listing" is mostly used by people trying to sell their home by owner who are also willing to work with real estate agents. Basically, it gives a real estate agent the right to bring buyers around to view your home. If their client buys your home, the agent earns a commission. There is nothing exclusive about an open listing and a home seller can give out such listings to every agent who comes around.

For that reason, no agent who accepts an open listing is going to market your home or put it in the Multiple Listing Service. If your home fits the criteria for one of their clients, and it is convenient, they may be willing to show it to their client. That is all an "open listing" is good for.

One-Time Show

A "one-time show" is similar to an open listing in many respects, as it is most often used by real estate agents who are showing a FSBO (for sale by owner) to one of their clients. The home seller signs the agreement, which identifies the potential buyer and guarantees the agent a commission should that buyer purchase the home. This prevents the buyer and seller from negotiating directly later and trying to avoid paying the agent's commission.

As with an open listing, agents will not be spending money on marketing your home and it will not be placed in the Multiple Listing System.

Exclusive Agency Listing

An "exclusive agency" listing allows an agent to list and market your home, guaranteeing them a commission if the house sells through any real estate agent or company. It also allows sellers to seek out buyers on their own. This is not a popular type of listing agreement.

The reason an "exclusive agency" listing is unpopular is because there is no incentive for your agent and their company to spend money and time marketing your home. If you come up with your own buyer, they have spent money (and time) that cannot be earned back through the real estate commission.

Plus, it is too easy for greed and a lack of ethics to enter the picture. Some unethical buyers or sellers will try to cut out the agent, even though it was an agent's efforts that brought the buyer to the home.

If you find an agent willing to accept such a listing, do not expect too much from them. They will probably just place it in the Multiple Listing Service and sit around to see if something happens.

Exclusive Right to Sell

Giving a real estate agent the "exclusive right to sell" your property does not mean that there will not be other agents involved. Your agent is the listing agent and the most important part of his or her job is to market your home to other agents who work with buyers. Those agents will show your home to their clients. Regardless of who sells the home, even if you sell it yourself to a friend at work, your listing agent will earn a commission.

If you want full service from an agent and his or her company, this is probably the only type of listing they will accept. Full service means an agent will advertise your home, place it in the Multiple Listing Service, market the home to other agents, and perhaps even hold open houses. This requires an expenditure of both time and money.

Only with an "exclusive right to sell" does an agent have a realistic expectation of earning anything on their investment in selling your home. That is why it is the most common type of listing. Of course, the agent and their company still have to perform in order to get paid - your home has to sell.