A real estate exclusive listing agreement is a sales agreement in which a specified real estate agent is chosen to sell a property and will gain a commission if that property is sold within a certain time frame — usually 6 months. The agent gains their commission no matter how the buyer is found.
What is the advantage of an exclusive listing agreement?
The motivation for the sales agent is clear. They stand to make a commission by finding a buyer, whether on their own or with other agents. The higher the price the property sells for, the higher their commission will be.
How an exclusive listing agreement works
An exclusive listing serves as a safeguard for both the agent and the seller. The agent knows that they will get compensated for putting in the work (advertising, showing, networking, etc) to sell the house. Also, even after the listing time period has expired, and the property has not sold, if a buyer that the agent found during their agreement period comes back to the home to buy, the agent will still get paid their commission.
The seller knows that they have a motivated agent working on selling their house for the best possible price.
Is there a downside to an exclusive listing?
The key downside is that if the agent doesn’t do their job then the buyer is stuck with them until the listing period expires or they find a way to get out of the contract.
Things to bear in mind when interviewing agents for exclusive representation
- Do you feel a connection? You may go through many ups and downs with an agent. Home selling can be extremely stressful. You need to feel that an agent will be there with you through it all and is not just filling you with hot air.
- Is the agent’s pricing realistic? Don’t be dazzled by the high numbers they are throwing at you. It may just be a tactic to have you sign with them before dropping the price. Find someone who’s realistic from the start.
- What is their sales strategy other than listing the home on the MLS?
- What are their ideas about staging or home improvements to help the house sell?
- What is the commission to your agent and to the buyer’s agent? You have to gauge the pros and cons. Sometimes an agent will offer to drop their commission if a certain price is not reached.
- Will the agent be doing the showings themselves? If not it would be wise to ask to meet the other agent who will be showing the house.
- Are they willing to show the home at the drop of a hat, ie every day if need be as soon as a qualified buyer or their agent calls or will they only show it at open houses? Generally, the more aggressive an agent is in showing the home, the better chance they have in selling it.