Pros and Cons of Exclusive Listing Deals
What does the word Exclusive mean to a listing agent?
You're selling your home, and you're taking no prisoners. Let's face it, you
have two goals: selling for as high as possible and as quickly as possible.
That's why you're looking for a top broker to deliver the goods for you.
Most homeowners realize the importance of finding the right broker. But few
consider the type of listing agreement to sign with that broker.
A new study, The Impacts of Contract Type on Broker Performance, conducted by
a researcher at Penn State's Smeal College of Business Administration, looked
at different types of contracts and reached several conclusions. For
example, it found that exclusive agency listings sell slightly faster than
exclusive right-to-sell listings. What's the difference? Most homeowners
enter into an exclusive right-to-sell agreement with a real estate broker.
You give the broker the sole right to sell the property, to list your home,
do all of the marketing and do their best to get you the highest possible
price. If another broker was involved in recruiting a buyer, your broker
will share the commission with the other broker. But no so if you're
involved. Even if you stumbled over a buyer yourself by accident and cinched
the deal, your listing broker gets a commission. In other words, under an
exclusive right-to-sell agreement, the listing agent is entitled to a
commission, no matter what. If you help, you're still paying. If another
broker helps, that broker gets paid out of the commission.
All that is not the case, however, with an exclusive agency agreement. Under
exclusive agency, the listing broker is the only, or exclusive, broker
entitled to a commission-- no sharing with other brokers. But here's a key
difference that makes this option seem tempting. When no commission is paid,
the seller may sell the property on their own. Thinking of saving big bucks
on commission? Not so fast. The study found that the exclusive agency
contract creates disincentives for effectively marketing your home. One is
the negative perception among other brokers. When other real estate agents
find your home on the Multiple Listing Service and see it listed that way,
they have little reason to show your home if their efforts don't pay off in a
commission. In addition, why should your own broker work hard and spend
hundreds of dollars marketing your home, if they could lose the commission if
you sell it yourself? Do you want to compete with your own broker? You get
what you pay for.
Remember that these rules may vary from state to state. And of course,
there's no reason to rule out any option when negotiating an agreement, as
long as you are happy with the arrangement and know the pros and cons. (But
some sources, including the Florida Attorney General, warn that sellers might
not get the highest level of service under an exclusive agency agreement.)
The length of the agreement should reflect a reasonable length of time to
sell a home in your area, perhaps 90 days. Be sure to have a contract
cancellation clause if you are unhappy with your broker.
Sources used to create this article include Robyn A. Friedman and the Florida