When it comes to selling a house, it’s essential to work with a real estate agent who can guide you through the process. The agent should also help you secure the best possible deal.
While working with a real estate agent, you might have to decide on the type of Listing Agreement. A Listing Agreement is a legally binding contract between you and the agent. You can either choose between an Exclusive Listing or an Open Listing Agreement.
In this blog post, we’ll explore Open Listing Agreements, what they are, how they work, and the pros and cons of this type of agreement.
KEY TAKEAWAYS
- According to NAR 2020 Member Profile, 22% real estate agents used Open Listings Agreements.
- You can work with multiple agents or brokerages in an Open Listing Agreement. Each agent can bring in a potential buyer for your property.
- You only pay commission to the agent that bring in the buyer. If you bring in the buyer yourself, you pay no commission.
- An Open Listing Agreement is not recommended strongly by agents or brokers. Some brokerages even have rules against practicing Open Listings.
What are Open Listing Agreements?
An Open Listing Agreement is a non-exclusive contract between a property owner and a real estate agent. It grants the agent the right to list and market the property for sale.
As you are not tied to any specific agent, you can work with multiple agents. This means that multiple agents can list your property for sale. Each agent can bring in a potential buyer.
The agent who brings a buyer to the table first gets the commission. You can also bring in a buyer on your own and avoid paying commission to any of the agents.
Open Listings vs. Exclusive Listings
“Open Listing Agreements” and “Exclusive Listing Agreements” are two of the most common types of real estate Listing Agreements:
- Open Listings: An Open Listing Agreement is a contract between you and the real estate agent. It specifies that you can work with multiple agents for the sale of the property. You only pay a commission to the agent that brings in the buyer.
- Exclusive Listings: An Exclusive Listing Agreement is a contract between you and the real estate agent. It grants the agent exclusive rights to market and sell your property. You cannot work with another agent or brokerage till the contract lasts.
Pros and Cons of Open Listing Agreement
As with any type of Listing Agreement, there are pros and cons to working with an Open Listing Agreement:
👍 Pros
An Open Listing contract does have certain advantages that work in your favor. They are:
- More Agents = More Exposure: By working with multiple agents, you increase the exposure of your property to potential buyers. This means that more people will see your property leading to a faster sale and a higher sale price.
- Non-Exclusive Contract with an Agent: Open Listing Agreements do not require you to work with one specific agent exclusively. This means that you’re not tied to any one agent and can work with multiple agents at the same time. You can also choose to sell your house FSBO.
- Flexibility in Marketing: Open Listing Agreements give you the flexibility to choose how you want to market your property. You can work with different agents and use different marketing techniques. You can also test different strategies to see what works best for your property.
👎 Cons
However, an Open Listing Agreement has certain drawbacks. They include:
- No Guarantee of Sale: With Open Listing Agreements, there is no guarantee that your property will be sold. As multiple agents are involved, there is a risk that they may not be able to sell your property.
- Lack of Control: When you work with multiple agents, you lose some control over the marketing of your property. Each agent may use different marketing techniques which can confuse potential buyers.
- Commission Disputes Between Agents may Arise: As multiple agents are involved in an Open Listing Agreement, there is a risk of commission disputes. Such disputes may arise if multiple agents claim that they brought in the qualified buyer. Resolving these issues are also be time-consuming and stressful.
Important Factors to Consider Before Signing an Open Listing Agreement
If you are considering signing an Open Listing Agreement, there are several factors you should consider before doing so:
- Commission Rates of the Agents: Make sure you know the commission rates of all agents or brokers involved in the agreement. You have to ensure that you are not overpaying for the agent’s services.
- Marketing Strategy for Your Property: Ask the agents or brokers about their marketing strategies for selling your property. You must ensure that the agents have a comprehensive plan that includes online and offline marketing efforts.
- Experience of the Agents Involved: Choose the agents or brokers involved in the Open Listing Agreement based on their experience. You should work with professionals who have a proven track record of successfully selling properties.
- Contract Period: Establish a clear timeframe in which you want to sell your property. You must ensure that the agents or brokers meet your deadline.
- Communication Between You and the Agents: The agents involved in the agreement must establish clear and transparent communication. Always work with professional agents who are responsive and easy to reach.
- Legal Obligations of an Open Listing: You must be aware of the legal obligations when signing an Open Listing Agreement. Make sure you understand the terms and conditions of the agreement before signing.
Overall, it is essential to do your research and consider all factors before signing an Open Listing Agreement. Ensure that you are comfortable with the commission rates, marketing strategy, and legal obligations involved in the agreement.
Alternatives to an Open Listing Agreement
There are a few alternatives to an Open Listing Agreement:
1. Exclusive Listing Agreement:
Exclusive Listing Agreements are the most common type of Listing Agreements, according to NAR. An Exclusive Listing Agreement is a contract between you and a real estate agent.
It grants the agent the sole right to market and sell your house. You cannot work with another agent or broker till the end of the contract. However, you are able to bring in a buyer yourself. You may or may not have to pay the agent’s commission.
There are two types of Exclusive Listing Agreements. They are:
- Exclusive Right to Sell Listing: In an Exclusive Right to Sell Listing Agreement, you grant the agent with absolute authority to market and sell your house. However, you have to shell out the agent’s commission regardless of who brings in the buyer.
- Exclusive Agency Listing: In an Exclusive Agency Listing, you allow the agent to have sole rights to market your property. But you can bring in the buyer yourself and avoid paying the agent’s commission.
2. Net Listings:
In a Net Listing, you can set a minimum sale price for your property. Any amount exceeding this price limit goes to the agent as a commission.
Net Listings are very uncommon as they can lead to conflicts of interest between you and the agent. Hence they are just legal in 3 states: Florida, Texas, and California.
3. Multiple Listings:
Multiple Listing features your property on the Multiple Listing Service (MLS) platforms. By listing a property on MLS, agents can increase its visibility. This increases the possibility of you landing the right buyer at the right price.
But don’t you need to hire an agent and pay a 6% commission to get on the MLS?
Not with Houzeo! With Houzeo, you skip paying the listing agent commission. Instead, you pay a one-time, small flat fee to list your house on the MLS.
Check out how Houzeo works in this video:
» Houzeo Reviews: See how Houzeo home sellers save thousands with Houzeo technology and MLS exposure.
Bottomline
Open Listing Agreements are a type of Listing Agreement that allows property owners to work with multiple agents simultaneously. There are pros and cons to this type of agreement. Hence, it’s essential to weigh the benefits and risks carefully.
If you are considering an Open Listing Agreement, it’s important to work with a real estate agent who has experience in this type of Agreement.
They can help guide you through the process, provide advice on how to market your property and help you resolve any issues that may arise.
Frequently Asked Questions
1. What is an Open Listing Agreement in real estate?
An Open Listing contract is an open non-exclusive Listing Agreement between a property owner and a real estate agent. It grants the agent the right to list and market the property for sale.
2. Can Open Listings be entered into the MLS?
Generally, Open Listing properties are not listed on the MLS by the associated agents or brokerages. If you want your property to be listed on the MLS, you can hire a third-party discount broker or a Flat Fee MLS service like Houzeo.
3. Who gets the commission in an Open Listing Agreement?
The benefactor of the commission in an Open Listing Agreement is the agent and their associated brokerage if they bring in the buyer. However, you can save up on the commission fees if you are able to bring a buyer yourself.
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