Why You Must Have an Exclusive Right to Sell Agreement

Whether you are a seller or a listing agent, it is always a good idea to push for an Exclusive Right to Sell Agreement. This contract gives the sellers peace of mind that they are working with a motivated listing agent. It also ensures that the listing agent will get a commission for all their hard work.

“I’ve been doing this for about 15 years and I would only do an exclusive; I would never do an open listing – an open listing will languish on the market. The house will languish on the market because no one broker is representing it.” -Cee Scott Brown, Senior Vice President for The Corcoran Group

What is an Exclusive Right to Sell Agreement?

An Exclusive Right to Sell Agreement is a type of listing agreement for selling a home. It gives the broker the right to earn a commission. During the sale, the broker will represent the owners. They will bring a buyer directly or through another brokerage.

Through this type of agreement, the owner will cover the listing and selling broker fees. Once the agreement has been signed, the homeowner cannot sell the property without paying the broker’s commission. The Exclusive Right to Sell contract will award the commission to the broker regardless of who sells the house. This gives protection to the brokers in case they aren’t the ones who bring the buyer.

An exception can be written into the contract to allow the owners to sell the house. This can be done if a friend or family member expresses interest in your house. The broker may give the seller a number of days to produce a contract without owning a commission.

Why You Need an Exclusive Right to Sell Contract

An exclusive right to sell agreement protects the listing agent’s interests as well as the seller’s interests. It guarantees the listing broker a commission if they sell within the time frame. This protects them from putting in a lot of work only to have another person sell the house and earn the commission. An “Exclusive Right to Sell Agreement” gives listing agents a financial motivation to sell the home.

For sellers, an Exclusive Right to Sell agreement ensures that they are working with a motivated listing agent. Sellers can find another agent if their home doesn’t sell within a specified time frame. Sellers can rest assured that their listing agents are working hard to make a sale within their time frame.

When is an Exclusive Right to Sell Necessary?

An Exclusive Right to Sell Agreement should be in place when you don’t have a buyer lined up for your house. Most homeowners do not know how to go about finding home buyers. Unless a neighbor or family member has expressed interest in the house, it is unlikely that homeowners will be able to sell their own home.

The other time an Exclusive Right to Sell Agreement is a great idea when there is a time-sensitive goal for selling the home. The exclusive right to sell provides the realtor with the motivation to get it done as quickly as possible or they lose the right to sell. They will lose their commission.

Benefits to the Seller

Pushing prospects to sign an Exclusive Right to Sell Agreement can be difficult if you don’t understand the benefits to the seller. The seller may be turned off initially by the commission or focused on being in an agreement that they don’t understand. Listing agents should point out the benefits of an Exclusive Right to Sell Agreement.

Sellers receive the following benefits from an Exclusive Right to Sell:

  • Representation during the sale
  • MLS listing.
  • Faster sales
  • Ensures proper pricing.
  • Marketing is done for them
  • Sellers don’t have to find out zoning restrictions

The Exclusive Right to Sell Agreement gives the seller representation during the sale. The listing agent will help them price the home properly, stage the house for buyers, list it on the MLS with a comprehensive description of the property, and facilitate home showings. Buyers are also guided through the negotiation process as well.

The seller doesn’t have to do any marketing whatsoever on their house. Getting a house sold requires listing it on the MLS, beautiful photographs, and excellent description. The seller doesn’t have to worry about finding interested buyers and showing it to them. The listing agent may even be having an open house to show it to multiple people. The listing agent takes care of all this work when the homeowner enters into an Exclusive Right to Sell contract.

62% of agents spend at least one hour every day on marketing. They place ads for homes on Facebook, network with buyers and generate leads of people who are currently in the market to buy homes. This is something that the average home owner doesn’t know how to do effectively.

An Exclusive Right to Sell agreement puts a deadline on the sale of a home, which can speed up the process. A delayed home sale can be very costly for a home owner. Homeowners who don’t sell before their move face paying the mortgage on two homes at a time, which may no be affordable for many people. According to Zillow, the average time it takes to sell a home is about 68 days. The Exclusive Right to Sell agreement motivates the listing agent to get it sold as quickly as possible or face losing their commission.

Buyers are often not aware of the zoning restrictions when selling a home. Listing agents know that they must find out what can be done with the property and the structures. For example, a buyer may be interested in a pool placement or expanding the home. Listing agents with an exclusive right to sell will find out every question from a zoning perspective so they can answer buyers questions. Most homeowners may not even think about finding out about the zoning restrictions on their properties.

Exclusive Right to Sell vs. Exclusive Agency

An Exclusive Agency agreement sometimes is used by homeowners that feel that they will be able to sell their homes by themselves. It is often a backup done by For Sale By Owner (FSBO) sellers when they think they may not be able to sell their homes.

The Exclusive Agency agreement gives the seller the right to sell the home and avoid paying a commission. This is not necessarily beneficial to the seller. If that happens, the seller does not have representation from a brokerage. Most likely the buyer and the seller are unrepresented in that sale. Their interests are not protected.

Losing a commission when a seller brings the buyer is a huge drawback. It is the reason that most mainstream brokerages demand the protection of an Exclusive Right to Sell Agreement.

Exclusive Right to Sell vs. Open Listing

An open listing will theoretically benefit the sellers the most. In this type of listing, sellers can use multiple brokers. The seller isn’t under any obligation to pay any of them if he sells the property without the broker’s help.

The Exclusive Right to Sell eliminates having multiple brokers competing to sell the home. It ensures that the broker will receive a commission for the sale regardless of who brings the buyer. This gives the listing agent the assurance that they will get paid for their efforts. Listing agents will prioritize these contracts over the ones where they are competing for a commission.

According to Cee Brown of the Corcoran Group, open listings tend to sit on the market. The brokers aren’t motivated to sell the property with the chance that they may not receive a commission. They don’t spend their time and energy marketing a product when they may not get paid for their efforts.

Conclusion: Always Opt for the Exclusive Right to Sell

There may be some rare instances where an Open listing or Exclusive Agency listing is best, but they are few and far between. Typically, the best option for both the listing agent and the seller is an Exclusive Right to Sell.

The benefits are fair for both parties. It provides the seller with a motivated listing agent who will accurately price the home, market it to the right buyers and get it sold as quickly as possible.

Listing agents who don’t push for an Exclusive Right to Sell risk working for free. They may spend a lot of time listing a property, marketing it, showing it, only to have the homeowner find a buyer.