Is A Listing Agreement Important When Selling A Home?

Homeowners today usually choose to hire an agent to find a buyer rather than selling a home by owner

. That is why it's very important to have a working understanding of the real estate listing agreement, the form you sign with a broker to put your home on the multiple listing service. Most people sign the listing agreement form without actually reading it, and even if they read it they don't completely understand it. Typically, a broker will explain the agreement but not the alternatives. Did you know there are alternatives? I'm writing this article to highlight a few different types of listing agreements and explain how they work.

It makes sense that the most widely-used listing agreement is beneficial to the listing broker, which is only practical. The Exclusive Listing Agreement is one which gives the listing broker the right to a commission on the sale at the time of closing. It doesn't matter if your broker or another agent brings the buyer into the transaction, an Exclusive Listing Agreement protects the broker's right to a commission. So, if you find a buyer yourself to sell a house to and you've signed this form of listing agreement you will still owe your broker a commission.

However, if you know enough about real estate and you have access to legal forms used in your area, but you want to maintain the right to sell your home yourself, there is another listing agreement you could sign with a broker instead. An Exclusive Agency Agreement is a listing form that requires you to pay a commission only if your broker (or another agent working through your broker) brings a buyer. You won't owe a commission at all if you find the buyer yourself. But remember, if you find a buyer and don't continue to work with the broker at all after you have a signed purchase agreement, you will have the responsibility of managing the transaction yourself, too. Seeing a real estate closing through to completion can be quite a challenge unless you know how to do it.

I'll mention one other alternative listing agreement called an Open Listing, which is understandably unpopular with listing brokers who are not guaranteed a commission at all. Signing this listing agreement with any number of brokers only obligates you to pay a commission to the broker who brings the buyer and closes the sale. It's easy to see that this process can be time consuming for you, and it can de-motivate brokers from advertising your property at all since they are not protected.

by: Leo Kingston

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