subject: Should You Use An Exclusive Rights Agreement When Selling A House? [print this page] Even though I occasionally hire a real estate broker when I'm planning how to sell my home, I usually consider selling it myself first. As an investor I have sold a lot of my houses, but of course it can save me some work to hire a broker. I've learned one important thing in all my transactions with a variety of real estate broker which concerns listing agreements. It's not a well-known fact but there are several choices of listing agreements available, not just the standard form your broker usually provides when you list your house.
Because this is a touchy issue with sellers and brokers alike, in this article I'm hoping to enlighten everyone on an important subject. As soon as I learned about various types of listing agreements I found that I could do business with more freedom, and with what you learn in this article you will have more freedom, too.
There are basically two standard listing agreements, and although there are others available, these are the two I'll discuss. The first is called an Exclusive Right to Sell Agreement, and the second, the lesser known of the two is called an Exclusive Agency Agreement. Those phrases can be intimidating, but after I explain it you'll find it makes sense. Keep in mind is that every state has unique real estate laws and I'm generalizing from my own experience, so the actual forms may be different in your state.
An Exclusive Right To Sell Agreement is the normal listing agreement brokers use. It is used for the purpose of protecting the real estate licensee so that he or she earns a commission no matter who brings the buyer. It gives the broker the right to earn a commission after finding a buyer and closing a sale on the property. It doesn't obligate the broker to find a buyer, it simply gives that broker the right to collect the commission regardless of who finds the buyer and closes the sale. From this brief description you can see that the normal listing agreement benefits the broker more than the property owner.
It just makes sense that brokers wouldn't be motivated to advertise or show your house without an opportunity to get paid. Any person who has been interested in your house in the past can be "excepted" from the Exclusive Right To Sell Agreement, which means you are not obligated to pay a commission if the person listed as an exception closes on your house. But your broker may be less inspired to work hard knowing that you are in a position to sell your house without paying a commission.
Now we get to the interesting part, the Exclusive Agency Agreement. This form guarantees your real estate broker a certain percentage of the sales price as commission, but only if you do not sell it yourself. Yes, with this agreement you retain the right to sell your house yourself without the obligation of paying a commission. This is a perfect arrangement for me, but I have a lot of experience selling my own houses. Remember - you will need your own forms, a sales agreement as well as other forms, and your broker is not obligated to help at all. The Exclusive Agency Agreement is an ideal listing agreement for real estate investors, and it is my choice when considering how to sell my house, but if you're unfamiliar with the needed forms and what needs to happen with them, well, the whole thing can become a nightmare. You may discover that it's better to hire a broker to sell your house after all.
