So you’ve identified an agent you would like to list your property for sale with and now it’s time to talk about the listing agreement. The following are the three types of listing agreements used in Arizona.
An open listing lets owners sell their home by themselves. It’s a non-exclusive agreement so the owners may execute open listings with more than one real estate broker and only pay a fee to the broker who delivers a ready, willing and able buyer whose offer the owner accepts.
As they are representing themselves, the owners don’t need to pay a broker for selling their house, they only need to pay the broker representing the buyer.
In the event the owners find a buyer themselves, the owners will not owe anybody a commission. Open listings are not commonly used by full-service real estate brokers.
Exclusive Agency Listing
An exclusive agency listing is similar to an open listing with the difference that the listing broker will represent the owner. The listing broker is free to cooperate with another brokerage, meaning the second brokerage could bring a ready, willing and able buyer whose offer the owner accepts.
In this case, the seller’s broker is paid a listing commission that is shared with the buyer’s broker, so in this agreement the owners pay both fees. However, the owners still reserve the right to sell the property themselves and not pay a commission.
Exclusive Right to Sell Listing
An exclusive right-to-sell listing is the most commonly used agreement. It gives the broker the exclusive right to earn a commission by representing the owners and bringing a buyer, either through another brokerage or directly. The owners pay both the listing and selling brokers‘ fees. The owners cannot sell the property themselves without paying a commission.
Other Terms & Conditions of a Listing Agreement
Length of the listing agreement: The duration of the listing agreement is negotiable. The most common timeframe is six months but any timeframe can be negotiated.
Selling Commission: As the seller, you will have a commission agreement with your listing broker who in turns pays the buyer’s broker. Commissions are typically six percent but are negotiable. Generally they are split equally between both brokers.
Cancellation of Contract: Will the broker/agent let you cancel the listing agreement? Some brokers do some don’t. If the broker will agree to let you cancel at any time, that broker in essence is giving you a guarantee. In that instance, the duration of the contract doesn’t much matter.
Expiration of Contract: If the contract should expire, or be canceled with mutual agreement of the parties, the listing broker might supply the owners with a list of the prospective buyers he or she produced. If any of those buyers approach the owners within a specified time period, agreed upon in the listing agreement, and successfully purchase the property, the owner will still owe the listing broker a commission.
Listing agreements are typically 3 pages long and, although some brokers might attach a few addendums to it, they are, for the most part, pretty straight forward. I would advise you to discuss the cancellation options with any broker you are considering – you don’t want to get stuck with someone you’re not happy with. Usually brokers won’t have an issue with this because it goes both ways. Also, when you negotiate the commissions, don’t be cheap… usually what you pay will reflect the level of service and experience you get.