When listing your home for sale you need to be familiar with the different types of listing contracts. There are 4 types of listing agreements in the market - Exclusive Right To Sell; Exclusive Agency; Open Listing and One Time Showing Agreements. They are all legally binding contracts that authorize a broker to find a “ready, willing and able buyer” for your home, according to the conditions specified in the contract.

Let’s start with the most common - Exclusive Right to Sell. With this type of listing contract you are hiring one agency/one agent to sell your home. Commission will be due to the broker regardless of who brings the buyer to the property. This will put the agent to working the strongest for you. They are dedicated to marketing your home in order to bring in a commission. Under Exclusive Agency if you bring the buyer to the table a commission will not necessarily be paid to the broker. Or you may have an arrangement with the broker to take care of the deal at a reduced commission rate. Open Listingsallow you to hire more than one agency to sell your home. The drawback to this type of listing is that no one agency feels the strongest motivation to really promote the home. Why pay advertising dollars for a buyer to come in through another agency? In my state you must have an Exclusve Right To Sell or Exclusive Agency contract in order to be placed in MLS. And finally one time showing agreements are most commonly used with For Sale By Owners (FSBOs) when an agent is bringing a buyer and wants to secure a commission for doing so.

Length of contract is also very important. To have a legal listing agreement it must have a start and end date stated clearly. Nowadays listing contracts seem to be a minimum of 6 months and more likely one year long. Ask your agent what their policy is for withdrawing from your contract. Will they let you out if you decide to take your home off the market or simply decide to hire a different agent? Will you be responsible for any advertising cost incurred if you withdraw? What happens if your house doesn’t sell in the time decided - does the contract automatically renew?

There is no standard commission rate in the industry! All things are negotiable- I have seen rates vary from 2% (on a multi million dollar property) to 15% (on a land sale). Commissions are not just what the agent takes home it is also how they pay for all the advertising and marketing it takes to sell a property. You can expect a rate somewhere between 4% to 8% depending on the property, marketing program desired and customary splits with other agents in the area. Remember that your agent is going to offer the buyer’s agents 40-50% of the total commission for bringing the “ready, willing and able” buyer. According NAR, 95% of all real estate deals are co-broked. Meaning that the buyer comes in with a different agent than the one representing you. This is a good thing. It means your agent positioned your property to get the most exposure possible. Now there are also variable commissions under special circumstances - maybe you already have a buyer in mind, maybe the agent does. Ask your agent if they will reduce their commission if they are representing both the you and the buyer. Finally, your agent will also be paying part of the commission to their office. Once you cut the pie up, you will be surprised at what a bargain your agent really is for all the hard work they put into selling your home.

So thing hard on these things prior to entering a listing contract with a broker. Ask the important questions up front so you will not be a victim of 20/20 hindsight.

(c) Shannon Aldrich, 2008