A Guide to Understanding a Listing Agreement | Redy

Nov 28, 2022 8:00:00 AM / by Zak Bretherton

What is a Listing Agreement?

Once you've decided to sell your home, most people are eager to get their house on the market and start their next chapter. However, before you can really get down to business, you need to sign a listing agreement with your real estate broker.

Listing agreements come into the home selling process once your house is ready to list and you've found a real estate agent, but before you've actually listed it. To move forward with a listing agreement, you and your real estate agent must sign a contract establishing the terms of your upcoming home sale. Both parties must dissect and fully understand this document so that all goes through correctly and legally.

We're here to help you better understand listing agreements and how they play into selling your home. This article will cover the different types of listing agreements, what's involved, how they're negotiated, and other helpful tips you need to know.

Listing Agreement Defined

A listing agreement is the official employment contract between a property owner and a real estate agent or broker that sets the binding expectations and arrangements of your business. The primary agreement is that the real estate agent has permission to present the homeowner's house to potential buyers and represent the homeowner. It also outlines the commission your real estate agent will receive for doing so and defines the roles of both the seller and the agent.

The agreement protects both parties. It ensures that the real estate agent will earn fair compensation with a guaranteed commission if they sell the home as planned. It should also protect the homeowner from being tied to an agent who fails to fulfill their end of the service agreement.

What’s Included in a Listing Agreement?

While these contracts all serve the same purpose, there may be slight differences between contract to contract or broker to broker. These are the general items you should find in a listing agreement:

  • Asking price

  • List of seller's and broker's duties

  • Broker's fee (the commission a broker charges to perform certain transactions or provide specialized services for clients)

  • Property description

  • List of personal property included in the sale

  • List of personal property to be removed upon sale

  • Terms for mediation

  • Contract expiration date (most listing agreements expire within six months, after which the contract is terminated)

  • Marketing plan

  • Commission

  • Mediation and dispute clause (a clause often added to ensure that, should a dispute between the homeowner and their agent arise, they will use an impartial third party to help mediate the disagreement)

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The Three Types of Listing Agreements

There are three primary types of listing agreements that you will see as a homeowner trying to sell your home. Let's outline the differences between each.

Exclusive right-to-sell

An exclusive right-to-sell agreement guarantees that the agent you've hired has the right to exclusively market and list the house and earn a commission on the sale. This is the most common type of agreement since it ensures an actual profit for the agent—even if another agent leads to a buyer, the broker that the seller contracted with will receive their commission either way.

Though it is more limiting for sellers since they must rely on one agent to sell their home successfully, they also benefit from having a dedicated agent pool their resources to get that sale. Read more about exclusive right-to-sell agreements here.

Exclusive agency listing

In exclusive agency listing agreements, the seller authorizes one broker to act as the exclusive agent for the home sale. However, unlike the exclusive right-to-sell option, the seller retains the right to sell their home without the broker. Remember, though, that the seller must still pay a commission to the broker if the broker sells the home.

Open listing

An open listing agreement is the most "non-committal" for the seller, as it allows any agent to list or sell the property. This means that the homeowner must only pay a commission to the broker that sells the property, which is why open listings are less popular among real estate agents.

In an open listing agreement, the homeowner retains the right to sell the property independently and pay no commission. Because this adds a level of insecurity for the real estate agent, these agreements are the least popular and are usually only agreed upon by agents with a promising buyer in the pipeline. Otherwise, sellers choose this type of agreement if they need to sell their home quickly or if they want to save money on commission.

Negotiating Leasing Agreement Terms

When establishing a listing agreement, anything can be negotiated between the two parties. However, some of the most common negotiation points include:

  • Commission

  • The length of the contract (listing term)

  • Whether the real estate agent will be representing both you and the buyer as a dual agent

  • Type of listing

  • Listing price

  • Duties

Your negotiation experience starts with finding the best real estate agent who's willing to work for you. Redy allows you to compare multiple real estate agents from the comfort of your home and choose the agent that best fits your needs. 

When Do You Sign The Listing Agreement?

You sign the listing agreement once you've found a real estate agent or broker and negotiated the terms to the fullest extent. Without your signoff, the home selling process can't proceed, so it's best to select the type of listing agreement you want and get the sale underway.

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Can You Terminate a Real Estate Listing Agreement?

You can fire a real estate agent if they do not perform their listed duties. Take time to read the fine print to ensure you approve of everything in the listing agreement. The right real estate agent will be trustworthy enough to avoid termination altogether, so do your research before going with the first real estate agent from your Google search.

Bottom Line

Signing a real estate listing contract is one of the most important first steps in getting your home on the market, and it can be a relatively painless process with the right real estate agent. You want to find a real estate partner that will work with you and sincerely do their best to get you the best deal they can on your home.

It's not always possible to know when an agent is the right fit for you and your house, so if you are looking for a real estate agent, let Redy help you cut through the chatter and connect with the right people.

With Redy, you skip those impending and overwhelming feelings that come with trying to sell your home and instead focus on finding a trusted agent to do it for you. In two easy steps, you can hand-pick your real estate agent from a pool of motivated partners by creating a quick property profile for your home.

The best part is how easy it is for homeowners. With minimal stress and effort, you can skip the hassle of endless online research and cut to the chase with competitive and prepared agents. Get started with Redy today to find your perfect real estate agent!

To learn more about selling your home, visit our Home Seller Resources >

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