An Exclusive Agency Listing in Real Estate
What It Is and How It Is Used
An exclusive agency listing is similar to an open listing, the major difference being the broker will represent the seller. The seller may still reserve the right to sell the property independently and, in that case, not pay a commission. The broker is free to cooperate with another brokerage, meaning the second brokerage could bring an able buyer whose offer the seller accepts. Typically, the broker is paid a listing commission that is shared with the selling broker, so the seller pays both sides of the commission (listing and selling).
Who an Exclusive Agency Listing Benefits
The exclusive agency listing is used sometimes as a compromise. It suits the For Sale by Owner (FSBO) seller who says if they were to hire a real estate agent, it would be yours. The reason a brokerage would entertain such a listing is because it might be better than no listing at all. There is a good chance the seller will be unable to sell the home without help.
The National Association of REALTORS® (NAR) reported in 2019 that only 8% of recent home sales were FSBOs, for the second consecutive year. The medium selling price was $200,000 for an FSBO, and $280,000 for the sale of a home assisted by an agent.
An Exclusive Agency Agreement gives both parties a bit of what they want. Perhaps the seller fully expects to sell the home themself. Perhaps the brokerage fully expects an exclusive right to sell listing agreement and wants to be paid for its efforts. It is not unusual for a real estate brokerage to desire an exclusive listing agreement, a contract that will pay only it, and not a competing broker. If a competing broker brings the buyer, the exclusively contracted agency will pay that broker.
The Inner Workings of an Exclusive Agency Agreement
An exclusive agency agreement listing means only one brokerage can represent the seller. That, in itself, is a partial victory for the brokerage. However, by giving the seller the right to sell the home independently, it gives the FSBO seller the ability to avoid paying a commission if they should find their own buyer. In that event, the seller would receive no representation from the brokerage, and the buyer most likely would be unrepresented as well. Both parties receive a partial benefit based on their own respective viewpoints.
On a practical side, an exclusive agency listing involves detailed monitoring. Under an exclusive agency listing, most likely the brokerage would manage all contact with other brokers and home buyers, to prove that the eventual buyer originated through its efforts. An exclusive right to sell listing pays the listing broker regardless of how the buyer found out about the property, and that's a protection many mainstream brokerages demand.
Why More Agents Don't Use Exclusive Agency Listings
The excessive monitoring is one reason not many exclusive agency listings are signed. In fact, if you asked a real estate agent to explain exclusive agency to you, most agents probably could not. An exclusive agency listing presents the possibility that an agent might expend a lot of effort for which there is no financial reward.
Another compromise some agents have used is to set a time period on the exclusive agency listing and if the seller is unable to produce a buyer through their own efforts within, say, 30 days, then the parties could make a separate agreement to automatically convert the listing to an exclusive right to sell listing at that time.