What is a listing agreement?

Selling your house is an exciting decision and there’s a lot to think about. While some people decide to sell their homes without a real estate agent, that’s not always advisable unless you have a lot of experience in real estate.

Hiring an agent can save you a major headache and let you focus more on moving to your next home. Once you’ve found someone you like and trust, you’ll have to complete a listing agreement. This document sets out the terms for your relationship with the agent who is going to list and sell your house.

What does a listing agreement include?

The listing agreement permits a real estate agent or broker to represent you and your property to third parties. Once the listing agreement is signed, you can officially begin the home sale process.

Most listing agreements contain the same basic information and all must be put in writing. Although there are different types (covered below), every listing will tend to include the following:

• How much the house will be listed for
• How much the agent is paid
• List of seller’s and broker’s duties
• Terms of mediation
• When the contract expires
• Description of the property
• What personal property is included in the sale

The listing agreement may also set the terms of how the real estate agent will promote your home — using the MLS, internet marketing, for-sale signs, and more. It will also give the broker the right to use listing content like photos, graphics, videos, virtual tours, and written descriptions of the property.

Finally, a listing agreement will also spell out Equal Opportunity Housing rules, attorney fees, and lay out the protocol for dispute resolution.

Types of listing agreements

There are three types of listing agreements, each outlining different terms and arrangements that may benefit different sellers.

Exclusive right-to-sell listing

The most common listing agreement is the exclusive right-to-sell listing. In these agreements, a single person is appointed the seller’s agent and has exclusive authorization to represent the property to potential buyers. It’s the agreement that most heavily favors agents as they will earn a commission regardless of who buys the property.

Despite limiting the seller’s options, this type of agreement also incentivizes a real estate agent to do their best work. That means devoting all their (and their agency’s) resources to finding the right buyer.

Learn what questions to ask a real estate agent when selling your home.

Exclusive agency listing

An exclusive agency listing authorizes a single broker to act as the exclusive agent for the seller. Upon selling the property, the seller pays a commission to that real estate agent.

However, with these agreements, sellers retain the right to sell the property on their own, thereby avoiding paying a commission. It’s a bit of a have-your-cake-and-eat-it-too deal. You can put in the work to sell the home yourself to save on a commission, but you can still fall back on the help of a real estate agent if you can’t get the job done.

Open listing

An open listing is when the seller retains the right to employ any number of agents for a property sale. This nonexclusive type of listing makes the seller obligated to pay a commission only to the broker who successfully finds a buyer. The seller can even sell the property independently without having to pay a commission.

This listing agreement lets the seller leverage many brokers. However, these agreements are not popular among real estate agents who aren’t keen on competing to earn a commission when there are plenty of other homes on the market. It’s most commonly used by sellers who need to sell a property quickly.

Learn more about working with multiple real estate agents.

Can you negotiate the terms of the agreement?

A listing agreement is a legally binding document, so you must understand what you’re signing before putting your name on the dotted line.

Remember, virtually everything in real estate is negotiable. There’s no shortage of brokerages or real estate agents out there so don’t feel like you have to settle for a clause or deal point that you’re uncomfortable with. Some agents may walk away from a deal, but if you feel strongly about a certain point, don’t give up after a few meetings.

These are some of the most common things negotiated in a listing agreement.

Commission

Most real estate agent commissions land somewhere between 5% and 6% and are split with the buyer’s agent. Once you’ve agreed to the commission percentage and signed a listing agreement, you cannot change this percentage.

Ahead of time, however, you can negotiate this percentage. Bear in mind, though, that most fees go to marketing your house and are the main incentive for agents to work for you. Plus, when you lower the commission, you’re also lowering the eventual buyer’s agent’s commission, which may make it more difficult to attract interest.

Expiration date

Most real estate agents want as much time as possible to sell your house. After all, it behooves them to take on as many clients as possible and give themselves as much time as possible to work a deal. If you think your house should sell faster than the time the agents want to allot for themselves, you’re free to negotiate the agreement expiration date.

Related: Signs of a bad real estate agent

List price

One of a real estate agent’s principal jobs is to recommend a list price based on market data, comparable home sale prices, and the condition of your home. This list price will be based on real data and expertise but you can still negotiate the list price to go on the market with.

If you’re looking to sell your home, Orchard can help. Our expert team uses decades of housing data to help our agents price your home so you can sell for top-dollar. 

Responsibilities

In addition to helping figure out a list price, real estate agents might list the address of the home and promote it online, post a sign in the yard, and create a list sheet for the property. If you’re uncomfortable with any of these duties or others laid out in the listing agreement, you can negotiate them to suit your preferences.

Can you cancel a listing agreement?

First off, you do not have to sign a listing agreement — you’re entitled to sell your house on your own.

But if you want to use a real estate agent to sell your house, you need to sign a listing agreement because it permits the agent to represent you and your property.

If you’re dissatisfied with your agent or brokerage’s services, you can cancel the listing agreement. You can ask for a release or request another agent within a brokerage. Otherwise, you can wait for the listing agreement’s expiration date.