Did you know you must have at least 120 hours of real estate education in an approved institution to become a realtor? The real estate examination is also difficult for many people.
One aspect of real estate is there are a lot of terms you’ve got to understand if you want to be successful. Phrases like “closing costs” and “open listing” may not have meaning to the average person.
We’ll teach you about the four types of real estate listings, so you leave this article with an in-depth understanding of open listings. Keep reading for more about open listings explained.
What is a listing agreement?
A listing agreement (or listing agent contract) is a legally binding contractual agreement between sellers and the agents representing them during the sale. The agent in this arrangement is also called a “seller’s agent.”
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Now that you know what a listing agreement is and who uses them, let’s talk about listing agreement types. Listing agreements can be modified as needed, but there are generally four types:
- Open listing agreement
- Exclusive right to sell
- Net listing agreement
- Exclusive agency
What is an open listing in real estate?
At the article’s start, we’d said that a real estate open listing is a non-exclusive contract; this is true, but it’s a little more complicated. Open listings are flexible contracts that allow you to work with multiple agents.
In the most common type of listing – exclusive right to sell – you’d enlist a listing agent (agent marketing the house) with the exclusive right to sell your home. This agent would keep all commissions from the sale.
All offers for your residence would go through this listing agent you’ve hired. With open listings, there is no listing agent; instead, various local buyer’s agents would market the listing.
Think of open listings like an expanding web. Each buyer’s agent (agent attracting home buyers) can bring more potential buyers to your property. An open listing can reach out to many sales demographics.
Real estate open listing: What is FSBO?
FSBO or “For sale by owner” means that a seller is trying to sell their home without the assistance of a real estate agent. Before moving on, let’s clarify something – you do not need a real estate agent’s license to sell a home.
If you own a home, you can sell the property. But, the catch is that FSBO sales are often difficult for homeowners. Selling a home takes a lot of effort, something many may not realize when begging the task.
Many homeowners have issues staging their homes for sale and handling the multitudes of paperwork. You can hire a real estate attorney to handle paperwork, but it costs extra and doesn’t come with the perks of a realtor.
Marketing an FSBO home is also notoriously tricky, mainly because the typical homeowner may not know how to attract buyers to their property.
How open listings help FSBO sales
You might wonder, “What does this have to do with open listings?” Open listings are technically a form of FSBO. Remember, you don’t enlist the help of a listing agent – you’re not getting someone to market the home.
You’re only reaching out to people that will bring potential buyers to your property. Here’s one of many open listing tips to keep in mind – they make FSBO sales easier.
An open listing on your residence makes marketing your house much more manageable. Various buyer’s agents can attract people to your home, and you’re not stuck trying to figure out how to handle the task.
Advantages of an open listing
Here is the second of our open listing tips; these listings are more flexible than the others. As we said, you’re not committed to a single buyer’s agent.
You can take your house off the market whenever you want without penalties. Typically, using a committed listing agent may result in having to pay full commission or marketing fees.
These penalties happen because of cancelation clauses written into the listing agreement. The agents don’t want to lose the money they’ve put into your property before you’ve taken the property off the market.
An open listing means you only have to pay part of the average commission amount. An agent’s commission is often around 6%, meaning you only pay 3%.
Disadvantages of open listings
There are cons to opting for real estate open listings. Open listings are essentially FSBO sales; you’re on your own with inspections, open houses, negotiations, and marketing.
You’re still in charge of most of an agent’s responsibilities. Also, while agents will bring buyers, they’re more concerned with the buyer’s desires, not yours.
The buyer’s agents are negotiating on behalf of their client. They’ll pose prices agreeable to the person looking to purchase your home, and you either agree or decline.
Open listing vs. exclusive right to sell
If you’ve wondered, “What is an open listing?” and never had an answer; hopefully, this guide has explained. But what exactly is the exclusive right to sell?
We told you earlier that the exclusive right to sell means you hire a listing agent with the exclusive right to all sales commissions. You cannot work with another agent during this arrangement.
We’d also said that these listing agreements were the most common kind. Most agents agree to exclusive right to sell listings because they’re entitled to their entire commission fee (the complete 6%).
The agent handles all offers, so they don’t lose any money or time on a deal they won’t garner payment. An exclusive right to sell listing agreement may have exceptions when the person is predetermined to buy your home.
You must have included this predetermined person in the sales proceedings before listing your residence. Their name must also be on the contract before all parties sign it.
Customer service is the most significant advantage of an exclusive right-to-sell listing agreement. Securing buyers is not an easy task, so an agent will do whatever it takes to market your home to potential buyers.
What is a net listing agreement?
Net listing agreements are less common than even open listings. A net listing agreement is when a listing agent agrees to sell your home for a specified price.
The agent pockets the remaining funds if the house sells for more than the stated price. Before you attempt a net listing agreement, know that they’re illegal in most places in the United States.
You can attempt a net listing agreement in California and Texas. These two states have strict laws in place to protect sellers and prevent lawsuits regarding perceived losses.
Net listings are a potentially good option for people looking for an assured, quick sale. But you need to be absolutely sure you trust your agent.
Agents are very involved in the purchase price, so they can take advantage by hiding lower offers from you. The financial danger and possible abuse of power are why these arrangements are risky and illegal in most places.
Exclusive agency
Exclusive agency listing arrangements are also rare. You can still hire a listing agent, but if you find a buyer, you keep the entire commission. You may have guessed why exclusive agency listings are rare.
Many agents don’t want to risk putting in effort on a job to get no money. But exclusive agency does have great benefit to the seller.
If you’d like to be hands-on and are confident in investing in marketing your home, an exclusive agency real estate agreement may be perfect for you. You still have an agent as backup and a source of reliable information.
You should know that while you’ll still have a listing agent on your side, they may not provide the full suite of marketing services. It’s a good idea to track each buyer, so you’ll know who gets the commission.
What is an open listing?
An open listing is a non-exclusive agreement that enables you to work with multiple buyer’s agents to find a potential buyer for your home. While open listings mean you pay an agent less than usual, there are disadvantages.
You’re still committing an FSBO sale, so you’re stuck doing most of the leg work to sell your home. Luckily, this guide helped you understand this type of real estate listing.
If you need help selling your home, you can get a no-obligation offer from iBuyer.com. To get the process started submit your address and create an account to get your estimated home value.
