You’ve found a Listing Agent. Now what?
If you’re selling your home and have found a listing agent you want to work with, you will need to sign a listing contract. A listing contract is a binding legal agreement between you and the real estate broker (or the real estate agent) who is listing your property for sale. There are a number of different terms of agreement that are included in a listing contract. In addition to giving your broker permission to post your home in the MLS (multiple listing service), this contract details the exact stipulations of what you and your agent can and can’t do during the selling process, so it’s important to carefully consider the contract options that are available to you.
Types of Listing Contact
One of the first decisions you’ll need to make is what type of listing contract you’d like to sign. Take note that there a number of different types of listing contracts that are out there, but the three main types of listing contracts include: an open listing, an exclusive agency listing and an exclusive right-to-sell listing. If you sign an open listing contract you will retain the right to work with multiple brokers or to sell your home on your own. In this scenario, you would only pay commission to the specific broker who sold the home, and if you made the sale on your own, you wouldn’t pay any commission. In an exclusive agency listing, one broker would represent you exclusively, but you could still sell the home on your own and avoid paying a commission.
The most popular listing contract option is the exclusive right-to-sell listing, which gives your broker the sole right to receive a commission on your home’s sale, regardless of who makes the sale. This contract gives your listing agent the most motivation to sell your home quickly and at the best price possible.
Terms of Agreement
In addition to deciding which type of listing contract you want to enter into, there are several other options that you’ll need to think about, including the length of your contract. The average listing contract length is between 3 and 6 months, but many sellers alter the time period depending on the market. If it’s a seller’s market, you may want to keep your contract length short so that if your home isn’t selling you don’t have to wait too long to consider entering into a new contract with a different broker.
Another contract consideration is the broker’s commission rate. The average rate for brokers is 5 – 7% of the selling price, but you do have the right to negotiate a lower commission percentage. If you expect your home to be in high demand or if you live in a very high-priced home, you could request a lower percentage. Keep in mind that the commission is typically split between the listing agent and the buyer’s agent, so you should also pay attention to how much of the commission the buyer’s agent receives. Ensuring that the buyer’s agent receives a strong share of the commission will give those agents a greater incentive to show your home.
Lockboxes provide buying agents and potential buyers with the flexibility to view your home when you’re not there, which gives you a better chance of selling it faster. However, you will be allowing people you don’t know full access to your home, so if that makes you uncomfortable you should specify in the contract that you don’t want lockboxes permitted while selling your home.
Keep in mind that a listing contract is legally binding and it can have a significant influence on the selling process of your home, so be sure to read through it carefully, ask your listing agent plenty of questions and remember that many elements of the contract are negotiable.