DEFINITION of Exclusive Listing
An exclusive listing is a real estate sale agreement in which a specified real estate agent stands to gain a commission if a property sells within a specified number of months. In most cases, the agent earns the commission no matter how a buyer is found. The purpose of an exclusive listing is to motivate the agent to sell the property quickly and at the highest price possible. If a homeowner signed an exclusive listing agreement with an agent, and the homeowner also placed an ad for the property, the agent could still earn a commission even if the buyer acted upon the ad.
The agent would not earn a commission if the seller who placed the ad also established exclusive agency (the right of the seller to sell the property themselves without paying commission despite the exclusive listing agreement).
BREAKING DOWN Exclusive Listing
The exclusive listing agreement can act as a protection period to prevent the seller from abusing an agreement to avoid paying a commission to the agent for doing their job. The protection period would allow the agent to receive full commission on certain types of sales after the expiration of the agreement. For example, a potential buyer the agent previously brought to the house during the listing period might return later and decide to complete the purchase. The agent would receive their commission on that sale.
How Exclusive Listings Are Structured
Terms must be agreed upon by the seller and the agent for an exclusive listing. Those details will include establishing a time frame for the agreement to be in effect. This could be a period of six months or even briefer when demand is high in the market. There are must also be an agreement on the size of the commission the agent can earn on a sale.
An exclusive listing agreement may include a list of exempted parties who can buy the property without the agent earning a commission. These exemptions typically include family members or close associates who the seller favors to buy the property. For example, if the seller’s sibling makes an offer to purchase their home and they were named among the exemptions, the agent would not collect a commission on the transaction.
Real estate agents tend to prefer exclusive listings over open listings that only pay about half the usual commission rate. Open listings put real estate agents in competition with each other to bring in buyers but with no guarantee that agents will earn a commission at all. The buyer could negotiate their own deal with buyers and completely cut out the agents.