What is an Open Listing?
In real estate, an open listing has two meanings. Open listing can refer to a property for sale whose owner is using multiple real estate agents in order to find as many potential buyers as possible. The agent who brings in the winning buyer for the property collects the commission.
An open listing can also refer to an owner who is selling their home or property independently, without engaging (and thus, having to pay a commission to) a real estate agent.
In either case, the open listing is the opposite of an exclusive listing, in which a real estate agent is engaged by the property owner, and is the only conduit to bidding on and buying the property. This agent has the unique, or exclusive, right to show the property and try to sell it.
- In real estate, an open listing has two meanings; though different, both go contrary to the usual practice of giving one real estate agent the exclusive right to show and sell a property.
- In one meaning, open listing refers to a property whose owner is using multiple real estate agents in a nonexclusive arrangement.
- In another meaning, open listing refers to a property being sold directly by the owner, with no agent involved at all.
- Not surprisingly, real estate agents aren't big fans of open listings, and some refuse to work with properties they don't have exclusive rights to.
Understanding an Open Listing
In the first instance, an open listing is commonly referred to as a listing agreement with one or more real estate brokers on a nonexclusive basis. Agents who participate in selling this property are all entitled to a commission if—but only if—they ultimately bring in the buyer. Several reasons might exist for a seller to engage multiple agents: A property might need to be sold quickly. Conversely, the property have been on the market for a while and faced prior difficulty attracting buyers.
In the second instance, the seller may simply be trying to save money—i.e., the agent's commission—by handling offers for the property directly. Such properties are frequently advertised as "for sale by owner." This status may attract thrift-minded buyers, who figure that the asking price for the property will be lower, since the seller doesn't have to build commissions into it (Typically, a real estate agent's commission is based on the property's final purchase price; the agent's cut comes directly out of the buyer's payment during the closing, before the seller gets any money). They might also feel that dealing directly with the owner will make the transaction smoother and quicker, since negotiations won't have to go through a third party.
Special Considerations for Open Listings
Real estate agents may be reluctant to take on an open listing because of the lack of commitment by the seller to work with them exclusively. The arrangement stands to benefit the seller by offering them versatility and more options in finding potential buyers. The seller will also likely only pay half of the usual commission, which would go to the agent who brings in the buyer with a winning offer. This is because that agent usually only serves on the buyer’s side of the deal. There is no selling agent because the seller takes responsibility for all the marketing of the property themselves. The seller might believe the property will be in such demand that it will be relatively easy to attract buyers who can meet her price.
Real estate firms may have rules that govern whether or not their agents may participate in open-listing arrangements. For example, some firms might not advertise open listings, but the agents may be allowed to engage clients they already have as potential buyers. Real estate firms can be reluctant to work with open listings out of concern that the seller might find their own buyers anyway and strike a deal without any involvement from agents. That would make the agents’ efforts a waste of time and money. The seller might try to sidestep the agents and work out a deal directly with their clients that cuts them out of the loop. There may also be concerns that the property will not be attractive to any buyers.
The limited potential for agents to earn a commission through open listings may lead them to focus their energy on exclusive contracts instead. Some agents declare that they will only handle properties they have the exclusive selling rights to.