When you're ready to sell your home, one of the first steps you take will be to hire a real estate agent. Once you’ve found an agent, you’ll no doubt be anxious to put the for-sale sign in the yard, host open houses and capture spectacular photos of your beautiful home. Before you can get this show on the road, you'll need to sign an important document called a listing agreement.

Listing agreements come into play early in the home selling process, typically after you've interviewed and selected a real estate agent. Once you've chosen an agent you feel comfortable working with and who has a proven track record of success in your market, you'll discuss the terms of the listing agreement. Your agent typically won’t begin work on marketing or selling your home until the listing agreement is signed, as it serves as a foundation for your working relationship.

Not everyone who sells a home will be well-versed in contracts and legalese (and that’s perfectly OK!), so we're here to help you understand the different types of listing agreements, what goes into a listing agreement, and what to look for in your contract before you sign one. Then you can move on to the exciting part of getting your house sold!

P.S. Before we get into the details, did you know that you can get paid for the privilege of selling your home? That’s right, your listing has value, and Redy is the only platform that helps you unlock it. Feature your home on Redy before you sign a listing agreement to receive proposals from top local agents, including their commission rates, terms of the agreement, and details about their experience, allowing you to compare proposals before making a decision. Redy sellers on average save $5,862!

What is a listing agreement?

A listing agreement is a legally binding contract between you and your real estate agent's brokerage that outlines the terms of your partnership. The brokerage assigns a specific agent (the one you’ve chosen to work with) to represent them and help you sell your home. You are in this together. The primary agreement in a listing contract is that the seller agrees to pay the brokerage a commission if the assigned agent sells the home within a specified period.

This agreement protects both you, your agent, and the brokerage. It ensures the brokerage and its assigned agent are compensated for their work — in news that will come as a surprise to nobody, very few people want to work for free!

But a listing agreement also says that you will only pay if the terms of the contract are met by the brokerage and your agent. In most cases, this means the agent has to sell your house in a certain amount of time. 

Some (but not all) listing agreements will spell out what an agent will be doing to market the property and find a buyer — whether that’s photos, open houses, showings, MLS visibility, internet marketing, or some combination. 

The contract also helps to prevent misunderstandings or disputes by clearly defining the rights and responsibilities of both parties.

Here’s a quick summary of what your listing agreement will likely include:

• How much you'll owe your agent for their help selling your home (typically calculated a percentage of the property’s sale price, also known as a commission)

• How long your agent has to sell your home before the agreement expires

• What happens if you find a buyer on your own (maybe your neighbor is interested?)

• In some cases, depending on your MLS, how much you plan to sell your home for

• With some listing agreements, what specific services your agent will provide (such as marketing, open houses, or professional photography)

3 types of listing agreements you should know

Listing agreements aren’t all one and the same. In fact, there are actually three main types of listing agreements to be aware of, according to the National Association of Realtors. 

“One big misconception I often see is that all listing agreements are the same. It's crucial for homeowners to know there are different types, like exclusive right to sell, exclusive agency and open listing,” says Britney Witt, real estate agent and real estate consultant at Crye-Leike Executive Realty.  

When you're ready to sell your home, choosing the right listing agreement is crucial. 

What’s great about working with Redy is that we make this whole process easier. When you create a property profile for agents to see your home, they have the opportunity to submit proposals to you. With Redy, you control the rules of engagement with agents and choose the terms of your home listing agreement.

Unlike other platforms where you enter your contact information and suddenly get hounded by strangers, Redy offers a low-pressure environment where you can hold up and compare proposals from real estate agents privately from the comfort of your home and reach out on your timeline – including the terms of each listing agreement. This helps you feel secure throughout the process as we are committed to protecting you, your home and your data from unwanted interactions.

Hear that? It’s the beautiful sound of peace and quiet.

Now, let’s take a closer look at each type of listing agreement so you can decide what makes sense for you.

Exclusive right-to-sell listing agreement

The exclusive right-to-sell agreement is the most common type of listing agreement you'll encounter, and for good reason. This agreement offers advantages for both you and your real estate agent, ensuring a smoother and more successful selling experience.

Exclusive right to sell: What it means for you

By signing an exclusive right-to-sell agreement, you give your agent the exclusive right to sell your home within a specified time frame. This means that your agent will be fully committed to selling your property and will invest their time, resources, and expertise in marketing your home to potential buyers. Your agent will be the only one who can sell your home and earn a commission during the agreed-upon period. So even if you find a buyer through your own efforts, such as sharing your home listing on social media, you’ll still owe your agent the same amount of money.

Motivated agent, better results

One of the key benefits of an exclusive right-to-sell agreement is that it motivates your agent to work diligently on your behalf. Since they know they'll earn a commission if your home sells, they'll be more likely to go above and beyond in their efforts to market your property and find qualified buyers. This level of commitment and dedication from your agent can make a significant difference in the success of your home sale. 

By the way — with Redy, we take it a step further to connect you with agents who are directly invested in your success. Redy is the only platform that enables agents to pay home sellers cash upfront. This payment represents an investment, and a commitment, to your home sale. As a result of this upfront investment, your interests and your agent’s interests are perfectly aligned. Talk about ideal!

Improved communication

Additionally, having a single agent represent your home can lead to a more streamlined and efficient selling process. You won't have to worry about coordinating with multiple agents or dealing with potential confusion or communication issues. Your agent will be your primary point of contact and will handle all aspects of the sale, from marketing your home to negotiating with buyers and guiding you through the closing process.

Exclusive agency listing agreement

An exclusive agency listing agreement is an arrangement where you grant one agent and their brokerage the exclusive right to market your home. The agent and their brokerage become the sole representative for your property, meaning they are the only ones allowed to promote and list your home for sale. If the home sells to a buyer brought forward by the agent, the exclusive agency agreement obligates you to pay the agreed-upon commission to the agent.

Commission obligations and exceptions

While an exclusive agency agreement provides the agent with the exclusive right to market your property, it does not always require you to pay a commission. In certain circumstances, such as when you find a buyer without the agent's assistance, you may not be obligated to pay the commission. 

This can occur if you sell the house to a colleague, friend, or family member without the agent's involvement. This flexibility in commission obligations sets the exclusive agency agreement apart from other common listing agreements, like the exclusive right-to-sell agreement.

Agents' perspective on exclusive agency

Many real estate agents are less enthusiastic about exclusive agency agreements because they allow the homeowner to retain the right to sell the property independently. Since the agent's commission is not guaranteed if the seller finds a buyer on their own, most real estate professionals prefer an exclusive right-to-sell agreement, which ensures they will receive a commission regardless of who procures the buyer.

Factors for sellers to consider

When deciding whether an exclusive agency agreement is suitable for your situation, consider the following:

• Flexibility: An exclusive agency agreement provides you with more flexibility compared to other listing agreements, as you maintain the right to sell your home independently.

• Potential commission savings: If you successfully find a buyer on your own, you may not be required to pay a commission to the agent, potentially saving you money.

• Agent motivation and effort: Since the agent's commission is not guaranteed under an exclusive agency agreement, they may be less motivated to invest significant time and resources in marketing your property compared to an exclusive right-to-sell agreement.

• Exposure limitations: By retaining the right to sell your home independently, you may inadvertently limit the exposure of your property to potential buyers, as agents may be less inclined to show homes listed under exclusive agency agreements.

Before deciding on an exclusive agency agreement, consider your goals, the local market conditions, and the level of support and representation you require throughout the selling process to make an informed decision.

Open listing agreement

While less common than other types of listing agreements, an open listing agreement, also known as a non-exclusive listing agreement, may be an option if you want more flexibility in the selling process. This type of agreement allows you to work with multiple agents simultaneously or even sell your home on your own.

Reasons to consider an open listing agreement

You might consider an open listing agreement if:

• You want to test the market with multiple agents: An open listing agreement allows you to see which agent can bring the best results, as you're not committed to working with just one. This can be beneficial if you're unsure which agent will be the most effective in selling your home.

• You're considering selling your home yourself: If you're thinking about a For Sale By Owner (FSBO) approach, an open listing agreement lets you retain the option to work with an agent if needed without being locked into an exclusive contract. This flexibility can be particularly appealing if you're confident in your ability to market and sell your home independently.

• You're in a hot seller's market: In a market where homes are selling quickly and easily, you may feel more confident about attracting buyers on your own or working with multiple agents. An open listing agreement allows you to capitalize on these market conditions without being tied to a single agent.

Potential drawbacks and considerations 

Under an open listing agreement, the agent only earns a commission if they are the one who ultimately finds a buyer for your home. This means that agents may be less motivated to invest significant time and resources into marketing your property, as they risk not being compensated for their efforts. This lack of guaranteed commission can lead to reduced exposure for your property and potentially longer selling times.

However, the primary benefit of an open listing agreement is the flexibility it offers you as the seller. You have the freedom to work with multiple agents, sell your home independently, or switch to a different type of listing agreement if you find that the open listing isn't working well for you. This level of control can be appealing to sellers who want to maintain a high degree of involvement in the selling process.

While an open listing agreement may seem appealing due to its flexibility, it can also lead to a less coordinated and efficient selling process. You may find yourself managing multiple agents and potentially fielding duplicate inquiries from buyers, which can be time-consuming and confusing. 

Ultimately, the decision to use an open listing agreement depends on your unique circumstances, goals, and comfort level with the selling process. Before choosing this type of agreement, consider the following:

• Your experience and knowledge of the local real estate market

• The amount of time and effort you're willing to invest in the selling process

• The current market conditions and demand for homes in your area

• Your desired timeline for selling your home

• The level of support and guidance you need from a real estate professional

If you're unsure whether an open listing agreement is right for you, consult with a trusted real estate agent or broker to discuss your options and determine the best approach for your situation.

What are the key components of a listing agreement?

The specifics of your listing agreement will depend on the agreement type and your location. However, there are some general components you'll find in any listing agreement, and it's a good idea to have a solid understanding of what those are and how they impact you.

Essential elements to review

When reviewing a listing agreement, Witt encourages sellers to pay close attention to the following:

• Duration: Ensure the agreement term is not excessively long and aligns with your selling timeline.

• Commission rates: Compare the proposed commission rate to the average in your area to ensure it's fair and competitive.

• Services provided: Look for clarity in the services the agent will provide and ensure they meet your expectations.

• Cancellation options: Understand your rights to cancel the agreement and any associated fees or penalties.

• Terms and conditions: “It's essential to carefully review all terms and ask questions about anything that seems unclear or concerning before signing the agreement,” says Witt. 

Who’s involved?

A listing agreement begins by identifying the seller and real estate agent. The agent may also be referred to as the "broker" or the "agency." The legal name and address of both you and the agent will be listed. This section spells out exactly who is legally bound by this contractual agreement.

Importance: Clear identification of the parties involved protects both the seller and the agent. It establishes that only the legal owner listed on the deed (or the lender, in case of a defaulted mortgage) can sell the property and that only the hired agent or anyone else specified by the agreement type has the legal right to represent the seller.

Property description

This section identifies the complete legal description of the property being sold. It may include:

• Legal address

• Deed book/page

• Map/lot

• Home square footage, rooms, property type, and features

• Fixtures and personal property that will not be included in the sale

Importance: An accurate legal description of the property confirms that the correct property is being sold and protects you from any misunderstandings or disputes regarding the property's boundaries or included assets.

Listing agreement type

The agreement should specify the type of listing (exclusive right-to-sell, exclusive agency, or open listing) and who has the right to sell the home.

Importance: Understanding the type of listing agreement and whether it meets your needs is crucial, as it determines your obligations and the agent's rights regarding commission and representation.

Listing price

Depending on where you live, some listing agreements may include a section for the listing price — in other words, how much you plan to ask for your home.

Importance: You should set a listing price with your agent that you both agree to, taking into account market conditions, comparable properties, and the home's unique features. You have the ultimate say on what price you want to set, but your agent will bring valuable insights into what makes sense for your selling timeline and what’s likely to attract the most buyers.

Agreement duration

A listing agreement expires after a specified period, which will be detailed in the contract. The effective date and termination date should be clearly stated.

Importance: The agreement duration determines how long the seller is legally bound to work with the agent. It's important to negotiate a term that allows sufficient time for the property to sell while also providing flexibility if you’re unsatisfied with your agent's performance or if market conditions change.

Commission structure

The commission structure, including the percentage of the sale price or a fixed amount, will be specified in this section.

Importance: Understanding the commission structure helps ensure that your agent's fees align with your financial expectations. It's important to negotiate a fair commission rate and to clarify that payment is due only upon the successful closing of the sale.

Agent and seller duties

This section outlines the obligations and responsibilities of both the agent and the seller. The agent's duties often include acting in the best interest of the seller, implementing marketing strategies, and making efforts to sell the home. The seller's duties typically involve accommodating showings, open houses, inspections, and considering all offers.

Importance: Clearly defining each party's duties helps minimize misunderstandings and keeps the focus on achieving a successful sale. It ensures you and your agent are aware of your responsibilities and can work together effectively.

Marketing the property

Some (but not all) listing agreements will outline your agent's marketing plan to attract potential buyers. This may include:

• MLS listing

• Professional photography and videography

• Lockbox installation

• "For Sale" sign placement

• Open houses

• Online and social media advertising

• Print materials (brochures, flyers)

• Leveraging the agent's network of contacts

Importance: A comprehensive marketing plan is essential for maximizing your home’s visibility and exposure toward attracting qualified buyers. You should review this section and make sure the agent's proposed marketing strategies align with your expectations. “My expertise and knowledge of the local market allow me to create a marketing plan that is tailored to my clients home and location, in turn, maximizes exposure and attracts the right buyers for a seller's property,” explains Witt. “By analyzing market trends, comparable sales data, and neighborhood dynamics, I can determine the most effective strategies to showcase the property's unique features and appeal to potential buyers.”

Dispute resolution

This section outlines the process for addressing any issues that may arise between you and your agent during the contract period.

Importance: A clear dispute resolution plan can save time, stress, and legal fees if conflicts arise during the selling process. It provides a framework for resolving disagreements.

Termination clause

The termination clause details the rights of both parties to terminate the listing agreement. It may include provisions for early termination, duties upon termination, safety and protection clauses, and any applicable early cancellation fees.

Importance: While entering into a listing agreement with the intention of canceling is unlikely, unforeseen circumstances may warrant termination. Understanding the termination clause is crucial for defining the seller's legal rights and obligations should they need to end the agreement prematurely.

Make sure you carefully review and understand each component of a listing agreement so that you can be confident in entering into a fair and beneficial contract with your real estate agent. Open communication and a thorough understanding of the agreement's terms can help you get off on the right foot with your agent and set the stage for a successful sale. 

How to negotiate your listing agreement

Before signing a listing agreement, consider these possible areas of discussion:

• Research and compare: Familiarize yourself with standard commission rates, agreement durations, and services provided by agents in your area to ensure you're getting a fair deal.

• Discuss the commission: Don't be afraid to negotiate the commission rate, especially if you have a high-value property or if the agent is eager to work with you. Redy makes this easier by asking agents to include their commission rate in their proposal upfront (alongside their cash reward).

• Clarify services: Ensure that the agreement clearly outlines the specific services the agent will provide, such as marketing strategies, open houses, and communication frequency.

• Negotiate the term: Aim for a term that allows sufficient time to sell your property while also providing flexibility if you need to terminate the agreement early.

• Seek a cancellation clause: Request a clause that allows you to cancel the agreement if you're unsatisfied with the agent's performance, and negotiate any associated fees.

• Address exclusivity: If you prefer an exclusive agency or open listing agreement, discuss the terms and ensure they align with your goals and expectations.

• Review and ask questions: Carefully review the entire agreement and ask questions about any unclear or concerning terms before signing.

Remember, a listing agreement is a negotiable contract, and you have the right to advocate for terms that best serve your interests. Open communication and a willingness to collaborate with your agent can lead to a mutually beneficial agreement.

Getting even more value out of your listing

Are you thinking of signing a listing agreement or still interviewing agents? There’s something you should know first: Traditional home selling methods and platforms have kept the true value of your home listing out of reach. Redy hands you the keys to unlock the hidden value of your home listing for the very first time. With Redy, agents pay you a cash reward to list your home. This is not available on any other platform. 

Come see how much experienced agents would pay upfront as a commitment and investment to your home sale. Together, we’ll unlock the hidden value of your home listing for the very first time.

Ashlee Valentine has an MBA and has dedicated over a decade to educating and empowering individuals on personal finance, including real estate. With extensive personal experience in purchasing, selling, and building homes, as well as venturing into land acquisition, Ashlee brings a nuanced understanding of the industry. Through her writing, she demystifies real estate complexities, guiding others to informed decisions.