How to Fully Understand Your Listing Agreement


When you are preparing to sell your home and you are working with a realtor, they may have you sign a listing agreement. Listing agreements can be daunting and scary, but before you put the pen to paper, it is a good idea to do some research and make sure you understand what you are signing!

What is a listing agreement?

A listing agreement is a legally binding document between a seller and a real estate broker. This contract sets the terms of the agreement and is designed to protect both parties. It is typically composed of five parts: names, type of listing, price of the listing, period, and commission terms.

What are the different types of listing agreements?

There are the most common types of listing agreements. It is important to know the different types so that you understand your options before signing a listing agreement and so you can find the one that fits your needs as the seller!

Exclusive Right to Sell Listing

This is the most common type of listing agreement. In this agreement, The seller agrees to only work with one real estate agent. The real estate agent agrees to list the property and find buyers for a percentage of the sale of the property. A commission is given to the real estate agent even if the seller finds a buyer on their own.

Exclusive Agency Listing

This listing agreement states that the real estate broker or agent will receive a commission if they find a buyer for the home. If the seller finds a buyer on their own, they can attest to the terms of the agreement.

Open Listing

 An open listing allows the seller to work with as many brokers as they want when selling their property. They then pay commission to the real estate agent who finds the most qualified buyer or best offer for the property. The seller has no obligation to pay any party. This is also known as a “for sale by owner” listing.

Net Listing

This type of listing agreement is less common and even illegal in some states. For this agreement, if a property is sold above the asking price, the real estate agent can pocket the remainder after the asking price. Before making a net listing agreement, be sure you have checked with state laws to ensure this is allowed in your residing state.

How long do listing agreements last?

A listing agreement can last anywhere from two months to six months. The terms can vary and are negotiable. This is dependent on the type of property or if repairs are needed on the home. Also, if the buyer lives out of state, this can make extend the listing agreement time period.

Helpful Tips

  • The terms of your listing agreement are negotiable. You can negotiate the commission percentage, the expiration date, and the listing price. You must establish these terms early in your agreement so that both parties are fairly represented in the terms.
  • Be sure to read reviews and verify the real estate agent’s license number. You want to be sure you have the right fit for your and your property before you sign a listing agreement.
  • Don’t pay anything upfront! You should never have to pay your real estate broker before the property is sold.
  • You can avoid a listing agreement altogether by selling your home on your own.

A listing agreement can be a scary task, but be sure you have read the terms carefully, make changes to the terms if you not comfortable with them and that you fully understand the agreement. Remember a listing agreement should benefit both parties and keep meet the needs of both sides!

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