A motivated agent is one who is guaranteed some form of monetary compensation or commission when your property sells. Usually, you can hire more than one agent to sell a property, but only the agent who sells the property would get paid.
To circumvent this, agents almost always will ask you to sign an exclusive real estate agent agreement.
What is an Exclusive Real Estate Agent Agreement?
An exclusive real estate agreement is a contract that prevents the seller from hiring another agent to try and sell the property within a stipulated number of days. As a result of this, the property will not be listed on any multiple listing service.
The duration is usually between 30-90 days, but it can also be longer. During this time, the agent has the task of finding a buyer with the knowledge that no other agent is working on the prospective sale.
There's a caveat to this agreement, though; the seller can also try to find a buyer and sell to the buyer directly without the help of the agent. If this happens, the agent won't get paid.
To combat this, there is usually an agreement that the seller has a stipulated number of days to try and find a buyer themselves, after which, if they fail, they have to let the agent do their work.
Sometimes, an agent can ask for greater payment security by way of asking for an exclusive right of sale. In fact, most real estate contracts today are exclusive, and sellers are not able to find a buyer themselves without compensating the agent.
The Pros and Cons of Signing an Exclusive Real Estate Agreement
Pros (To the Seller)
The agent will be more motivated to sell your property.
The agent will aim to sell for the best possible price.
The agent will invest time and effort in advertising and looking for qualified buyers that will meet the list price.
The agent will do all the work necessary to sell your property within the time stipulated.
Pros (To the Agent)
An exclusive real estate agreement offers more protection for labor and also a competition-free listing.
There is an abundance of time to sell and try to get the best price for the property.
There is a guarantee of earning agent's fees from the sale of the property.
Cons (To the Seller)
Getting an offer for the property may take a while.
Signing an exclusive real estate agent agreement doesn't guarantee a speedy sale.
An exclusive real estate agreement is more expensive than an open agreement.
Inability to sell the property, even if the agent's performance isn't up to scratch.
Cons (To the Agent)
The time frame given to sell the property might invite some pressure, especially if the prevailing market dynamic is tilting towards a buyer's market.
Signing an exclusive real estate agreement makes it difficult to work on other property listings.
What Does an Exclusive Real Estate Agent Agreement Include?
The contents of a typical exclusive real estate agent agreement are;
1. A Start and End Date
An exclusive real estate agreement contains the date the agreement will start and the date it will end. This duration should be an agreement between the agent and the seller, not just a date the agent has decided upon.
Another thing is that within the start and end dates, agents will usually build a minimum sale time into the contract. This is to give them a duration in which they are to be able to sell the property before the seller can look to do so themselves.
This is a sort of fail-safe for the seller, in case the performance of the real estate agent isn't excellent.
2. List Price
The agreement must also stipulate a list price in which the property is to be offered for. Offering the property at a price lower or higher than the agreed list price would be counted as a breach of the contract.
The property can and is usually sold higher than the list price, but it mustn't be listed higher or lower.
Terms and Conditions for Paying the Agent's Fee
This is also another content of the agreement. The contract has to spell out the terms under which the agent is paid. If the agent doesn't satisfy those terms, then he will not be paid, and that decision will be legal.
The terms and conditions must also be fully satisfied, not just a part of them. Typically real estate commissions are split between the listing company and the company that brings the buyer. The term used is called cooperating compensation.
3. The Amount of Agent's Fees to be Paid
Payment for the agent is also another key part of the contract, and the amount to be paid must be stipulated clearly. Usually, agents are paid a percentage of the listing price, and the method of payment must also be defined.
Some agent's fees are fixed, which means they will be paid that amount regardless of how much the house sells for. Other times, the fees might be tiered, which means if the house sells for a particular price above a threshold already set, the agent will be paid a higher fee.
Another popular way of selling a home is going with a flat fee MLS company. In this scenario, all the real estate company who is listing the property does is put it in the multiple listing service. There are certainly pros and cons of flat fee MLS to be aware of when selling your home. Getting your home into MLS without a traditional agent may be cheaper but may not be the best option.
The agreement should also contain several authorizations for the agent. These authorizations will help the agent work better and increase the chances of a sale within the stipulated period.
A number of those authorizations are;
Whether or not the agent can cooperate with other agents for the purpose of finding a buyer. From a seller's, standpoint, cooperation is smart. Buyers typically have their own real estate agents.
Whether or not the agent should reveal the number of offers received before the one that will be accepted.
Whether or not the agent can post a sign and advertise the property.
Final Thoughts on Real Estate Listing Agreements
Signing an exclusive real estate agreement with your real estate agent can be very beneficial, but ensure you look through the contract properly to know if it's bilateral. Hopefully, you now have a better understanding of how real estate listing contracts work.
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About the author: The above article on real estate agent listing contracts was written by Allison Staley. Allison has been in the writing field for a decade now. He has excellent expertise in writing informative articles, and his work has been appreciated and published in many popular publications. Recently he has been covering many topics around Real Estate Marketing, Real Estate Investment, and laws.