What is an open listing agreement?
How do you legally define it?
What are the important elements that you must know!
In this article, we will break down the legal definition of “open listing agreement”, so you know all there is to know about it!
Let’s dig into our legal dictionary!
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Let’s get started!
What is an open listing agreement
An open listing agreement or open agency agreement is a type of agreement where a homeowner or real estate property enters into a non-exclusive arrangement with a real estate broker or agent for the listing of his or her property.
It’s called an “open” listing as the seller is not bound to deal with the listing agent exclusively.
The homeowner can enter into multiple open listing agreements with different real estate brokers at the same time.
Unlike an exclusive agency or exclusive right to sell where a home seller deals with one exclusive agent, the seller may list the property with multiple agents in an open listing contract.
What’s particular with open listings is that the seller can work with multiple agents but is not obligated to work with any of them either.
The seller can choose to sell the property directly (commonly referred to as “for sale by owner” or FSBO).
There are standard open listing agreement templates available to use if you are looking to do that.
Open listing agreement definition
In real estate, an open listing agreement means:
A real estate sale arrangement where real estate owners enter into a contract with a real estate professional or firm for the non-exclusive sale of their property while maintaining the right to sell their property directly or dealing with other real estate agents.
Types of listings
There are three types of listings you may have with a real estate agency:
- Exclusive right to sell listing
- Exclusive agency listing
- Open listing
The exclusive right to sell listing is when you deal with one exclusive real estate agent or broker who is guaranteed a commission if the property is sold during the exclusivity period.
An exclusive agency listing is when you list the property with one exclusive agent but you can also sell it yourself.
If the agent sells the property, they’ll get a commission.
If you sell, the agent does not get a commission.
An open listing is when you list the same property for sale with several real estate agents or agencies in a non-exclusive contract.
At the same time, you can sell the property directly without having to pay any commission to the real estate agents with whom you signed an open agency contract.
What are the benefits of an open listing agreement?
Here are the possible advantages:
- The seller can sell his or her home directly
- The seller can work with multiple real estate agents
- If the seller cannot find a buyer, a prospect can be found through the open agents
- The seller does not have to pay commission to an agent if the sale is direct
- The seller can choose to work with the agent of his or her choosing
What are the drawbacks of an open listing agreement?
Here are the possible disadvantages:
- The seller does not have a dedicated real estate agent
- The real estate agents are not guaranteed to earn any compensation as the seller can work with anyone or nobody
- The seller will not benefit from the real estate agent’s professional marketing experience
- The seller will have to deal with the entire transaction directly
- There may be conflict between the seller and agents or between agents if a lead is not properly tracked to the right source
So what is the legal definition of open listing contract?
What are open listing contracts?
An open listing contract is an agreement between a property owner and a real estate agent, broker or firm with regards to the non-exclusive sale of a property.
In other words, the real estate owner does get locked into dealing with one single real estate agent but retains the right or option to deal with multiple real estate agents.
In some situations like when the market is hot and the seller can easily sell the property, an open listing may be the best course of action for a seller.
Otherwise, a seller should evaluate whether an open listing arrangement is the best strategy to optimize the sale of a property at the intended price.