An exclusive right to sell provision allows a broker to have exclusive rights in the selling and commission of a particular house. The purpose behind exclusive right to sell provisions is to prevent homeowners from changing brokers or agencies while their current broker is still working to sell the house. In most cases, violating an “exclusive right to sell” provision entitles the original broker to their expected commissions from the sale.
Does an “Exclusive Right to Sell” Provision Apply If the Homeowner Sells the House Themselves?
Many courts exclude homeowner sales from an “exclusive right to sell” provision. Even if the contract has an exclusive right to sell provision, a homeowner can still sell the house themselves without paying a broker for any lost commissions. In many cases, it is up to the broker to prove that the contract excluded the homeowner from selling the house themselves.
How Does a Broker Prove That “Exclusive Right to Sell” also Precludes the Homeowner?
It is emphasized that the words “exclusive right to sell” alone do NOT indicate that the provision also applies to the homeowner. Although courts vary in terms of what exact words they feel make a homeowner liable for the sale of the house, two common themes are:
- The contract clearly says that the homeowner cannot sell the property: For example, “The “Exclusive Right to Sell” provision also applies to the Homeowner. One should consult their state laws to determine what language courts in the area typically prefer.
- The contract awards commission to the broker, regardless of who sells the house; brokers generally see this as a protective measure if they aren’t the ones who make the sale. Therefore, most courts will assume that homeowners are included in an “exclusive right to sell” provision.
Exclusive Right to Sell vs. Exclusive Agency
An exclusive agency agreement is a contractual agreement where the listing broker acts as the agent or legal representative of the seller. Under exclusive agency agreements, sellers must agree to pay a commission fee to the broker if they sell the property.
Based on the terms of each agreement, the biggest difference between an exclusive right to sell and an exclusive agency is who pays the realtor fees. Under exclusive right to sell agreements, the seller is responsible for paying the realtor fees regardless of whether they or the owners sell the property. Under an exclusive agency listing, the seller only pays the fees if the agent sells the property.
Under exclusive agency agreements, brokers do not receive a commission if the seller is the one to find a buyer for the property.
Exclusive agency listings also require monitoring from the broker. The broker will have to manage contacts with other brokers and buyers to ensure the home’s sale happens with their help.
Unlike exclusive rights to sell, exclusive agencies also put agents at financial risk if they expend resources to sell a home and end up not getting paid for it. For this reason, many agents won’t agree to an exclusive agency agreement.
What Are the Other Types of Listing Agreements?
If an exclusive right to sell or an exclusive agency listing doesn’t fit your needs, there are other options you can choose from if you’re thinking about listing your property:
- Open listing: Open listings give the most benefit to home buyers. Unlike exclusive right to sell listings, open listings allow owners to place listings with multiple real estate brokers. Homeowners can still sell the home themselves and avoid paying any commission to an agent. You won’t find an open listing on the multiple listing service; however, they’ll rely on real estate brokers to bring them a buyer. Agents rarely agree to these types of listings since they work on commission.
- Net listing: Net listings allow real estate agents to keep the difference between what the homeowner wants to sell the home for and the actual sales price. Unlike exclusive right to sell listings, where the commission rate is set, net listings can be a gamble for real estate agents.
- For example, say you go into a net listing with an agent, and both of you agree that you want to sell the house for at least $300,000. This is the base price. Anything above that sales price, the real estate agent gets to keep. If the house sells for $340,000, the real estate agent’s commission would be $40,000. On the other hand, if the home is sold for $302,000, their commission would only be $2,000. Net listings are among the most complicated listings available because they could end badly for the seller and the broker. If you agree to a sales price of $200,000, but the agent sells the house for $400,000, you may feel like you’ve been cheated on the front end by your agent. If you were an agent and the house ended up selling under the baseline, and you walked away with no commission, you would be upset. Net listings are not seen often because they’re illegal in several states. Even in states where they are legal, there are many restrictions.
- Multiple listings: Multiple listings get a property featured in the Multiple Listing Service (MLS), and that’s usually it. The MLS is a tool used by almost all real estate agents to find properties for buyers. The MLS is like Google, but specifically for finding houses for sale. Most exclusive agency and right to sell listings are on the MLS. One downfall for those who decide to go the “for sale by owner” route is paying a fee to get their home placed on the MLS. They may not sell their house for as much as they could have with an agent.
What is the Duration of the Agreement?
You should know how long your exclusive right to sell agreement is contracted to last because if you sell your home without the agent, you could be on the hook for their commission.
As long as your exclusive right to sell agreement is in place, your real estate agent will be able to collect their commission.
However, if your agent cannot find you a willing, ready, and able buyer before the exclusive right to sell contract is up, and you’ve found your own buyer, you won’t have to pay them a commission.
How Can a Lawyer Help Me?
If you are a broker, a contract attorney is essential for protecting your property sale. A lawyer can help you include a foolproof “exclusive right to sell” provision in your real estate contracts and protect your rights in case one of your customers has already violated such a provision.
If you are a homeowner looking to sell your property, a real estate attorney can oversee any broker contracts, helping you to understand your particular rights and obligations in the process. If there are any problems, an attorney can defend your rights against the broker.
Use LegalMatch to find the right real estate attorney in your area today. There is no fee to schedule a consultation. Our services are completely confidential.