Q: We are attempting to sell our own house. Recently, a real estate broker approached us with a proposal that is confusing to us.
The broker suggested that we could continue to sell our own house, but that we would give the broker an exclusive listing, so that the house can be advertised and marketed as if it were under the control of the real estate company. Can you explain this situation? Are there any protections that we should include in our agreement, if we decide to use that brokerage firm?
A: You should carefully read the listing agreement the broker has given you. Generally speaking, there are three kinds of real estate brokerage listing agreements:
Open listing. Under this kind of arrangement, the owner of property gives a real estate broker authorization to sell the property, but there are no prohibitions on the owner - or other brokers with similar open listing agreements - to sell the property also. A real estate commission is owed only if the broker is the "procuring cause" of the actual sale. This is legalistic concept, which requires a lot of proof on the part of the broker who claims the commission. For these reasons, most real estate brokers are unwilling to take the open listing.
Exclusive agency. Here, the broker is given an exclusive listing, and no other brokers can be given a similar listing during the pendency of that agreement. However, under an exclusive agency listing, the owners retain the right to sell the property through their own efforts, and if they are successful, the exclusive agency automatically comes to an end, and no commission is owed the broker.
Exclusive right to sell. This is the type of agreement that most real estate brokers favor. It gives the broker an exclusive right to sell your property, and, even if you sell it yourself while the agreement is in effect, you will be obligated to pay a commission to the broker.
As you can well imagine, it is extremely important to read each word of any proposed listing agreement.
I can fully understand why your broker wants to market and advertise your house. This is additional publicity for the broker, and, of course, that is the name of the game. I don't have any problem with your giving the broker an exclusive agency listing, provided it is in fact only that, and not an exclusive right to sell.
You should make it very clear, in writing, that if you sell the property yourself no commission will be owed, even if the broker brings you a prospective purchaser. Make the commission dependent on the sale of the property, and not merely the signing of a contract.