22 Oct What Does Exclusive Right to Sell Mean in Real Estate?
Selling your home, especially in the current market, can be stressful, which is why we always recommend hiring a real estate agent to help you. But even the process of hiring a real estate agent can have its own set of challenges, headaches, and paperwork!
Before you can even get the ball rolling on putting your property on the market, your real estate agent may require that you sign a right-to-sell agreement. Before you sign on the dotted line, you should know exactly what you’re getting into and whether or not it’s right for you and your needs.
Exclusive Right to Sell: Definition
So, what does Right to Sell mean? The National Association of Realtors defines an exclusive right-to-sell agreement as “a contract between the listing agent and the owner of the home, wherein the seller agrees to compensate the agent’s efforts regardless of who ultimately brings forth a buyer.”
In layman’s terms, that basically means that you cannot hire another agent or broker as long as that agreement is in place. By signing, you are agreeing to work only with that agent for the purpose of selling your home for the agreed amount of time, and you are granting that agent exclusive right to market the home, and that all potential buyers must go through them throughout the sale process.
How Long is an Exclusive Right to Sell Period?
Like any contractual agreement, terms may vary, and the length of your agreement depends on many factors, like the conditions of your local market, the requirements of your agent and their brokerage firm, and your own personal preferences.
Generally, it lasts an average of 3-6 months. It’s very important to read through the terms of your agreement before signing it (as you should with any contract) because as long as the right-to-sell agreement is in place, your agent will get a commission, even if you sell your own home yourself during the prescribed time.
However, if the agent cannot secure a buyer during the right-to-sell period and you are able to find one on your own after the contract period has expired, they do not get a commission.
What Happens When an Exclusive Right to Sell Agreement Expires?
If your home has not sold by the end of the term of the agreement, you can do as you please. That might mean that you part ways with your current agent and find another one, sell your home on your own, or take it off the market entirely.
However, sometimes in these contracts, buried deep in the fine print, there are stipulations that state that your agent will still require commission in the event that a buyer, brought forth by your agent during the contractual period, decides shortly thereafter to buy the property after all.
There is usually a limited window of opportunity in these situations (typically 30-45 days after the contract period ends), but it can happen, and it’s important that you are aware of it.
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Pros and Cons of Signing an Exclusivity Agreement
A right-to-sell agreement is beneficial to homeowners, especially those who are unfamiliar with the real estate process or who are motivated to sell as soon as possible. But it’s not right for everyone! So how can you know if an exclusivity agreement is right for you?
If time is of the essence and you want your property to be noticed by potential buyers and to sell as soon as possible, an exclusivity agreement can help make this happen, but this is also dependent on the state of the market in your area.
Hiring an exclusive agent also means that they will do all of the work marketing your property so you don’t have to, and since they will be managing the buying and selling process of your property entirely, it might be worth it to spend a little extra money to have someone alleviate the stress and responsibility of that for you.
You could do it yourself to save some money, but you’d be taking on the stress of managing your own listing, and that might not necessarily be worth it. If you don’t know a lot about the real estate industry, it’s best to hire an agent who does, and with exclusivity, your agent will b better able to negotiate on your behalf.
An exclusivity agreement is also more private, so if you want your property and personal information only available to a few qualified buyers, this might be a good option for you.
How to Get Out of an Exclusivity Agreement
Signing a contract can be scary. We get it! Keep in mind, contracts exist to protect both parties, but you can get out of it. As with any contract, you should carefully read and review the contents of the contract (we really can’t reiterate this enough), and don’t be afraid to ask questions before you sign on the dotted line!
Often, contracts have cancellation policies outlined in them. Ask about them before you sign so that you’re clear on them. Some listing contracts include clauses that agree to waive cancellation fees as long as both parties agree to the termination.
Sometimes, clients may want to cancel an agreement if they are dissatisfied with their agent, but you can avoid this by doing your due diligence and selecting a reputable, experienced, high-quality agent. Other reasons for canceling usually indicate some kind of change of plans, whether that means a job offer has been changed or postponed, a family emergency, or that the seller has decided not to sell the property after all.
Other Types of Listing Agreements
Aside from exclusive right-to-sell agreements, there are other types of agreements as well. There’s an exclusive agency agreement, which differs from the right-to-sell agreement in that the homeowner retains the right to sell the property themselves.
To earn a commission under this type of agreement, the agent must be the one to bring the buyer. If the seller finds a buyer on their own, they do not have to pay the agent a commission.
There is also an open listing agreement, which allows the seller to sell the house themselves and hire as many agents as they want to help sell the home. So who gets commission in this scenario?
Even though the seller can hire countless agents, the only one who earns commission is the one who finds the buyer. If even after hiring several agents, it’s still the seller themselves who finds a buyer, no one gets a commission.
Selling your home is a big decision, and you shouldn’t have to navigate the process on your own, especially if you don’t know a lot about the real estate industry.
Find a reputable real estate agent who you can trust and who will be fully committed to selling your home. Don’t be afraid to shop around and ask questions before settling with an agent and signing anything.
Ask about their commission rates, their contract term lengths, the cancellation process, whether or not you would still owe them a commission for a period of time after the contract term ends, and anything else you should know if you work with them.
A real estate agent’s job is to help you, and it’s important that both parties are clear on the expectations before signing any contracts and starting the selling process.
Do you have more real estate-related questions? If so, contact us today!