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For many homeowners, one of the first steps to selling their home is signing an exclusive agreement with a listing agent. This agreement states that the agent has the sole right to sell the property and excludes even the seller from doing so.
By contrast, an open listing is a home that is listed without an exclusive agent attached to it. The commission attached to it is free for any agent, broker, or even the seller to claim if they’re able to secure a buyer for the property. But this type of listing agreement comes with some caveats.
What is an open listing agreement?
An open listing agreement is a legally binding contract between a seller and a listing agent or broker that is non-exclusive. In other words, the agent will list the property, but any agent or broker may win the commission by securing a buyer for the property.
Sellers are also free to find a buyer for their home under an open listing agreement. If they do, the seller doesn’t have to pay a commission to the listing agent.
Open listings are often used by for sale by owner (FSBO) sellers. FSBO is a relatively uncommon practice, accounting for only 7% of home sales in 2020. Open listings are a popular choice for FSBO because they often don’t require the expertise of a listing agent. Roughly a third of FSBO sales aren’t marketed at all, and almost a quarter are sold to friends, relatives, or neighbors.
However, open listings aren’t common. Finding an agent for these homes can be hard because there’s no guarantee that they will receive payment for their efforts.
Types of listing agreements
To understand the difference between open listings and other types of listings, let’s take a look at some of the most common listing agreements:
- Exclusive right-to-sell: This type of listing agreement is the most common. Under the terms of this contract, the listing broker has the sole right to sell and market your home.
- Exclusive agency: This agreement permits the broker to act as a representative on behalf of the seller; however, the broker will only get paid if they sell the property. For example, if a seller brings in a buyer for the property, the broker will not get paid. While it allows a seller to sell the property as an open listing does, it is different in that it is still an exclusive contract with a single brokerage.
- Open: This contract grants multiple brokers the right to list and market the home. It also allows the homeowner to sell their property FSBO.
- Net listing: With this rare listing type, the agent only makes money if the home sells over a certain amount.
How are open listings different?
Home sellers typically work closely with one listing agent throughout the process of selling their home. Homeowners and their listing agents work together to coordinate showings and strategize which offers to accept. Under an open listing, home sellers may work with multiple agents to find a buyer for their home.
This is the key difference between open listings and their counterparts: open listings are nonexclusive. As the seller, you’re not bound to an agent or brokerage. You’re free to play the field.
However, open listings are not permitted on the Multiple Listing Service (MLS) — a private database where brokers upload and share information about properties for sale — except where required by law. So open listings receive limited exposure and even less promotion since agents aren’t incentivized to market the home with a guaranteed commission.
How does an open listing work?
To list their home as an open listing, homeowners can follow these steps:
- Sellers must first find an agent or brokerage that is willing to take on an open listing client.
- Once they do, they will sign a non-exclusive listing agreement with the brokerage, which lays out the terms of the contract.
- Agents (and the seller, if they choose) compete to secure a buyer and win the right to the commission.
- Homeowners work with an array of agents and brokers to arrange home showings and open houses. They may also market and arrange showings of their home on their own.
What are the pros and cons of an open listing?
This unique type of listing comes with some positive and negative aspects. Here are some to consider if you’re thinking about putting your home on the market as an open listing:
- Homeowners may be able to avoid a commission by selling the home themselves.
- Homeowners have the freedom of not being locked into an exclusive agreement.
- Open listings are not listed on MLS (except in specific cases).
- Open listings are often agents’ last priority because there’s no guarantee that they will be paid for their work.
- They require heavy oversight and tracking to accurately determine who earned commission.
Should I use an open listing to sell my home?
A traditional exclusive listing is the better choice for most home sellers. This type of listing will ensure that your home is listed on the MLS, gets the most exposure to potential buyers, and helps you get the most for your money.
However, an open listing may be the right choice for you if:
- You don’t want to commit to one brokerage or agent.
- You want to list your home as FSBO.
- You have a background in real estate.
Open listing alternatives
If you want to challenge the status quo when listing your home, consider using a power buyer. These companies, like Orchard, are utilizing technology to revolutionize the real estate industry and provide a fresh alternative to the traditional way of doing things. While their services differ from company to company, many can guarantee your home sale and turn you into a cash buyer for your next home.
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