An Exclusive Right to Sell Agreement: A Win Win For Everyone

If you are selling your home for the first time, bear in mind that it involves a lot of paperwork. One of the first things you should do is enlist the help of a real estate agent. You’ll have to sign one of three types of agreements when you hire an agent: an exclusive right to sell agreement, an exclusive agency listing agreement, or an open listings agreement. The most common agreement among the three is an exclusive right to sell agreement; it protects the rights of both the buyer and the seller.

How does this agreement protect the rights of both parties, and what do you need to know about it before agreeing to sign? Here are some important facts about exclusive right to sell arrangements.

What is an Exclusive Right to Sell Agreement?

An exclusive right to sell arrangement is a contract between the owner of the home and the listing agent. When entering into this type of agreement, the seller agrees to work exclusively with one agent for the duration of the contract period. The seller also agrees to compensate the agent even if someone else refers the buyer.

Once you hire an agent, he or she will list your property on the multiple listing service (MLS) database and develop a marketing strategy to attract buyers and answer potential buyers’ questions. If things progress towards a sale, the agent would schedule the house inspection, help negotiate the logistics for closing and do the required paperwork to finalize the deal.

Working with an experienced agent is always in your best interest–they have years of experience in real estate which has helped them make valuable connections and learn the nuances of the real estate market. They also know which professionals are needed at the various stages of the selling process such as inspectors, appraisers, lenders, and moving companies. This will help you along your journey as a seller.

You will be expected to pay the agent’s commission based on the terms of your exclusive right to sell arrangement. This usually means 6% of the total sales price for which the property is sold. The listing agent does not keep the full commission–it is split between the buyer’s and seller’s agents.

Duration of an Exclusive Right to Sell Agreement:

Agreements are always subject to the mutual agreement of those who are involved, and an exclusive right to sell arrangement is no exception. The standard contract length varies between three to six months.

The agreement protects the rights of the seller as well as the buyer. As a seller, you receive insight into the market along with the expertise of a real estate market insider when you work with an agent. On the flip side, the agent gets the reward of a commission. It’s a win-win situation for everyone.

Canceling an Exclusive Right to Sell Agreement:

The seller may cancel the agreement if she’s not happy with how things are going. However, cancellations mostly happen due to a change in plans such as the prospect of a new job falling through or the seller plans to remain in their current home for a while longer.

If the property remains unsold at the end of the agreement term, you may decide not to renew the agreement, hire a new agent, or resolve to sell the property on your own without the help of an agent (for sale by owner).

Before agreeing to cancel, you should ask the agent plenty of questions so you don’t have to face new obstacles in the middle of the agreement.

Questions to ask an Agent before Signing any Type of Agreement

So much depends on the real estate agent that you cannot afford to go in blind. You need to make sure you are choosing the right person for the job. But how can you be sure?

Consider Asking the Agent the Following Questions:

• What would be the rate of commission?
• Do we have to enter into a right to sell agreement?
• How long would be the contract term?
• How can we terminate the agreement if required?
• Do I have to pay the commission even if the property remains unsold?
• Is there anything that needs to be discussed before signing the agreement?

 

Pros of an Exclusive Right to Sell Agreement

The major advantages of signing an exclusive right to sell agreement include:

Your Property is Listed in the MLS:

The exclusive right to sell agreement is the most common among all agreements because sellers want to maximize their chances of selling their homes. In this agreement, the seller can list the house in the MLS, which is the primary database for finding real estate property.

The Agent Works Efficiently:

Because of the timeline in an exclusive right-to-sell agreement. The seller remains motivated to make things happen within that period. So the agent establishes the best marketing strategies to attract potential buyers for the house.

No Workload On the Seller:

When a seller signs an exclusive right to sell agreement, the workload shifts to the agent. Sellers have to do next to nothing in the selling process. It is worth knowing, though, that if the seller uses personal links and funds to advertise the house, the seller would still owe the agent’s commission.

Conclusion:

Selling a home can be a tricky business. As a layperson, you will not be familiar with everything that goes into selling your home. On the contrary, hiring an agent makes up for everything you lack: they have experience with selling real estate, insight into the market, negotiation skills, and legal information.

A real estate agent would be available to you during the whole process of selling a home. So, agreeing to an exclusive right to sell agreement is a great way to sell your house.