Everything You Need to Know About a Listing Agreement

Get the information you need to make an informed decision about a listing agreement. Avoid any surprises and know what to expect.

You’ll need to sign a listing agreement when it comes time to sell your home with a real estate agent. There are several different agency agreements available, and today, we’ll discuss them and their pros and cons. We’ll also answer listing agreement FAQs, so you can make an informed decision when it comes to selling property.

What is a listing agreement? 

A listing agreement is a legally binding contract between the property owner and a real estate agent.

What is included in a listing agreement? 

The listing agreement will include details agreed upon by both the owner and agent, including:

• The type of listing agreement (more information on the different agreements below).
• Sale price. This might include the minimum sale price or reserve price the seller expects, the advertised price and the agent’s estimated selling price. However, note that the real estate agent’s estimated selling price can be a single price or a price range; if it’s the latter, the higher price cannot exceed the lower price by more than 10%.
• The agent’s commission and any additional fees (if marketing or auction costs are extra, for example).
• The circumstances in which the real estate agent or real estate broker is entitled to payment. For example, if the commission is only payable once they sell your property.
• A stipulation on whether you have to pay commission to more than one agent.
• Payment terms and whether the agent will deduct the commission from the buyer’s deposit.
• Sale method.
• The settlement period. 
• The listing agreement duration (more on that below as well).

The agreement should also include your details, the agent’s information and the property’s details to secure the basis of the real estate transaction. 

Types of listing agreements

The types of listing agreements differ between states and territories. However, the two most common types of listing agreements are an exclusive listing agreement and an open listing agreement.

Other options include a sole or exclusive agency listing agreement, an auction listing agreement and a multi-listing agreement. Here’s more information on each different agreement to help you decide which works for you.

Exclusive listing agreement

This is the agreement most sellers opt for and means one real estate agent has the exclusive right to sell the property during a set period. They may sell the property and find potential buyers through their real estate agent or by using a networked agency. Because of this exclusivity, sellers generally pay a larger commission compared to other agency agreements.

Auction listing agreement

This is basically the same as an exclusive agency agreement. However, it’s exclusively used for properties selling at auction.

Sole/exclusive agency listing agreement

A sole or exclusive agency listing agreement (not to be confused with an exclusive listing agreement without the “agency”) means one agent has the exclusive right to sell your property. However, exclusive agency agreements also permit you to find your own buyer, and if you sell your property to a buyer independently, you don’t have to pay the agent’s commission.

Exclusive agency listings are often the best of both worlds for some people. It means you work with only one agent, but it gives you the flexibility to find a potential buyer yourself. Plus, if the buyer does come from the agent, the commission is generally lower than what you’d pay in an exclusive listing agreement.

Open listings agreement

Open listings agreement means there are no exclusive rights, and any agent can sell your property. So you can potentially have multiple open agreements with several real estate agents. Whoever sells your property earns the commission.

An open listing agreement means you’re simply hiring multiple real estate agents to find potential buyers and sell the property, so other work, such as marketing, may fall on your shoulders.

Multi-listing agreement

You will enter into a multi- or multiple-listing agreement with a listing agent as part of an agent network. You pay commission to your agent, who commonly splits it amongst other agents in their network.

The Pros and Cons of Exclusive Listing Agreements

Wondering whether you should jump into an exclusive right-to-sell listing agreement? Here are the main advantages and disadvantages. However, remember that while the pros certainly outweigh the cons, a successful sale relies heavily on the current market conditions.

Advantages

• Because the agent exclusively works with you, they’ll tailor an advertising and marketing campaign that expertly targets potential buyers.
• The higher the selling price, the higher the commission. When you’re working with only one agent, you know they’ll use their experience to get you the best possible price on your residential property.
• Agents will prioritise your sale because there’s no competition. Besides the aforementioned marketing, they’ll focus on your home’s presentation, provide helpful advice on things like the optimal time for open house inspections and actively work to find you a buyer.
• An exclusive agency relationship without competition means you can build a trusting relationship with your listing agent. Communication will be simpler with one point of contact, and you can feel confident they’ll be open and honest about the sale process, received offers and whether you should accept or reject them.

Disadvantages

• Exclusive listing agreements are generally more expensive when it comes to both fees and commissions.
• Sellers can’t sell the property themselves (if you want this opportunity, remember you want an exclusive agency listing agreement).
• You must stay with one real estate agent until the agreement’s expiration date. This can be frustrating if you want to change agents due to your current agent’s lacklustre performance.

The Pros and Cons of Open Listing Agreements

Here are the pros and cons of open listings:

Advantages

• Competition between multiple agents means there’s typically a higher urgency to sell, so don’t be surprised if your property sells quicker with an open listing.
• Multiple agents mean they’ll each have their own list of potential buyers. Each agent might also target a different demographic, but more buyers always equal a greater chance of selling the property quickly.
• You don’t have to pay a commission if no one’s able to sell the property.
• You’re free to market and sell the property yourself.
• Moreover, the seller retains the commission if they bring in their own buyer. For this reason alone, many agents prefer not to enter an open listing agreement.
• Sellers usually only have to pay about half of the fees and half the commission associated with an exclusive listing agreement, as one sole agency doesn’t represent them. This in itself has its pros and cons too.

Disadvantages

• The responsibility of advertising and marketing generally falls to the owner, as there’s no exclusive agent to create a targeted campaign.
• An urgency to sell the property means the focus is typically not on the highest possible price, just on getting the property off the market.
• Some buyers may assume that multiple agents mean the property is difficult to sell.
• Sneaky potential buyers who know it’s an open listing agreement may work hard to find the real estate agent willing to put forward their lowest offer.

FAQs regarding listing agreements

What are the seller’s rights when selling a house? 

A seller has rights until they sign and exchange contracts with the buyer through their conveyancer. After this point, they’re breaking a legally binding agreement, so there are potential penalties from both the prospective buyer and the real estate agent.

In turn, buyers have a cooling-off period following the signing of the contract, where they can pull out without incurring any fees.

This period differs across Australia but is, on average, around five days. Once again, if they pull out following the cooling-off expiration date, it’s a breach of contract, and there are financial consequences.

How long is the average real estate listing? 

Some of the most common lengths of time for listings include 30 days, 90 days, six months and one year. Your agent will typically expect you to choose one of these four options for your real estate listing agreement.

How long should I list my house with a real estate agent? 

How long you list your house with a real estate agent depends on a few key factors, such as:

Urgency

If you’re urgent for a property sale, for personal or financial reasons, opt for a 30-day exclusive listing agreement with an experienced selling agent who can get the job done.

The local market conditions

30 to 60 days is more suitable in a “hot” or seller’s market when properties typically sell quickly and within days of hitting the market.

If you settle on a 30-day contract and notice similar properties in your suburb are selling, but yours is lingering on the market, you can change real estate agents once the agreement ends and find one to suit your needs better. However, ensure you investigate why there was no sale, as it may not be due to the agent’s services.

Alternatively, 90 days is preferable in a buyer’s market. This is the average period for listing in a “normal” real estate market and for exclusive listing agreements. With a well-priced home, the first month will be when your agent shows your property and holds open house inspections.

If the house doesn’t sell during this time, you should ask your agent for buyer feedback. This can give you vital insight into what is turning off buyers, whether it’s your sale price or the property’s current condition. You may need to carry out a bit of maintenance to improve your chances of a sale, but fortunately, you still have roughly two months to sell.

If the current market conditions are “cold”, then the average time a home tends to sit on the market is over two months. This is when you might look into a six-month listing agreement, which helps protect you if your agent’s listing expires while your home is still being held under the rules of a pending sale or in escrow. If this occurred, you would have to extend the listing agreement, which could be troublesome.

One tip to keep in mind is that it’s best to ask your agent for a written guarantee allowing you to leave after 90 days if you are dissatisfied with their services. This helps you from becoming completely locked into your six-month contract if you find that your real estate agent isn’t working out.

Property uniqueness

The only time you’d opt for a one-year listing is if it was the norm for your particular market. It’s generally only standard if you live in a rural area, are trying to sell a very expensive or unique property (think a resort on a private island), or own a large parcel of land.

Remember, the length of the real estate contract is entirely up to you and shouldn’t be something you let the real estate agent dictate. They may help you decide by suggesting a realistic time frame, but you also need to think about what duration works best for your needs.

Are listing agreements negotiable?

Absolutely. If you’re not comfortable with the terms and conditions outlined in the agreement, you don’t have to sign it. The right agent should want your business and be happy to make changes to receive it.

Here are some things to confirm before signing on the dotted line:

• Does the agreement state whether it’s an exclusive or open agreement?
• Do the fees and commission rate work for you? You should also ensure the agreement states the real estate agent will only receive their commission if the property sells during the agreement’s duration.
• Speaking of, does it specify the employment contract duration?
• Is there a mediation and dispute clause? Is there a mediation and dispute clause? A dispute resolution clause is a written understanding between you and the other party specifying what should happen in the case of a disagreement between the property owner and real estate agent. 
• Is there a termination clause? This is typically 30 days’ written notice. If your real estate agent is unwilling to add a clause that allows you to end the agreement, you should consider a different agent. By including this clause, the agent is guaranteeing top-quality service.

Do listing agreements have a cooling-off period?

This differs between states and territories, but the average cooling-off period is one business day following signing the listing contract. The next day, the contract is officially legally binding and to cancel it before the end date, you’ll need to typically give your real estate agent 30 days’ written notice.

How do I end a listing agreement?

The rights around ending listing agreements differ between states and territories. However, if the agreement’s end date arrives and the property is still on the market, both parties can decide not to renew it.

In this instance, some real estate agents will give the seller a list of potential buyers collected over the sale process. Some contracts will state that if one of these buyers purchases the property in a specific time period following the contract’s expiration date, the real estate agent can ask to receive some form of commission.

This is just one instance. If the exclusive right to sell listing agreement is for 60 days or longer, you can give your real estate agent a 30-day written notice to end the agreement after 90 days. However, the amount of notice you need to give should be stipulated in the agreement.

If you’re ever unsure about how to end a real estate agreement, seek legal advice. But remember, if you’re dissatisfied with the agent’s services, ensure you properly end the existing agreement before signing with a different agent. This is because if they sell the property, they may charge you commission as well as your new agent. And no one wants to pay double the commission.

What happens if I have a dispute with my real estate agent?

Once again, the steps you can take regarding a dispute are different for each state and territory. However, the first general step is to write your complaint directly to your real estate agent. Explain the problem and how you want them to fix it. If they accept your complaint and actively work to remedy the problem, you don’t have to take the matter further.

However, if they reject the complaint, you can contact your state or territory’s industry body for assistance and advice. Your final step will be to make a formal complaint with your state or territory government.

In this instance, you may also be within your rights to claim compensation for financial loss. But this should be the last step; agents are usually willing to fix their mistakes and avoid legal proceedings.

What’s the difference between a real estate agent and a buyer’s agent?

A buyer’s agent is a licensed professional who helps buyers purchase commercial or personal property. They work in the best interests of the buyer, not the seller. On the other hand, a real estate agent works in the seller’s best interests.

If you’re thinking of purchasing property, it’s a good idea to engage the services of a buyer’s agent. They will be able to help you find the right property, negotiate a purchase price, and handle all the paperwork associated with the sale.

If you are selling property, you will need to engage the services of a real estate agent. They can list your property, market it to potential buyers, and negotiate on your behalf.

Browse real estate agents at LocalAgentFinder

Now you know the ins and outs of listing agreements, it’s time to find a real estate agent to sell your home and commit to an amicable agreement. We always recommend interviewing two to three top real estate agents to compare their agreements and find the one that suits you best.

LocalAgentFinder is the perfect place to compare agents in your local area. We make it easy to compare their sales performance, marketing strategies and commission rates. So visit LocalAgentFinder today to find the right agent for you.