Signing a listing agreement with a real estate agent is a crucial step when selling your home. It’s a type of contract that outlines the terms of your working relationship, stipulates a listing price, but it can also include pitfalls that may leave a property owner stuck with unwanted obligations. To ensure a smooth and successful home-selling experience, here are the key areas homeowners should carefully evaluate before signing this type of agreement.
1. High Commission Rates
What’s Typical?
Real estate agents typically charge a commission between 5% and 6% of the final sale price. This fee is usually split between the listing agent and the buyer’s agent. However, in competitive markets or for high-value properties, it’s possible to negotiate lower commission fees.
What to Watch Out For:
- Non-Negotiable Rates: Some agents may insist on fixed rates, even if they’re higher than the local average.
- Hidden Fees: Additional costs for marketing, staging, or MLS listings beyond the agreed-upon agent's commission.
How to Protect Yourself:
- Compare commission rates among multiple agents.
- Ask which services are included in the commission (e.g., marketing strategy, professional photography, staging).
- If you’re using a service like TrueParity, rely on their agent-matching process to ensure you’re connected with agents offering fair and transparent terms.
2. Long Contract Terms
What’s Typical?
Listing agreements generally have a time frame of 3 to 6 months, though some agents may push for longer durations, especially in slower markets.
What to Watch Out For:
- Excessively Long Terms: Contracts lasting 9-12 months can lock you in, even if the agent’s performance is unsatisfactory.
- Lack of Flexibility: Agreements that don’t allow you to reassess or switch strategies midway.
How to Protect Yourself:
- Opt for a shorter duration of the agreement, such as 90 days.
- Negotiate for performance metrics (e.g., number of showings, regular updates) to evaluate the agent’s efforts during the term. Remember, this is an employment contract so you want your agent serving your best interests.
- Always be aware of the expiration date before signing any real estate listing agreement
3. Cancellation Clauses
What Are They?
Cancellation clauses outline the conditions under which a homeowner can terminate the agreement early, before the sale of your home is completed.
What to Watch Out For:
- High Penalties: Some agreements require homeowners to pay fees or reimburse marketing costs if they cancel.
- Restrictive Terms: Clauses that make it difficult or costly to exit the contract.
How to Protect Yourself:
- Ask about the cancellation policy before signing.
- Look for agreements with a termination clause that comes without penalty for unmet expectations.
- Request a trial period (e.g., 30 or 60 days) to evaluate the agent’s performance before committing fully. If they cannot bring any potential buyers, this agent may not be the right fit.
4. Exclusive Rights
What Are They?
An exclusive right-to-sell agreement means the agent is entitled to a commission, regardless of how the home is sold, for the entirety of the listing period. Even if you find the buyer yourself or use another agent, your contracted agent still gets paid. This type of listing agreement is what most agents will ask you to sign.
What to Watch Out For:
- Restricted Selling Options: You lose flexibility to sell independently or switch agents.
- Dual Agency Risks: If the agent represents both you and the buyer, conflicts of interest may arise.
- Post-Contract Obligations: “Protection clauses” (e.g., tail periods) requiring you to pay the agent if their buyer purchases your home shortly after the contract expires.
How to Protect Yourself:
- Understand the implications of an exclusive agency listing and ensure it aligns with your needs.
- Negotiate shorter protection periods (e.g., 30 days instead of 90).
- Consider an exclusive agency agreement if you want the flexibility to sell independently.
- You may also consider an open listing agreement, where any agent may sell your house -- especially if your property may be extremely difficult to sell
General Tips for Homeowners
- Read the Fine Print: Carefully review every clause and ask questions if something isn’t clear. Make sure the length of the agreement is stated before signing on the dotted line.
- Don’t Be Rushed: Take time to review the contract and consult a real estate attorney if necessary.
- Ask for Transparency: Ensure the agent provides a detailed plan for marketing your home and measurable goals.
- Use Trusted Services: Platforms like TrueParity can help you connect with agents who operate transparently and have a track record of success.
The Bottom Line
A listing agreement is more than just a formality — it’s a legally binding contract that defines your partnership with your real estate agent. The list price and the start date aren't the only factors to consider; you must also understand the total commission, amount of time, and any additional fees that might arise during the real estate transaction. By understanding the common pitfalls and knowing what to watch for, you can protect yourself from unnecessary risks and ensure a smoother home-selling process. Do your homework, ask questions, and don’t settle for anything less than a fair, transparent agreement.
Need help finding the perfect agent for your home? TrueParity makes the process easy by matching you with top-performing agents in your area. Connect with us today to get started!
