Exclusive Agency Agreement: How They Work and Should You Sign One
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What is an Exclusive Agency Agreement?
An Exclusive Agency Agreement is a legal contract between a real estate firm and home seller that grants the firm the right to be the only entity to market and sell a property. In other words, this agreement gives the real estate agent the right to be the only agent to sell the property.
This is different from the exclusive right of sale agreement in which the seller cannot retain the right to market and sell the house without paying a commission. For exclusive agency agreements, the seller still retains the right to market and sell the home without paying a commission to the listing firm or agent, if the seller finds the buyer independently.
Anyone who hires a real estate agent signs an agreement. In case of sellers, it is the exclusive agency listing. In case of buyers, it can be the buyer’s exclusive agency agreement.
Difference Between Exclusive Right and Exclusive Agency
In an exclusive right agreement, the listing agent will receive commission from the seller regardless. After signing this agreement, the seller of the house will also have to pay a commission to the broker if they find a buyer and sell the house.
In an exclusive agency agreement, the seller retains this right. The biggest difference between the exclusive right and exclusive agency is commission. An exclusive agency will not guarantee commission but an exclusive right will.
Here is an article about different types of listing agreements.
How Exclusive Agency Agreements Work
There are key elements in any exclusive agency agreements. Here are some common ones used by firms and agents:
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Exclusivity
:
- Exclusive right to sell : If the agreement is between a seller and a broker, it could include the exclusive right to sell, thereby giving the chosen firm or agent the sole right to sell the property.
- Buyer-broker exclusivity : Buyer-broker exclusivity in an exclusive agency agreement means that a buyer will only work with the firm or agent the buyer chose. The buyer cannot change or look for other firms and agents to work with.
- Term of contract : The term of the contract is the first part of an exclusive agency agreement where length of the contract is outlined. Term could be weeks, months and even years and can be negotiable if you feel that the term is too long or too short. It essentially sets the length of time the real estate firm will have exclusive rights to sell the property.
- Compensation: This lists the amount of compensation the agent will earn if the sale happens. Commission is generally 5-6% of the sale price but is negotiable. The document should clarify that if the seller pays the compensation out of the proceeds of the sale then the buyer is not obligated to pay anything extra.
- Property description in the contract : The agreement should define the property in question. You are only bound to the contract if this description matches the actual property in case you are the buyer. This would also include the type of listing.
- Listing Price : In case of an exclusive agency listing, the document should mention the listing price.
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Should You Sign an Exclusive Agency Agreement?
Before deciding if an exclusive agency listing is right for you, you should consider the advantages and disadvantages of the agreement.
Advantages of Exclusive Agency Listings
- Save Money : This type of listing can help you save money. If you find a buyer independently for your home and sell the property, you will not pay any commission to the real estate firm or agent.
- Better Relationships with your Agent : Since an exclusive agency agreement gives the agent the right to exclusively market your property, greater trust is established between you and your agent, which can create a better working relationship.
Disadvantages of Exclusive Agency Listings
- Agent Motivation : If commission is not guaranteed, an agent might not be motivated to market and sell the property as much as if it were. You may also create a sense of security for the listing agent, as opposed to hiring multiple that may work harder to create a sale.
- More work for seller : Since the agent might not be motivated, there would be more work for you, or the seller, to market and sell your home.
You can compare the pros and cons of an exclusive right agreement before deciding which would be the best fit for you. Here are some pros and cons of an exclusive right agreement:
Advantages of Exclusive Right Listings
- Motivated Agent: Since the contract has a fixed term and the agent will earn a commission under an exclusive right to sell agreement, they are more likely to be motivated to find and sell the property.
- Multiple Listing Service: In order to sell the property quickly, the agent is more likely to use multiple listing services to provide exposure.
Image via Pexels by Karolina
Disadvantages of Exclusive Right Listings
- Cancellation policy of the contract: Some contracts do not allow cancellation mid-term. Read through the agreement before signing.
- Pay Commissions Regardless: You may be able to find your own homebuyer but still be required to pay the agent commissions for the sale.
Want to know if an exclusive right listing is a better fit for you? Here is an article comparing the pros and cons of exclusive right listings.
Before signing an exclusive agency, agreement make sure to read thoroughly and ask questions. Do the following before signing an exclusive agency agreement:
- Inquire about a shorter term : If your contract seems too long, you can negotiate the term of the contract.
- Ask for a trial run: Before handing off your house to an agency, you might want to go for a trial run to ensure they are fit to sell your house. You can also ask your firm or agent for a trial run before signing an exclusive agency agreement to ensure you can work well with your firm or agent.
- Read the fine print : You will want to ensure that all clauses are agreed upon in the agreement. If there are provisions and conditions to any services being offered by the firm, be sure to read through them before signing the contract.
You can find templates online to draw up your own exclusive agency agreement. However, it is advised to consult a real estate professional to ensure a smooth deal.
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Do you have any questions about buying agency agreement and want to speak to an expert? Post a project today on ContractsCounsel and receive bids from real estate lawyers who specialize in real estate law.
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Tim E.
I help small businesses, entrepreneurs, and business owners draft, review, and negotiate the agreements behind their operations and transactions. My work includes service agreements and MSAs, LLC operating and shareholder agreements, business purchase documents, commercial leases, independent contractor agreements, and NDAs. My approach is practical: understand what you are trying to accomplish, identify the terms that materially affect the deal, and deliver clear, usable documents without unnecessary complexity. For reviews, I focus on meaningful risks and proposed solutions, with redlines and plain-English explanations. I offer fixed-fee services for defined projects, from a single contract review to a broader business transaction. Each proposal identifies the deliverables, revision scope, and expected turnaround so you know what is included before we begin.
"Excellent experience with Tim on my relatively complex EULA for a suite of network appliance products. Tim was very fair with pricing, responsive, diligent, thorough, technically knowledgeable, took the time to address all my questions and concerns, and finished (with revision) on schedule and budget. Great experience overall and I'll definitely be using Tim for more work in the future with my business. I'll also be using Contract Counsel and recommending it to everyone I know as well! THANK YOU! -Devin"
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I am a Contracts and Mergers & Acquisitions Attorney with more than 25 years of diverse legal and business experience. My practice focuses on mergers and acquisitions, commercial contracts, contract dispute resolution, and a broad range of business-related legal matters. I have extensive experience managing and closing transactions across a variety of industries, including SaaS, IT, eCommerce, franchises, agencies, and food services. I take a practical, business-oriented approach to transactions, helping clients efficiently navigate complex deals from initial structuring and negotiation through execution and closing. My combined legal, litigation, financial, and business experience allows me to deliver strategic, efficient, and practical solutions tailored to my clients’ objectives, whether in deal negotiations, contract structuring, dispute resolution, or complex business transactions
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Accomplished business and litigation counsel with experience managing a broad spectrum of legal matters on behalf of individuals as well as early-stage and established technology, software, service and medical device companies. Substantial experience in drafting commercial agreements as well as litigation and arbitration of complex business disputes as plaintiff’s and defendant’s counsel. Served as infantry officer (attaining rank of Major) in ground combat units for the United States Marine Corps and educated in Marine Corps management and tactics. Adept at taking complicated information and legal principles and presenting strategy to non-lawyers in a concise and easy-to-understand format.
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Ms. Ayub is an attorney licensed to practice in Texas. Before moving to the US, she has a number of years of experience in contract review, analysis and drafting. Ms. Ayub is available to help you with your legal problems, as well as filling LLC and other business entity formation documents. To know more about her practice, please visit https://ayublawfirmpllc.com/.
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