Exclusive Agency Agreement

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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:

  1. Exclusivity :
    1. 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.
    2. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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

  1. 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.
  2. Multiple Listing Service: In order to sell the property quickly, the agent is more likely to use multiple listing services to provide exposure.

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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:

  1. Inquire about a shorter term : If your contract seems too long, you can negotiate the term of the contract.
  2. 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.
  3. 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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