Should I Sign an Exclusive Contract With a Real Estate Agent?

What is an exclusive contract with a real estate agent?

An exclusive contract with a real estate agent is an agreement between the home buyer or seller and their agent. Sellers can have an exclusive listing agreement, and buyers can have an exclusive buyer-broker purchase contract.

An exclusive contract assures the buyer or seller that the agent will be completely committed to working for their client’s interest. It also gives the real estate agent the assurance the buyer or seller is committed to completing the transaction. It protects the work the real estate agent puts in on their client’s behalf.

Myers, who leads a team of top-performing agents at his San Antonio brokerage, explains that it’s always better to have terms and conditions in writing, but you can have a spoken agreement with an agent, to begin with.

“You can have an oral agreement and not have it in writing but still be representing the client,” says Myers. “Having it in writing enforces in the client’s mind that they are being well represented.”

An exclusive contract is more than just the details of the real estate agent’s commission. It establishes commitment levels and plays a role in making your home sale a priority, which we’ll discuss below. It’s also not a tool or trick to keep a client stuck with an agent.

Exclusive vs. non-exclusive listing agreements

Listing agreements are typically classified as exclusive or non-exclusive.

As the name implies, a non-exclusive listing contract allows a seller to list a property with more than one real estate agent. A non-exclusive agreement establishes that a commission will be paid only to the agent who actually sells the house.

On the other hand, an exclusive listing agreement grants the agent the right to a commission reward, regardless of who sells the property.

State laws or regulations can dictate how listing agreements are written, but the National Association of Realtors’ (NAR) Handbook on Multiple Listing Policy, provides three definitions regarding the various types of listing agreements, which we’ve summarized below:

Exclusive right-to-sell listing: This contract gives the broker the sole right to sell the property and earn the commission. With this exclusive agreement, the seller agrees to pay a commission to the listing broker, regardless of whether the property is sold through the efforts of the listing broker, the seller, or anyone else.

This is a popular listing for agents because it guarantees that their selling efforts will be rewarded with a commission. The home seller and the agent agree on the terms of the listing contract, including the expiration date.

The seller can name specific “exemptions” or exclusions in this listing agreement. If the home is sold to an exempted individual or entity, such as a friend or family member interested in purchasing the home, the seller is not obligated to pay a commission to the listing broker.

This type of listing agreement, with its commission guarantee and selling deadline, motivates agents more than an exclusive agency listing.

Exclusive agency listing: Agents are not as eager to accept an exclusive agency listing because this type of agreement fully allows the homeowner to retain the right to sell the property themselves. This means there is no assurance of compensation for the agent’s time helping the seller prepare the home and their efforts to market the property. This listing option can benefit the seller who invests in their own marketing and sales efforts.

With an exclusive agency listing, the listing broker acts as the agent for the seller, and the seller agrees to pay a commission to the listing broker only if the property is sold through the efforts of the broker. If the property is sold solely through the efforts of the seller, the seller is not obligated to pay a commission to the listing broker.

Open listing: An open listing is typically the least attractive option to selling agents. This is a listing agreement with non-exclusive terms, which means the seller can hire multiple real estate agents to find a buyer, allowing any of those agents to sell the home and earn a commission.

Only the agent who sells the home earns a commission. Here again, if the homeowner finds a buyer without the help of an agent, no commission is paid. While an open listing may sound like an opportunity to stir up competition and reach more potential buyers, this listing option can come with drawbacks.

When multiple agents are competing for a paycheck, there can be a lack of cohesion in regard to who is at the helm steering the course of the home sale efforts. An agent may be less willing to invest their time, effort, and money in marketing and showing a property that may ultimately benefit a rival agent.

What can sellers expect with an exclusive ‘right to sell’ contract?

“When a seller commits to an exclusive ‘right to sell’ contract, they agree to work only with a specific agent for the length of the agreement, and agents of other brokers can find a buyer for the property,” Myers explains.

Sellers commit to:

Signing an exclusive “right to sell” contract gives the real estate agent permission to sell your property. You will receive professional suggestions to increase the value of the property and a tailored advertising and marketing strategy to promote your property. This can lead to higher offers and an easier home sale. However, sellers will have to pay the real estate agent a commission on the home sale in this type of agreement.

Seller pros:

• The seller can be assured their real estate agent is committed to selling their home for the right price in a reasonable time frame.
• Agents often prioritize their exclusive contracts first.
• Your home is shown to the right kinds of buyers.
• You’re more likely to receive higher-quality offers from serious buyers.

Seller cons:

A seller may not want to sign an exclusive contract if they have a potential buyer in mind (a friend or family member, for example). An open listing may be a better option for home sellers who want to do their own marketing and advertising, and will mean they do not have to pay a commission to a real estate agent.

Should a seller sign an exclusive ‘right to sell’ contract?

“Without an exclusive right to sell, the agent may not be as motivated to put as much time and effort into it,” says Myers.

If the seller can just sell it to someone they know themselves, it could be a waste of time for the agent. Unless the seller already has pretty firm interest from someone they know for the home sale, it’s often in the best interest of both parties to sign an exclusive contract.

Most real estate agents will ask for an exclusive “right to sell” contract to preserve their time and to make sure they have the bandwidth to properly serve the home seller throughout the entire home-selling process.

What can buyers expect with an exclusive agent contract?

When a buyer commits to an exclusive contract, they agree to work with only one agent for the duration of the agreement. The buyer cooperates with the agent by looking at the homes the agent presents and reviewing the paperwork that will accompany the potential property purchase.

Buyer pros:

• Agents often prioritize their exclusive contracts first.
• You will be more likely to find out about new listings sooner because your agent will be watching listings more closely for their exclusive clients.
• Agents with exclusive clients establish a closer working relationship and explain the purchasing process in more detail.
• The buyers don’t have to worry about the agent putting them under pressure.
• The buyer can be assured their real estate agent is committed to finding them a home in their price range in a reasonable time frame.

Buyer cons:

Signing an exclusive contract with a buyer’s agent can limit your flexibility, as it prevents you from working with another agent until the contract expires or is terminated.

If the agent’s communication style doesn’t align with your needs or they don’t fully understand what you’re looking for, you’ll be stuck with them until the contract ends — unless there are special circumstances that allow for termination.

In some instances, such as a military family being reassigned or other extenuating circumstances, an exclusive contract may be amicably terminated by both parties.

Should a buyer sign an exclusive agent contract?

There are very few reasons for a buyer not to sign an exclusive contract. “Frankly, the client is going to get the same treatment from us, whether it’s in writing or not,” says Myers. “It’s more in the agent’s interest to have an agreement signed than the buyer’s interest.”

This doesn’t mean it’s not in the buyer’s best interest. It is, in that their agent will be more motivated to tend to their needs than clients who may not have agreed to sign an exclusive contract.

What are the key things to look for in an exclusive real estate agent contract?

When looking at an exclusive agreement with a real estate agent, make sure to check out these key clauses:

• Duration: The contract will specify the length of time you’re tied to the agent. It’s important to know how long the exclusivity lasts, so you aren’t stuck if things aren’t working out. A shorter term is often better, giving you the flexibility to explore other options.
• Termination clause: This outlines how you can exit the contract if needed. You should have the ability to end the agreement if the agent isn’t meeting your expectations or providing the service you need. Without a clear termination clause, you might be stuck in a contract longer than you want.
• Commission: This details how much the agent will be paid once the property is sold. Make sure you understand the commission structure and if any additional fees are involved. Knowing this upfront helps avoid any surprises when the deal closes.
• Agent responsibilities: The contract should clearly define what the agent is responsible for during the process. This may include marketing, showings, and negotiations. Having these responsibilities outlined will help ensure the agent is fulfilling their duties.

How long is an exclusive real estate agent contract?

While the length of an exclusive real estate agent contract can be any period of time you choose, Myers says it typically falls between three to six months for most normal listing situations. The contract period can also depend on housing trends and regional sales conditions.

Many agents will be hesitant to accept an agreement for less than a month because it’s difficult to effectively market a property in such a short amount of time.

Any listing agreement will have the beginning and ending dates spelled out.

What is a protection clause in an exclusive listing contract?

Some seller’s agents will insert a protection clause that applies even after an exclusive real estate agent contract expires. The clause acts as an insurance policy to prevent a back-door deal from being brokered between the seller and a buyer that the agent introduced.

An unprincipled seller might attempt this tactic to avoid paying the agent a commission. If inserted in an agreement, a protection clause typically lasts for 30 to 90 days after the listing contract expires.

What is an exclusion clause in an exclusive listing contract?

An exclusion clause is less common but can be helpful for home sellers under certain conditions. This clause allows sellers to sell their homes to certain parties listed in the agreement without having to pay a commission.

For example, you may sign an exclusive contract with your listing agent but include an exclusion clause stating that if your son or daughter comes up with the money, you can sell the home to your child without paying the agent a commission. Or if you have a neighbor who’s always wanted to buy your house, you might include their name in an exclusion clause.

Can I cancel an exclusive contract with a real estate agent?

There are always exceptions to the rule, but exclusive contracts are usually not broken. “It’s always on a case-by-case basis,” says Myers. “The short answer is no, but circumstances come into play.”

For example, when unexpected life circumstances change, real estate agents are more willing to be flexible about breaking the contract. In some cases, the agent may ask the buyer or seller to cover the agent’s out-of-pocket expenses and then let them out of the contract.

Or, if it can be shown that the agent has not upheld their responsibilities as stipulated in the agreement, you may have a legal right to terminate the contract early without financial concessions.

There may occasionally be cases or situations where you don’t need to apply legal leverage regardless of the reasons for canceling the contract.

In an industry that relies on reputation and referrals, some agents may want to keep their clients happy in a tight spot, even if the agreement is being broken. There is no guarantee of this, which underscores the need to read your agent contract carefully before signing.

However, Myers points out that if someone wants to switch agents because they have overpriced their home against the agent’s advice or in a similar situation, the listing agreement typically cannot be canceled unless the agent’s fee is paid.

How can I find a proven, trusted real estate agent?

Before you sign an exclusive contract with a real estate agent — whether you’re buying or selling — you’ll want to find a top agent in your area.

HomeLight’s free Agent Match tool can connect you with a proven professional who is familiar with your market and can advise you on every step of your homebuying or selling journey. See each agent’s strengths, experience, selling results, and reviews from other buyers and sellers who have used their services.

Before signing an exclusive contract, choose an agent you can trust and feel comfortable committing to for your real estate transaction.

Header Image Source: (Mathew Addington / Death to the Stock Photo)