Property owners looking to sell would typically reach out to a local real estate agent, sign an exclusive right-to-sell agreement, and allow the realtor to do what they need to do to sell the property. Then, when the time comes, that realtor will collect their commission for the work they put into the sale.
Yet, how do you know if the realtor is going to give you the best chance at selling for the right price and in the right amount of time? Do you really need an exclusive right-to-sell agreement?
Here is everything you need to know about an exclusive right-to-sell agreement – and what you should be looking for before you sign.
What is an Exclusive Right to Sell?
In real estate, an exclusive right-to-sell agreement is what gives your chosen real estate agent (and the company they work for) the right to sell your property. They have the right to list it, market it, and, when agreeable with you, to show it.
Any buyer will have to go through the agent that holds this signed agreement. And, regardless of whether or not the realtor found the buyer, they will still get their agreed-upon commission fee at the closing.
Many sellers agree to this exclusivity because it gives them less to worry about. They have a point of contact who is responsible for selling their property and they can go about their business as usual until it’s sold. On the flip side, it motivates the agent to sell since the property is listed with them and they have a certain amount of time to make their commission.
What To Look For in an Exclusive Right-to-Sell Agreement
It is never, ever a good idea to sign any document without reading it and making sure you understand it first. Having it overlooked by an attorney is an even better idea. This goes for the right-to-sell agreement, too.
If you receive one from an agent, here are a few key parts you won’t want to overlook.
The Time Frame
The right-to-sell agreement should always have an expiration date. It is common for them to last as short as 30 days or as long as 6 months. However, if the duration of the agreement is not specified within the document – or if it is a timeframe you do not agree to – then do not sign it until it is revised.
The Commission Amount
The idea behind right-to-sell agreements is for realtors to ensure they get a commission on the sale. Therefore, this is something that should be listed within the contract in detail. More specifically, the agreement should state the percentage of commission they will get based on the selling price of the home — and how it will be split between the agents involved in the transaction.
Do some digging to find the typical commission rate in your area to make sure that it is in line with it. Usually somewhere between 5% and 6% is common, though it can vary.
Familiarize yourself with the cancellation terms. Make sure that there is an out if you need one. After all, if your agent isn’t performing as expected, you want to make sure you can seek other avenues for getting your home sold without wasting time.
If there is no cancellation clause within the contract, request one before signing.
Should You Sign an Exclusive Right to Sell?
Many people sign an exclusive right-to-sell agreement when selling their property. If you want to work with a specific agent, then this may be a great idea. However, just be sure to read the contract thoroughly and understand it. If possible, have it reviewed by an experienced real estate attorney.
Roach & Lin is a real estate law firm in Long Island, NY, specializing in foreclosure, bankruptcy, evictions, REO/real estate, loss mitigation, and litigation.