Why Agents Won’t Agree to an Exclusive Agency Listing

Real estate agents won’t agree to an exclusive agency listing because of the conflicts of interest present in such an arrangement between the owner and the agent.

The owner might just be price checking an existing offer, and the agent could easily end up marketing a property for months for free.

Plus, it doesn’t help that owners decide who to sell to, and agents have to engage in excessive monitoring to avoid disputes around who sourced a buyer.

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What Is an Exclusive Agency Listing?

An exclusive agency listing is a real estate listing with only one broker, the exclusive listing agent, marketing it for sale or rent.

For the avoidance of doubt, this means that other brokers will not be able to also list the property on the MLS or public search websites under their agency names.

The only exception is if another broker is also an exclusive listing agent of the property, in which case the listing is a “co-exclusive.” As the name suggests, a co-exclusive simply means there are multiple brokerages, all explicitly named in the agreement, exclusively listing the property for sale or rent.

What’s unique about an exclusive agency listing is that the owner also has the right to find a buyer on their own, and will not owe any commission to the exclusive listing agent by doing so.

As we’ll discuss in the next section, this possibility does not sit well with most full-time real estate professionals. Who would agree to run around for months showing a property, only to have it be sold from under them by the owner?

Understandably so, exclusive agency listings are quite rare vs exclusive right to sell listings which account for the vast majority of traditional listing arrangements.

As an interesting side note, listing agreements in New York typically have an “explanation” section with New York Department of State mandated language included, explaining what an exclusive agency listing means vs an exclusive right to sell listing:

An “exclusive right to sell” listing means that if you the owner of the property, find a buyer for your house, or if another broker finds a buyer, you must pay the agreed commission to the present broker.

An “exclusive agency” listing means that if you, the owner of the property finds a buyer, you will not have to pay a commission to the broker. However, if another broker finds a buyer, you will owe a commission to both the selling broker and your present broker.

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Why Agents Don't Like Exclusive Agency Agreements

Real estate agents typically never agree to an exclusive agency listing arrangement for a variety of reasons, unless they are desperate or the owner has agreed to an extraordinarily low listing price.

No one likes to run around for free

You wouldn’t work for free, so why would you put your real estate agent in that same potential position?

Real estate agents understand that there’s a great deal of work involved in managing a sale listing, from private showing requests at odd hours to calls late in the evening.

As a result, the last thing they’ll want to do is to agree to work on a listing for several months, produce multiple offers, only to have the owner sell it to someone else at the end.

The owner might be doing a price check on an existing offer

The owner may have already negotiated an offer directly with his or her neighbor, and is simply using the hapless listing agent to do a comprehensive market check on pricing.

Even if the listing agent finds a higher offer, net of commission, the owner still might screw the agent over by giving the last look to the owner’s original buyer. This means the owner would take the listing agent’s higher offer, and ask the original bidder to match or improve upon it.

This is great for the owner because not only has he or she gotten the original bidder to improve their offer, but the offer price has been validated by a wide, public marketing process. Unfortunately, this isn’t so good for the listing agent who did all of this work for nothing, except to give a price check to the owner.

The owner decides who to sell to

Another reason why agents are loathe to accept an exclusive agency listing is because it is the owner who decides who the winning bidder is. As a result, a listing agent may work very hard to find the highest offer on the public market, but the owner can always choose to decline selling and instead opt to encourage his own buyer to match the offer from the listing agent.

Remember that the listing agent has no idea whether the owner has a solid buyer waiting, and what the state of those negotiations are.

Who sourced the buyer?

The fact that the owner is able to not pay commission by finding their own buyer creates serious conflicts of interest, and often produces an antagonistic vs cooperative relationship with their listing agent.

A prime example is in determining who actually sourced each buyer, and this is not as black and white as some first time home sellers like to think.

For example, a homeowner will claim that their neighbor Frank on the 2nd floor is their buyer, because well, Frank is their neighbor.

An infographic explaining what an exclusive agency listing is and why agents don't like agreeing to them.

However, their listing agent may disagree because Frank walked into their open house, or perhaps even inquired on another of the agent’s listings.

At this point, who does Frank belong to from a relationship perspective?

As you can imagine, these kind of political battles should be left at the corporate office, and not introduced to one’s home sale process.

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What is Excessive Monitoring?

Excessive monitoring is when a listing broker, typically working on an exclusive agency basis, continuously monitors and takes credit for listing inquiries from buyers and buyer’s agents.

A listing broker will need to engage in this relatively inefficient process to be able to claim that he or she brought the buyer and was the procuring cause of the sale.

This means the listing broker will need to meticulously document in writing the name, contact information and notes about each incoming call, private showing, walk-in buyer and conversation about the listing.

Even though inefficient, the risk for the listing agent in not engaging in excessive monitoring is that he or she won’t have definitive proof of sourcing the ultimate buyer, and ending up in a dispute with the owner over who actually found the buyer.

As you can imagine, no serious real estate listing agent will agree to put up with this, which is why exclusive agency listing arrangements are so rare both in New York as well nationwide.

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Sample Exclusive Agency Listing Agreement

[Date]
[Seller’s Name]
[Street Address]
[City, State & Zip Code]

Re: [Street Address] [City, State & Zip Code] (hereinafter the “Property”)

Dear [Seller’s Name]:

Thank you for choosing New York Brokerage Real Estate LLC (hereinafter “New York Brokerage”) to market the Property. This letter reflects the agreement between us.

1. You have hired New York Brokerage as a real estate broker with exclusive agency to sell the Property. New York Brokerage will advertise and show the property in accordance with industry standards. New York Brokerage will arrange for professional photography, floor plan drawings and other marketing of the property. You represent that you are the sole owner of the Property.

2. This agreement shall be effective as of date signed and it shall continue in full force and effect for 180 days from the day the property first goes on market. If this agreement expires while the Property is in contract for sale, the Seller agrees to extend the agreement until the day the Property closes.

3. You authorize New York Brokerage to offer the Property for sale at a price of $_____. This price can be updated at any time with mutual consent.

4. New York Brokerage is authorized (1) to solicit the cooperation of other licensed real estate brokers (hereinafter “Cooperating Broker”) who will act as agents for the prospective purchasers, and (2) to work with them on a cooperating basis for the sale of the above Property. New York Brokerage is jointly liable for payment of any fees due to such Cooperating Broker in accordance with a separate co-brokerage agreement between New York Brokerage and such broker. In no case shall the fee for brokerage service paid by you exceed the Fee for Service referenced in this agreement.

5. If the Property is sold pursuant to this agreement, you shall pay New York Brokerage a Fee for Service equal to ___ percent (__%) of the total sale price of the Property. This Fee for Service shall be due and payable whether the Property is sold (a) to an independent third party, (b) to the Board of Managers of the building in which the Property is located (exercising its right of first refusal), or its designee, or (c) to a current lessee of the Property.

6. In the event the property does not sell during the term of this agreement or any extension hereof or during the protection period set forth above, you shall nonetheless be obligated to reimburse New York Brokerage for expenses in the amount of $____. If you pre-pay this in advance and the property sells, you will be credited back the amount at closing.

7. During the term of this agreement, unless otherwise agreed upon by New York Brokerage and you in writing, the Property shall only be offered for sale. It shall not be available for lease.

8. Within five (5) business days after the expiration of the listing term, we shall deliver to you in writing a list of no more than six (6) names of persons who inspected the premises during the listing term. If within ninety (90) days after the expiration of the listing term a contract is signed to sell the Property to a person on said list, we shall be entitled to the Fee for Service referenced in this agreement. You represent and warrant that if a new exclusive listing agreement is executed with another exclusive broker (the “New Exclusive Broker”), you will notify the New Exclusive Broker (a) of the existence of this provision and (b) that New York Brokerage may negotiate directly with you with respect to the customers on the list during the ninety (90) day protected period.

9. This agreement shall be governed by and subject to the laws and jurisdiction of New York.

10. This agreement shall bind and benefit the personal representatives, successors, and assigns of the parties.

11. Facsimile signatures shall be construed and considered original signatures for purposes of enforcement of the terms of this agreement. Same may be executed in counterparts and taken together shall constitute the whole of this agreement.

12. This agreement may not be changed, rescinded, or modified, except by written notice signed by both of us.

EXPLANATION

An “exclusive right to sell” listing means that if you the owner of the property, find a buyer for your house, or if another broker finds a buyer, you must pay the agreed commission to the present broker.

An “exclusive agency” listing means that if you, the owner of the property finds a buyer, you will not have to pay a commission to the broker. However, if another broker finds a buyer, you will owe a commission to both the selling broker and your present broker.

SPECIAL LEAD PAINT NOTIFICATION

If your property was built before 1978, you have an obligation to disclose to the Purchaser and the Purchaser’s agent all information known to you regarding the presence of lead-based paint and lead-based paint hazards within this target housing. All information known to the Seller’s agent regarding the presence of lead-based paint and lead-based paint hazards within this target housing will be disclosed to the Purchaser. Federal laws require that the Purchaser be given a 10 calendar day period (unless otherwise agreed in writing) to conduct a risk assessment or inspection for the presence of lead-based paint before becoming obligated under the Contract of Sale to purchase the target housing.

FAIR HOUSING NOTIFICATION

New York Brokerage is committed to upholding the city, state and federal Fair Housing requirements prohibiting discrimination. Please sign this letter where indicated below and return a copy to us at your earliest convenience. If you have any questions, please don’t hesitate to contact us. Again, we appreciate your confidence in us and we look forward to working with you.

This is a legally binding contract. If not fully understood, we recommend consulting an attorney before signing.

Disclosure: Hauseit and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. You should consult your own tax, legal, financial and accounting advisors before engaging in any transaction. The services marketed on Hauseit.com are provided by licensed real estate brokers and other third party professional service providers. Hauseit LLC is not a licensed real estate broker nor a member of any multiple listing service (MLS).

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