Real Estate Listing Agreement Negotiating Points

What to Negotiate in a Real Estate Listing Agreement: https://www.hauseit.com/what-to-negotiate-in-real-estate-listing-agreement/

Calculate Seller Closing Costs in NYC: https://www.hauseit.com/closing-cost-estimator-for-seller-nyc/

Most sellers don’t know that a listing contract is negotiable to begin with, let alone what to negotiate in a real estate listing agreement. Here’s what you need to know.

Total Commission Rate

Commission rates across the US typically range from 5% to 6% of the sale price despite the fact that anti-trust laws prohibit any sort of industry wide price setting.

The typical reason fed to sellers for the necessity of this extravagant rate is twofold:

1. 90% of buyers are represented by agents, and the market rate that buyers’ agents expect to earn on a listing ranges from 2.5% to 3%. Anything less and buyers’ agent might “forget” to show it to their clients.

2. The MLS requires commissions to be split equally between a seller’s agent and a buyer’s agent. As a result, the total commission must be double the market rate buyer’s agent fee, thus 5% to 6%.

In our experience, part 1 is certainly true while part 2 is more nuanced.

How Commission is Split

The listing agent typically procures a fixed percentage commission through a contract with the seller, and then splits that equally with buyers’ agents in accordance with local MLS rules. This is what happens in most transactions; however, it’s possible to offer less to your listing agent while still offering a full commission to buyers’ agents.

Type of Listing Agreement

The two main types of listing agreements in the United States are the Exclusive Right to Sell Listing Agreement and the Exclusive Agency Listing Agreement. The former is much more common to see, and is greatly preferred by real estate agents. Furthermore, many MLS systems and even some public search websites will only allow exclusive right to sell listings to be included.

Contract Duration

The typical length for a listing agreement is 180 days, or 6 months. This may seem long, but the reason that listing agents ask for this kind of term is because the average time from a property being listed to having a signed contract is typically over 3 months. In fact, in a slow real estate market, the average time on market to signed contracts can easily creep up to 4 months or more.

Contract Termination

Most listing agreements will not allow changes or cancellation unless agreed upon in writing by both parties. This is actually fairly standard for contracts of all types. If something goes terribly wrong, most brokerage manners will let you out of the contract.

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