Legal Blog

 
legal blog 

Legal Blog

The Legal Blog, brought to you by NVAR's Professional Standards department, helps you stay on top of the latest rules and regulations in the industry.

Right to Sell v. Exclusive Agency Listing Agreement

Sep 9, 2016

Listings

Question:
An agent called with some questions about our NVAR standard forms. First, she wanted to know what the difference was between the "Listing Agreement - Exclusive Right to Sell" and the "Listing Agreement - Exclusive Agency" forms. She read both forms and said they looked exactly the same.

Answer:

The critical difference is a few little words buried in the middle of all that text. While the rest of the forms are almost exactly the same, those few words can have an important impact on the listing firm's entitlement to compensation.

I have taken the liberty of underlining the relevant portions of the first sentence of Section 6A (Section 7A when the new revised forms are released in a few months) to emphasize the difference between the two forms:

Listing Agreement - Exclusive Right to Sell
"The Seller shall pay the Broker compensation of ______ in cash if, during the term of this Agreement, anyone produces a buyer ready, willing and able to buy the Property."

Listing Agreement - Exclusive Agency
"The Seller shall pay the Broker compensation of ______ in cash if, during the term of this Agreement, the Broker or any other broker(s) (or agent thereof) produces a buyer ready, willing and able to buy the Property."

Under an exclusive right-to-sell agreement, the listing firm is offered compensation in the event of a sale regardless of who procured the eventual purchaser. In contrast, under an exclusive agency agreement, the seller only offers the listing firm compensation if the purchaser is procured through the firm's efforts or the efforts of other real estate firms. This means that in certain situations the listing firm may not receive compensation if the property is sold. In the exclusive agency agreement, the listing firm or another firm working with the listing firm must procure the purchaser in order to have a claim on compensation.

An example is when the seller sells his property to his niece. If the niece discovered that the house was for sale during a conversation at a family gathering without any assistance from the listing firm (or any other real estate firm), then the seller could argue that the listing firm is not entitled to compensation under their agreement. However, if the niece discovered the house was for sale when her buyer agent sent her a list of recently listed properties in the Multiple Listing Service that met the criteria they discussed last week, then the listing firm (and the buyer broker) could argue that they are entitled to compensation if they can show that their efforts procured the buyer.

However, under the exclusive right to sell, the listing firm could still claim entitlement to compensation even if the niece learned of the property's availability without using the services of the listing firm or other firms. The exclusive right to sell was intended to provide compensation to the listing firm if "anyone" produces a ready, willing, and able buyer. This anyone could include the seller finding his own buyer for the property.
Group(s):
  • Listings