Right to Sell v Exclusive Agency Listing Agreement

 

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.

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
"Seller shall pay Broker in cash total compensation of                                                                                                                                                                    (“Compensation”) if, during the term of this Agreement, Broker, or any other broker(s) (or agent(s) thereof), produces a buyer ready, willing and able to buy 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.

Commercial Council