How Long Does a Realtor Listing Agreement Last, and Can You Negotiate Commissions?
Understanding Realtor Listing Agreements
A realtor listing agreement is a written, binding legal document between you as the seller of your property and a real estate agent who will help handle the sale of your home and earn a commission from it once the sale is made.
The realtor earns their commission through marketing your home in a range of ways and handling a lot of the important paperwork involved.
It is up to you to decide how long you would like to list your home with that particular realtor. You can negotiate with the realtor in terms of duration and payment of commissions. For example, they may list it for you, but you might be the person who finds the buyer in the end – in which case, they would not get the commission.
Duration of a Realtor Listing Agreement
The average duration of most contracts is six months. If the house does not sell by then, you can list it with another realtor. The term should be no less than three months, because that gives the realtor the chance to get to know your property and market it effectively. They can build up momentum in order to make a good sale and thus earn a good commission.
Commission Clauses
The average commission on a home is 6% of the final closing price of the property. However, you might be able to go lower if the house is in good repair and in high demand due to its location and desirability as a property.
Protection Clauses
It is important to note that in some cases you might still have to pay commission even if the listing has already expired. If the person who eventually buys is someone that the realtor brought to the table, the clause will usually state that the commission is payable for up to 90 days after the contract has expired. This helps protect realtors from having all their hard work taken advantage of.
Exclusion Clauses
Have you been in discussions with other interested parties prior to the contract with the realtor? These may be such as family members or neighbors who might want to buy your house. You can include the names of these people in order to show you are bringing in the sale. Therefore there would be no commission due to the realtor.
Factors Influencing the Length of Listing Agreements
Several factors can influence the duration of a listing agreement:
- Market Conditions: In a hot market where homes sell quickly, a shorter listing period might be sufficient. Conversely, in a slower market, a longer listing period may be necessary.
- Property Type and Location: Unique or high-value properties might require more time to find the right buyer, affecting the length of the agreement.
- Agent’s Strategy: Some agents prefer longer agreements to ensure they have ample time to use their marketing strategies effectively.
Tips for Successfully Negotiating Commission Rates
- Research Market Rates: Understand the typical commission rates in your area to ensure your negotiation is informed.
- Compare Agents: Interview multiple agents to compare their services and commission rates. This can provide leverage during negotiations.
- Highlight Your Strengths: If your property is likely to sell quickly or if you’re working with an agent who’s looking to build their client base, use these points to negotiate a lower commission rate.
- Consider Full-Service vs. Discount Brokers: Some brokers offer lower rates but may provide less comprehensive services. Weigh the pros and cons of full-service agents versus discount brokers.
Early Cancellation of Contracts
Your contract with the realtor can be cancelled early for a number of reasons. Do you feel the realtor is doing enough to market your property effectively? You are legally entitled to ask for an early cancellation. Be clear about the responsibilities and obligations of each party. See if you can get them to be more proactive on your behalf. If they are not meeting the terms of the agreement, ask to cancel.
If they make a fuss, remind them that word-of-mouth referrals are important. They certainly would not want to hold you to a contract when you are so unhappy with their services.
Conclusion
Understanding the duration of a realtor listing agreement and the potential for negotiating commissions can significantly impact your property sale experience. By being informed and proactive, you can ensure that your agreement aligns with your goals and that you receive the best possible outcome in the sale of your property.
