What Is an Open Listing in Real Estate?
Go Back To Previous PageReal estate never ceases to amaze people with the sheer number of different terms they have as part of their regular day-to-day
occurrences. One of the common terms you might hear is an “open listing” agreement in New York real estate transactions. If you’ve ever wanted to buy an open listing or sell a home, you probably asked what an open listing is and how it could affect the sale. Don’t worry! It’s a lot simpler than you think. An open listing is a property listing where the owner has not agreed to list with any broker exclusively. However, the owner has decided to allow brokers to list the property on a non-exclusive basis.
The broker will only collect a commission if they find a buyer or tenant. Therefore the owner can always find their buyer and not owe any commission.
What Is An Open Listing?
An open listing means a home is for sale with a non-exclusive contract with a brokerage. Having an open listing means the owner might make an FSBO sale (‘For sale By Owner”) while the home gets listed for sale via a brokerage, which cuts down on commissions. Sometimes, a home seller might do an open listing with multiple brokerages to help spread the word about a home faster.
If the listing gets sold while an open listing has multiple brokerage agreements, the home seller will only have to pay the brokerage and real estate agent who sell the home, and all others are unpaid.
How Are Open Listings Different From Regular Listings?
With a typical listing, owners don’t have the right to find the seller, nor can they sell the home independently. They follow an
exclusivity clause, meaning they are stuck with a specific real estate agent for the sale duration (or a set number of days, whichever comes first).
Any sale in a traditional listing must go through the real estate agent. In an open listing, sellers eliminate the exclusivity clause with the sale hire agreement.
This means the owner can find and sell the home themselves if they choose to. They also can hire as many real estate brokers and agents to sell the listing as possible.
When Does It Make Sense To Have An Open Listing?
It can make a lot of sense for many buyers. Open listings are great for sellers who want to sell the home fast or save money on potentially selling agents’ commissions. However, they’re not always a good choice. Many real estate agents and brokerages won’t work with open listings simply because they feel like it’s a waste of time.
People who want to sell their homes fast and are focused on raising awareness ASAP should consider having an open listing. This usually refers to emergency sell-offs from significant life events like divorce or bereavement in NYC.
Otherwise, you probably will get better service with an exclusive contract (i.e., “exclusive right to sell”). Exclusive contracts (i.e., “exclusive listing agreements” or “exclusive agency listing”) ensure that your agent remains focused on your listing. Besides, having an agent work exclusively for you takes most of the hard work out of your hands.
How Do Open Listings Work?
Open listings are relatively simple to work with. The following is what both sellers and buyers must know:
- The seller starts by going to one or more brokerages and asking for an open listing. In many cases, they may get rejected. Many brokerages will not do an open listing. So it may take a while to find one or more brokers willing to work with you.
- The seller then signs a non-exclusive agreement, and they will have the contract terms laid out and the commission.
- The brokerages and agents compete to get the sale. Simultaneously, if a person comes to the seller, the seller can initiate an FSBO sale.
- Whoever sells the home can get the commission. Who pays the commission depends on the contract. But make no mistake about it. Only the agent and brokerage that make the sale will see any money for their work.
Exclusive Rights vs. Exclusive Agency To Sell: What’s The Difference?
You might hear these two phrases used heavily. They’re not the same thing as a fully open listing. Sometimes, brokerages may try to persuade you
into one of these exclusivity clauses. If you want to make an open sale, you might not want to agree to either.
- Exclusive rights mean that only one agent and brokerage have the right to sell your home. And that you cannot try to sell the house on your own.
- An exclusive agency to sell means that only one brokerage is allowed to show off your home. But you can try to sell the house on your own if you choose.
Why Don’t Brokers and Agents Like Open Listings?
Not all real estate agents and brokerages dislike open listings, but some do. However, there are several reasons why many agents run the other way when they hear about a new open listing. The most common causes include the following:
- There is a high risk of conflicts. Though it’s not as common as it once was, there were cases where home sellers claimed to meet a potential buyer referred to by an agent before. This leads to fights over whether or not an agent deserves their commission.
- The competition for a sale is fierce. Agents already have a hard job when it comes to selling homes, and having others trying to sell the same house as they do is just icing on the cake. Many don’t want to complicate things.
- There is no guarantee that the realtor ever receives a commission, even if the home gets sold. There’s an understanding that all your hard work will pay off as long as the home sells. This isn’t true with open listings. Another agent could swoop in, find a buyer, and get the commission instead of you.
- Commissions are lower. Despite all the work, there’s a good chance that the seller will pay only half of the commission to the seller’s agent. While this is not always the case, it’s still a valid concern for real estate agents on a budget.
- Seller agents get upset by the lack of commitment from the seller. Let’s face it; it’s problematic when you expect to get paid by someone who sees the entire process as a “meh.”
Can Brokers & Agents Choose Whether They Work With Open Listings?
New York City does not have a law that says all agents have to agree to represent people who come asking for help. This includes open listings. However, this doesn’t necessarily mean that the real estate agent you want to hire has the right to make that decision.
In many cases, it’s not up to them; instead, it’s a decision made by a broker.
Due to the high risk of time-wasting, many brokerages have policies that ban all agents working from the firm from taking up an open listing. If the real estate agent you want works with an exclusive-only brokerage, you must choose between an exclusive contract and a different agent.
Is An Open Listing Worth It?
Sometimes it is, but it’s an issue entirely dependent on your particular situation and the market you want to reach. An honest broker or agent is the best person to ask about this matter, and they’re the ones who see the market and understand New York City’s unique sales climate.
You’ll find excellent advice at your fingertips if you choose the right people.
