The Pros and Cons of an Exclusive Listing
By Emily Southey | 9 minute read
Are you selling your home but aren’t sure whether to sign an exclusive listing agreement with your realtor? You’ve come to the right place. Selling a home is a major decision, so you want to make sure you do it right. Hiring a realtor to help you is a great first step, but when they hit you with an exclusive listing agreement, you may wonder if it’s the right decision. Below, we break down the differences between exclusive and non-exclusive listings and explain the pros and cons of exclusive listings to help you decide.
What Does an Exclusive Real Estate Listing Mean?
An exclusive real estate listing is when a seller authorizes one realtor to act as their sole realtor. Most exclusive real estate listing agreements have expiration dates. Therefore, the seller does not authorize the realtor to represent them in perpetuity, but rather until the contract expiration date or the date the home is sold, whichever comes sooner. Exclusive real estate listings stand in direct contrast to non-exclusive or open listings, in which the seller retains the right to employ multiple realtors.
What Is the Multiple Listing Service (MLS)?
The Multiple Listing Service, otherwise known as MLS, is often seen as the alternative to an exclusive listing. The MLS is an online database available to all realtors that are part of a real estate board and is the most common way for sellers to list their properties. The MLS also syncs with other public online real estate marketplaces. Since most homebuyers begin the house-hunting process online, MLS can be an effective way for sellers to market and list their homes. Homes listed on MLS typically result in transactions that involve two realtors: a buyer’s realtor and a seller’s realtor.
“Most exclusive real estate listing agreements have expiration dates. Therefore, the seller does not authorize the realtor to represent them in perpetuity, but rather until the contract expiration date or the date the home is sold, whichever comes sooner.”
What Is the Difference Between Exclusive and Non-Exclusive Listings?
To determine if an exclusive real estate listing is right for you, let’s dive into the key difference between exclusive and non-exclusive listings.
As mentioned, an exclusive listing involves a seller agreeing to work solely with one realtor to sell their home. During this time, the realtor will attempt to market the property and entice qualified buyers to make offers on the home. Meanwhile, non-exclusive listings involve publicly listing the home (for example, on the MLS) and working with any realtor that comes to you with a potential buyer.
The main difference between an exclusive and a non-exclusive or MLS-listed sale is the number of buyers that have access to your home. With a non-exclusive listing, the home will likely be listed online by the seller’s realtor and made available to all buyer’s agents via the internet. From there, the buyer’s agents can take the listing information back to their clients and if interested, will work with them to submit an offer. Marketing a home online instantly opens it up to hundreds if not thousands of interested and qualified buyers, which can lead to more offers. In contrast, an exclusive listing means the home isn’t published on any online real estate marketplaces. Rather, the realtor representing the seller is tasked with trying to sell it to a pre-selected group of buyers. The advantage here is that while the buyer pool might be smaller, the quality of the buyers might be higher.
How Do Exclusive Real Estate Listings Work?
Now that you know what an exclusive listing is, you might be wondering how it works. An exclusive listing, or listing agreement, is a contract in which a seller authorizes a realtor to find a buyer for their home. With exclusive listings, only one realtor is permitted to market, show, and sell the property. Other realtors cannot try to sell the property while the agreement is in place. Realtors are paid by commission, so in exchange for the service they provide, the seller pays the realtor a commission when the home is sold.
Although realtors still earn a commission in open listings, it works a little differently. In a non-exclusive listing, the seller retains the right to work with multiple realtors. However, the seller is only obligated to pay a commission to the realtor responsible for finding the successful buyer (that is, the buyer whose offer is accepted). Further, in the case of a non-exclusive listing, the seller can try to find a buyer on their own, and if successful, they do not have to pay a commission to anyone.
The Pros of Exclusive Listings
Exclusive listings offer several benefits to sellers. Check out some of the pros below.
You develop a long-term working relationship with the realtor
First, with an exclusive listing, you are more likely to develop a long-term working relationship with a realtor. This will work to your advantage both now and down the line. In the short term, your realtor is more likely to take the time to understand your sales goals. From there, they can make more relevant and strategic recommendations on how to attract buyers (for example, they might suggest changing up the marketing strategy to appeal to a certain demographic or recommend that you make some minor repairs or upgrades). Meanwhile, in the long term, if you developed a strong working relationship with your realtor, you’ll have someone to turn to if you ever need to sell a home in the future.
The realtor might be more motivated to sell your home
Another perk of exclusive listings is that the realtor might be more motivated to sell your home. Since the realtor is the only one responsible for selling your property, they may work harder to do so. This could translate to better staging, more extensive marketing campaigns, and faster response times when you reach out with questions or concerns. Ultimately, the more motivated your realtor is to sell your home, the better customer service you will receive.
You can test out the market with low stakes
The third pro of an exclusive listing is that they give sellers a chance to test the market with little to no consequences. For example, if you chose a non-exclusive listing from the get-go and listed your property on the MLS, the general public would be able to see your original asking price as well as any subsequent price changes. But if you opt for an exclusive listing, only those your realtor permits to view your listing will be able to see the price. When pricing information is controlled, as it is with exclusive listings, there is less risk of potential buyers seeing that you previously reduced the price and using this as leverage in negotiations. So if you’re looking to test the waters to help determine the ideal listing price for your home, an exclusive listing might be the way to go.
Exclusive listings weed out unqualified buyers
Not all buyers are created equal. Even though a non-exclusive listing is likely to garner interest from a greater pool of buyers, it doesn’t mean the buyers will all be qualified or competitive. This represents a major advantage for exclusive listings. Since realtors with listing agreements market the home to a pre-selected group of buyers through their brokerage, the quality of the buyers is likely to be higher, increasing the odds of a sale.
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Restricted access to your home
One final pro of an exclusive listing is that it allows the seller to enter the housing market on a restricted basis. In some circumstances, such as if you’re in the process of renovations, the level of privacy that comes with exclusive listings can be a major advantage. So if you’re not yet able to show your home, whether because you’re painting, renovating the kitchen, or installing a new hardwood floor, an exclusive listing might be the best solution. It still allows you to list your property without having to worry about open houses or daily showings with prospective buyers.
The Cons of Exclusive Listings
While exclusive listings have several benefits, they also have some major drawbacks. The following is a list of cons associated with exclusive listings.
Complicated fee structures
First, exclusive listings often come with complicated fee structures. Although some realtors may charge a lower commission, they may charge additional fees or add a number of inclusions or exclusions to the agreement. Typically, the realtor fees for exclusive listings are more complex than those for non-exclusive listings.
Your home may sit on the market for longer
If time is of the essence, an exclusive listing may not be for you. Since exclusive listings are not marketed publicly, unlike open or MLS-listed properties, they are only accessible to a small pool of buyers. While these buyers may be more qualified than the average homebuyer house hunting online, it can take longer to receive an offer since fewer buyers are aware the property is for sale. Therefore, if speed is a priority, a non-exclusive listing may be a better option.
You might earn less money for your home
Bidding wars are far less likely in the case of exclusive listings. Therefore, in a seller’s market, listing your home publicly, such as through the MLS, could result in multiple offers. In turn, this could lead to a bidding war, which drives up the price of the home, leading to more money in your pocket. But if you list your property exclusively, there will be a smaller pool of buyers which means multiple offers are less likely.
Frequently Asked Questions
What sets an exclusive listing agreement apart from a non-exclusive listing agreement?
In an exclusive listing agreement, the seller agrees to work solely with one realtor. It is the realtor’s responsibility to market, show, and sell the property. In a non-exclusive listing, the seller is not tied to one specific realtor. Instead, they can list their house publicly and work with multiple realtors to sell their home.
How does an exclusive listing work?
When you agree to an exclusive listing, only one realtor is responsible for selling your home. No other realtor can attempt to sell the property while the agreement is in place. The realtor with exclusivity attempts to sell the home to a pre-selected group of buyers, usually found through their brokerage. In exchange for the service they provide, the seller pays the realtor a commission, along with any fees stipulated in the agreement.
Are offers for exclusive listings higher?
Offers for exclusive listings can be higher, but this isn’t guaranteed. While a realtor is more likely to bring you a serious, qualified buyer in an exclusive listing (which can reduce the odds of a lowball offer), there is no guarantee that the offer will be higher than what you could get in a non-exclusive listing. Since non-exclusive listings are open to the public, they are more likely to result in bidding wars, which can lead to a higher purchase price.
How can I determine if my house qualifies for an exclusive listing?
If you aren’t sure whether your home qualifies for an exclusive listing, contact realtors in your area and speak with them directly.
On the other hand, there are many reasons that realtors and sellers continue to favour open houses. Open houses offer a more relaxed environment for prospective buyers to tour the home. They also generate foot traffic, and the heavier the traffic, the more likely it is that a serious buyer will schedule a follow-up visit.
Why do most people exclusively list?
Many sellers choose to exclusively list their properties owing to the privacy it offers and the greater control they will have over the listing price. Plus, an exclusive listing can be an excellent opportunity to test out the market before listing on the MLS. They may also be beneficial for homes under construction or that are undergoing major renovation.