What is Open Listing?
Open listing is a method of selling real estate. In an open listing, property owners can sell without employing brokerage firms and avoid brokerage fees. Alternatively, owners can employ multiple real estate agents to sell their property. But the commission is paid only to one agent who closes the deal.
An open listing contract is the opposite of an exclusive listing. In exclusive listings, the owner is in contact with a single real estate agent, permitting exclusive rights to show and sell the property.
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- Open listing refers either to an owner selling a property independently or an owner employing multiple real estate agents simultaneously. In such a contract, there is no exclusivity.
- Property owners opt for this method due to urgency, legal trouble, societal pressure, real estate market, inability to sell independently, etc.
- This method helps homeowners sell their property quickly—multiple agents haggle over multiple buyers to close the perfect bargain.
- Exclusive listing, net listing, multiple listing, exclusive agency listing are other methods of selling real estate.
Open Listing Explained
Open listing is a scenario where one owner tries to sell a property with the help of multiple brokers—who bring in multiple buyers.
Following are other scenarios where owners opt for an open listing.
- It is also used when an owner wants to avoid brokerage feesBrokerage FeesA brokerage fee refers to the remuneration or commission a broker obtains for providing services and executing transactions based on client requirements. It is usually charged as a percentage of the transaction amount. charged by real estate agents. The owner can directly deal with the potential buyers by carrying out negotiations and other details without an intermediary.
- Usually, property owners get into an open listing agreement with multiple agents when they are in a hurry to sell. The urgency can be caused by a complication associated with the property—recent crimes, negative publicity, legal issues, problematic tenant, etc. In this case, the owner wants to crack a deal as soon as possible.
- Sometimes, an owner tries to sell a house with just one broker, and it fails. Then the owner tries to hire multiple agents for selling the same property.
An open listing contract establishes the listing broker as a non-agency representative of the property owner. This means the broker does not have a fiduciary responsibility towards the seller or the buyer of the house. The property owner pays a commission to just one broker, not all—that too after closing the deal successfully. If and when owners find buyers on their own, they are not entitled to pay any real estate commission to the brokers.
In addition, there is an agreement called net listing. In net listing, the agent keeps the difference between the asked and bought price of the property. For example, if a property is listed at $20000 and an agent manages to sell the same for $30000, the agent keeps the extra $10000. Net listing is risky for the broker. If the property gets sold below the asking price, the broker makes no profit and forfeits the commission.
Open Listing Examples
Let us look at some examples to understand the practical applications of open listing.
Sandcastle is one of the most popular homes in the Hamptons. It was sold for $31 million via an open listing. The buyer was a Florida-based Billionaire. The home caused a stir when it was listed for $50 million in 2018. Joe Farrell built a 15-bedroom, 17,000-square-foot house at 612 Halsey Lane in Bridgehampton. The property has housed celebrities like Jay-Z, Justin Bieber, and Beyonce.
Let us now consider a hypothetical. Lucy wants to sell her ancestral home, but the property is old and shabby. She goes with an open listing—multiple brokers try to find a suitable buyer, all at once. Among the multitude, Lucy has to pay only one agent. The agents need to find a potential buyer willing to pay the asking price.
Lucy is moving to another city. She met five new realtors ready to promote her property. Two of those five realtors decided to work together—they will split the commission among them if they sell the property.
Alternatively, had Lucy decided not to involve any real estate agents in order to save on the commissions, it would still be categorized as an open listing.
Frequently Asked Questions (FAQs)
Open listing is a real estate agreement—the property owner has allowed multiple real estate agents to show the property to potential buyers. The one who brings the final buyer earns a commission on the deal. The owner does not pay a commission to all the brokers. Alternatively, owners can negotiate the deal themselves without involving any real estate agent. When owners deal directly with the buyers, they save on commissions.
It is a non-exclusive contract allowing the owner to work independently or contact as many real estate agents as they please. Some contracts are enforceable when the owner works with multiple agents, but this differs from state to state.
In the agreement, the listed brokers act as legally recognized non-agency representatives of the property owner. The property sellers agree to pay a commission to the broker only when the property is sold. This commission is applicable only when the property is sold through the efforts of a particular broker.
This has been a guide to Open Listing and its definition. Here we discuss open listing, how it works, examples, and exclusive listing. You can learn more about it from the following articles –