What does ‘exclusive right to sell’ mean in real estate?

In the digital age, home sellers have more channels to promote their property than ever before. Given these options, signing an exclusive agreement with just one real estate brokerage may seem counterintuitive. However, some instances exist in which the exclusive right to sell a listing can benefit both you and the agent.

For starters, it’s common for established, successful real estate agents to require these agreements. In addition, having an exclusive right to sell in place can motivate your agent to work hard to sell your house before the agreement expires in order to earn their commission. (A recently settled federal lawsuit has triggered changes in the way real estate agent commissions are paid, but home sellers will still be responsible for paying their own agent.)

An exclusive right to sell contract won’t always be the right fit for all home sellers, though. Here are a few considerations to keep in mind.

What is an exclusive right to sell a listing?

As its name suggests, this type of agreement gives the agent you choose (and their brokerage — i.e., the company for which they work) the unique, unshared right to obtain a buyer for your home. They also get the exclusive right to list and market it. Once an agreement is in place, all interested buyers (and their agents) have to go through the contracted agent and brokerage.

If your home sells while the agreement is in place, you will be required to pay the agent their commission fee, which is agreed upon in advance. This is true regardless of whether the buyer was actually found by the agent or not (for example, if you found a buyer yourself without the agent’s help).

However, the exact amount of the commission you’ll pay is about to change. For decades, protocol has been for the seller to pay both their own agent’s commission and that of their buyer’s agent. However, thanks to a landmark lawsuit that was settled in March 2024, new rules around real estate commissions are set to go into effect in July. As a result, sellers will no longer automatically be responsible for paying the buyer’s agent — these changes make it especially important to reach an agreement with your listing agent in advance, specifying the exact percentage of the commission to be paid, and to whom.

One big benefit of an exclusive right to sell agreement is its influence over the agent’s focus and motivation. With an exclusive agreement, your listing becomes a priority for them, keeping them highly invested in making the sale happen.

Exclusive right to sell vs. exclusive agency

Exclusive right to sell is different from a similar-sounding term, exclusive agency.

With the exclusive right to sell, the agent and their brokerage make a commission no matter who finds the buyer. With an exclusive agency agreement, on the other hand, you retain the right to market and sell your home yourself without paying a commission to the agent. If you end up selling your home to your coworker, for example, and your listing agent was never involved in the process, you would not have to pay their commission.

To earn a commission under an exclusive agency arrangement, the agent and broker may have to do more work to track leads and ensure they are involved in finding the buyer. Because of this, brokerages may not always agree to exclusive agency arrangements. Ultimately, without the incentive of a guaranteed commission, there is less at stake to motivate the involvement of an agent and broker under exclusive agency agreements compared to exclusive right to sell arrangements.

Details of an exclusive right to sell agreement

As with any contract, the details matter. Before you commit to an exclusive right to sell agreement, be sure to review the following areas closely:

• Duration: The exclusive right to sell clause in the contract you establish with your real estate agent should have an expiration date, which might be anywhere from 30 days to six months or more. You don’t want the contract duration to be overly long — the expiration date encourages a encourages a timely and efficient sale.
• Commission: Make sure the amount of the commission fee is clearly outlined in the contract. Generally, it will be a specific percentage of your home’s selling price. The contract should also specify whether the commission will be shared between your agent and your buyer’s, and if so, what the split is. (As mentioned above, starting in July 2024, sellers will no longer be required to cover the buyer’s agent’s commission — but some still may, as the topic is open to negotiation. Just be sure you’re clear on exactly how much you’re paying, and to whom.)
• Cancellation: Your ability to cancel the agreement depends on the contract you sign, so familiarize yourself with the terms and conditions to make sure your cancellation rights are outlined in writing. You may be able to cancel due to a breach of contract, for example, if the agent doesn’t satisfy the marketing benchmarks outlined in the contract.
• Exemptions: You might have a specific person interested in buying your home but still elect to hire an agent in case that buyer doesn’t work out. To avoid paying the listing agent’s commission if it does work out, you can include that person by name as an exemption. That way, you’re not on the hook for compensating the agent if you sell to that person, even with the exclusive-right-to-sell agreement in place.

Drawbacks of selling this way

The big drawback with an exclusive-right-to-sell agreement comes from the guarantee of commission for the agent. Unless you have agreed to an exemption, you will be expected to pay your agent’s commission even if you happen to find a buyer without them. Because the agent has the exclusive right to sell your home, they make their commission regardless of how the buyer came to the closing table.

This type of arrangement also means that if you aren’t happy with the way the agent is marketing your home or the type of buyers they bring you, you might be stuck without recourse. You won’t be able to switch agents or hire another brokerage until the agreement’s duration is up, unless circumstances allow for a specific cancellation option outlined in the contract.

FAQs

• What should I consider before signing an exclusive agreement?

  As you would before hiring anyone, do your research first. Verify that the agent and their brokerage are experienced and reputable, ask for references and check out their online reviews. You should also carefully read the contract before you sign it, to make sure you understand all the terms and conditions, from the duration of the agreement to your ability to cancel if you’re dissatisfied. And if you already have a buyer in mind, consider whether you want to ask for an exemption for them — that way, if the sale works out and the agent’s services aren’t needed after all, you won’t be required to pay their commission.
  

• Can you back out of an exclusive right to sell agreement?

  That depends on your agreement. In some cases, you may be able to argue breach of contract if you feel the agent isn’t holding up their end of the agreed-upon contract obligations. You would likely need hard proof to quantify a breach of contract, and may require the assistance or guidance of legal representation.

• What happens if the agreement expires?

  
  If an exclusive right to sell agreement expires before the home has been sold, you have a few options. If you still like your agent, you can stick with them and put another agreement in place. If you’d rather find a new agent or to pursue a for-sale-by-owner transaction, now’s your chance to do so. Depending on your circumstances, you might also opt to take your home off the market entirely.