To begin formally working with a real estate agent, you’ll sign a listing agreement. There are three standard types of real estate listing agreements used in California: exclusive right to sell, an open listing, and an exclusive agency listing.
The exclusive right to sell listing is the most common form of listing agreement, and most agents you’ll talk to will want you to sign an exclusive right to sell. That means that no matter who brings a buyer – you, your agent, some other agent, whoever – the listing agent gets paid the commission on the sale.
An open listing agreement is one that says the seller agrees to pay the agent a commission if the agent brings a buyer, but the owner is free to sell the home on their own, or with the services of another agent. In this type of listing agreement, the home owner is not actually represented by the agent – the owner is only agreeing to pay the commission to the agent in the event he is able to find a buyer for the home.
An exclusive agency listing is like an open listing except that it allows the agent to represent both the home owner and possibly the buyer as well, but the seller still reserves the right to sell the property on their own, in which case the home owner would not have to pay the agent a commission.
Your listing agreement will specify the commission that is paid to both the listing agent, and the buyer’s agent. Typically the commission is split 50/50 between the buyer’s agent and the seller’s agent, however this can vary. It’s also possible for the listing agent to write in that the commission be dual or variable, that is, if the listing agent represents both buyer and seller, the total commission to be paid could be lower than if there were two separate agents.
The listing agreement will have a beginning and ending date. Most agents will try to get a six month, exclusive listing agreement. Many sellers are not comfortable giving such a long listing period – after all, what if your agent does not perform as promised? You could opt for a shorter listing period, or ask your agent to add language into the listing agreement which gives you, the homeowner, the right to cancel the listing agreement at any time.