What Is An Open Listing Contract?

for Sale SignPosted by Kevin J Potter

The legal document which allows a licensed real estate broker the right to offer a property for sale is known as a listing contract. In the state of New Jersey, there are the three types of listing contracts: (1) exclusive rights to sell listing, (2) exclusive agency listing, and (3) open listing.

Listing Contracts

Each type of listing contract provides a different form of relationship between the agent (the real estate broker) and the principal (the seller).

  1. An exclusive rights to sell listing is the most common listing contract. As the name suggest, this listing allows one real estate broker to be the sole and exclusive agent for a seller and assures that the agent is compensated even if the homeowner sells the property himself.
  2. An exclusive agency listing also allows one real estate broker to be the sole and exclusive agent for a seller but allows the homeowner to sell the property himself without compensation to the owner.
  3. An open listing not only allows the homeowner to list the property with more than one broker but also allows the homeowner to sell the property himself.

listing Contract

Open Listing Contracts

Of the three listing contract available in New Jersey, an open listing is the most appeasing to a seller; however, the qualities that make it so beneficial are also what make it so detrimental to a seller.

The Potential Benefits

Open Listing HomeUnder an open listing contract, since any broker is allowed to sell the home, any broker is allowed to market the home. This results in multiple picket signs placed on the lawn and a heightened amount of advertisement and promotion – due to several brokers marketing the home rather than just one. Having six different real estate brokers market your house and only having to pay one (if any, since the homeowner can sell the house too) is of course the best way to sell a home. But what the expectations of an open listing is different from the reality of it.

The Realistic Consequences

An open listing is appeasing to a seller but not so much to a real estate broker. Brokers do not like “friendly” competition nor do they like the idea of not being paid for their efforts. Thus, little effort is given. After all, if you are not going to give a broker your full attention, why should they give you theirs? A brokers will rarely market a property under an open listing contract, unless they are certain they can prove a potential buyer was produced by them. So all that advertisement and promotion the homeowner thought they would get falls down to little to none.

Conclusion

The natural tendency of an open listing require the homeowner to do their own marketing. If the homeowner is inexperienced or unskilled, than the result could be the property being left on the market for much longer than expected. This is not to say that an open contract is completely useless. In some cases they can be more more beneficial than an exclusive agency listing or an exclusive rights to sell listing, but only to those who understand the real estate business and/or marketing. It is highly recommended for a homeowner to use a exclusive rights to sell listing or at least an exclusive agency listing. However, if you think you have the skill and time, then use an open listing. Just be sure you understand the challenge, and do not mistake it for free marketing.

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