When the time comes to sell a house or an investment property, the majority of owners will choose the traditional way to market their property: through exclusive real estate listings. Yet, some others will choose to sell their property through a different type of real estate listing known as open listings. According to the National Association of Realtors, open listings account for only 8% of all home sales in the US. So, you may be asking yourself: What is an open listing? And why would you want to use it to sell your house? Keep reading to learn everything you need to know about open listings in real estate.
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What Is an Open Listing in Real Estate?
An open listing is a non-exclusive listing agreement in which more than one real estate agent or broker may be employed to sell a property, including the owners themselves. With this type of agreement, a property owner does not need to use a listing agent. Instead, the owner can reach out to several real estate agents who will then try to find a qualified buyer for the property. The owner is also free to look for buyers by themselves. When the property sells, the owner only pays a commission to the agent who found the buyer.
How Do Open Listings Differ from Traditional Listings?
In a traditional listing, or exclusive listing, an owner grants a single real estate agent the exclusive rights to list and market the property for sale. This agent will represent the owner in the real estate transaction and will typically work in conjunction with buyers agents to sell the property.
There are actually two types of exclusive listings in real estate:
- Exclusive Right to Sell Listing: This is the most common type of real estate listing. In an exclusive right to sell listing, the listing agent is the only one who has the right to list and market the house for sale and is guaranteed a commission no matter who finds the buyer. If the property buyer has an agent, the listing agent will typically split the commission fee with the buyer’s agent.
- Exclusive Agency Listing: This type of property listing is less common. In an exclusive agency listing, the listing agent is also the only one who has the right to list and market the house for sale. However, if the homeowner finds a buyer on their own, they wouldn’t need to pay any sort of commission to the listing agent.
What Are the Benefits of Open Listings?
A number of benefits come with open listings. Here are the main ones:
- More real estate agents mean more potential buyers. Each agent will have their own list of potential buyers, with each list consisting of different demographics. As a result, a property listed under an open listing has the potential to be seen by all these potential buyers rather than just by those of one agent only.
- The property might sell quickly due to the competition between the real estate agents. Several agents will be competing against each other in order to find a real estate buyer before anyone else, which may speed up the sale of the property.
- The homeowner does not need to pay any fee to a real estate agent if the property does not sell.
- The owner will only pay half the typical commission if an agent ends up finding a buyer and selling the property. This is because the owner is not represented, and so they do not need to pay a listing agent.
- The owner can, at any time, decide to stop working with a real estate agent without risking any penalty or losses.
- Last but not least, the owner is free to market and sell the property themselves. If they manage to find a buyer and sell the property on their own, they won’t owe a commission to anyone.
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What Are the Drawbacks of Open Listings?
Open listings are not without drawbacks. Here are some of the main ones:
- Since open listings have no listing agent, homeowners are responsible for marketing and advertising their properties themselves. This can be an extremely difficult task to do, especially for owners with no sufficient knowledge or experience in the real estate business.
- Prospective buyers might view a property under an open listing agreement as an easy buy. If they find out that the property is being handled by several real estate agents, they might contact all of the agents to try to find the one who is willing to put forward the lowest offer and then close the real estate deal through them.
- Real estate agents might not act in the best interest of the property seller. Since the agents are competing against each other for the sale of the property, it creates an urgency to sell as fast as possible. The agents may, therefore, be focused on finding a buyer to make an offer and getting the owner to accept, rather than seeking the best offer for the owner.
- Having multiple agents might give potential buyers the impression that the owner is having trouble selling the property. This could lead them to believe that there is something wrong with the property.
- Sometimes, real estate agents tend to prioritize their exclusive listings over their open listings as they are more likely to make a commission from these. Consequently, properties which are under open listings might stay on the market far longer than anticipated.
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When Would Sellers Use Open Listings?
- Sellers might use an open listing if they believe their home is easy to sell, or the real estate market is red hot and it won’t be difficult to find buyers who are willing to pay top dollar. With open listings, homeowners can employ several agents and receive numerous offers which can then be negotiated separately with each agent.
- An open listing might also be used when an owner needs to sell their property very quickly and is urgently looking for a buyer. Having more than one real estate agent working on finding a buyer increases the chances of selling it in a short amount of time.
- An open listing might also be employed when a home seller has already listed their property with a real estate agent and it failed to sell. By having multiple agents vs only one agent working on selling the property, the listing will most likely receive a higher market exposure and reach a larger number of potential buyers.
- Finally, open listings are an attractive option to an owner or real estate investor who wants to sell their property as a For Sale By Owner (FSBO). With open listings, they can represent themselves, manage the sale of their property without an agent, and, most importantly, save some money on commissions.
Related: How to Successfully Sell FSBO Homes: A Step-By-Step Guide
Should You Use an Open Listing? Conclusions
Upon first impression, an open listing sounds like the perfect option if you are thinking about selling a home: you can reach a larger pool of buyers, save money on commissions, and even sell your house without an agent! However, in reality, an open listing can be far more problematic than what you think.
While the idea of an open listing is appealing to a property seller, it isn’t so much to a real estate agent. Agents do not like competing against each other, nor do they like the concept of not getting paid for their efforts. And since they do not have exclusive rights to sell your property, they may not put as much time and energy into finding buyers. After all, if you are not going to be fully committed to working with them, why should they be fully committed to working with you? An agent will rarely accept to take this type of listing, unless they are certain that buyers will contact them and not go to another agent or to you, the seller.
That’s why, in most cases, it is recommended for an owner to use an exclusive listing to sell their property, especially if they don’t have a solid background in the real estate business. An agent who has exclusive rights will invest much more time and energy into selling your house, as they won’t fear that all their efforts will be in vain.
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But, this does not mean that open listings are completely useless. In some cases, they can be more beneficial than exclusive listings. If, for example, you have a unique property that you think wouldn’t attract many people and would require a specialized buyer, then it may be better for you to contact several agents and see if they have a particular buyer for your property. Open listings can also be advantageous if the inventory for homes for sale in a specific real estate market is low. If you ever decide to use an open listing to sell your property, just be sure you understand the challenges associated with it.