You might only complete one or two property transactions in your life, while some property investors might make many. Unless you are dealing with property on a regular basis, there is a good chance you have no idea about the different agreements you can have with a real estate agent for selling your home.
This puts real estate agents in a powerful position and they can direct you to the agreement which suits their interests best, rather than yours. So if you may only sell one property in your life, it is a good idea to get to know the different agreements that you can make with your real estate agent.
To be in an even more secure position, contact a solicitor to go over the agreement with you, so you can fully understand your legal rights.
Exclusive Agency Agreement
This is the most typical agreement agents make with property sellers, especially with residential property. As the name suggests, you give just one agent exclusive rights to sell your property. What you need to be careful with this agreement, is that you may still have to pay a commission if you find a buyer yourself, or even another agents sells the property.
Exclusive agreements have a fixed period of anywhere between 30 days and one year. How long you want to make the agreement is up to you. If you need to sell the property quickly, say if you are moving overseas or looking to purchase another property, then you should make the agreement as short as possible to push your agent to find a buyer.
Changing to a different agent when you already have an agreement in place is not easy, so it is important to not make the agreement too long. Also if a buyer makes contact with the agent while they have agreement, but ends up purchasing the property after the agreement has ended, you still might be required to pay commission to the first agent.
Sole agency agreements
The sole agency agreement is similar to an exclusive agreement, where you give just one agent the rights to sell your property, but it gives you the ability to sell the property yourself without having to pay commission to the agent. This is useful, say if you have friends or family who express an interest in buying your property, or you would like to advertise the property yourself, like in a classified advertisement or on the internet.
Open agency agreement
Open agreements are when several agents can list your property for sale. All of the agents compete for the sale. It is the least favoured agreement for real estate agents as they are all in competition with each other. It can create confusion for buyers if they see the same property listed with different agents. Agents might also spend less effort marketing your property than they would with a sole or exclusive agreement. It does give sellers the ability though to list the property with as many agents as possible. It could be a more effective way to sell larger commercial type properties and businesses to maximise exposure for the sale.
As the name suggests, this agreement is when you decide to sell your property through an auction.
It should be noted that the specific laws governing agent agreements are set at the state level of government. The different agreements are similar throughout the states, but they can have slightly different laws, say for example whether an agreement can have a cooling off period.