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NAR breaks down listing agreements, how agent pay ties in 

The latest consumer guide covers different types of contracts between sellers and their agents, and the “fully negotiable” nature of agent compensation.

October 18, 2024
3 minutes

Listing agreements — the different types, services they cover and potential offers of buyer agent compensation — are the latest topic in NAR's growing series of consumer guides.

"If you choose to work with a real estate professional to sell your home, one of the first things you'll do is negotiate and sign a listing agreement with the agent you've selected," the guide explains. "Here's what you need to know."

Four flavors of listing agreements: Agreements between a home seller and a real estate agent can vary, but they typically describe what an agent will do to facilitate the sale of a home. Such agreements most commonly fall into one of these four categories, NAR noted:

  • Exclusive agency: "You work with just one agent and agree to compensate them if they sell your home," the guide explains, adding that a seller can retain the option to sell the home on their own without paying their agent.

  • Exclusive right to sell: A seller works with one agent and pays them no matter who sells the property. This is a common type of agreement and is valid for a set amount of time — typically around six months. Some firms have taken this concept to the extreme, however: MV Realty required homeowners to sign a 40-year right-to-list agreement, something that has become the subject of multiple lawsuits. 

  • Limited service: You work with an agent who provides specific support, such as putting your home on an MLS, but they might not handle showings or counsel you on which offer to take.

  • Non-exclusive: You work with more than one agent but only pay the one who sells your home.

How agent compensation comes into play: This new guide — similar to one published last month and geared toward buyers — makes clear that agent compensation is "fully negotiable," a phrase that has become ubiquitous by the National Association of Realtors' deal to settle commissions lawsuits.

In addition to describing how sellers can offer concessions to help buyers with costs, this latest guide informs sellers that they can choose to (but are not required to) include an offer of compensation for the buyer's agent.

"It is up to you to determine if making or authorizing an offer of compensation is the best approach for selling your property," the guide states, highlighting the Code of Ethics that requires Realtors to put their client's needs first. "Your agent will work with you to help you understand the market and to weigh your options, answer questions, and reach an agreement that you are confident in." 

A consumer watchdog's perspective on listing agreements: Ahead of the new industry practices that took effect in August, many brokerages, MLSs and associations spent the summer revising or creating buyer and seller contracts. But an industry outsider — the Consumer Federation of America — was one of the most vocal groups in the conversation around forms. 

In July, the CFA released a detailed blueprint for listing agreements with the stated goal of assisting "regulators, consumer groups, and the industry itself in evaluating the fairness of new seller contracts." Among the recommendations, the group advised paying commissions as a flat fee or hourly rate versus a percentage of the home sale price, a departure from industry norms.

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