Definition
An open listing is a type of real estate listing agreement where a property owner may list their property with multiple real estate brokers at the same time. In this arrangement, only the broker who successfully secures a buyer who is willing, able, and ready to meet the terms of the listing, or who secures an acceptable offer from the seller, will receive a commission. The listing agreement automatically terminates upon the sale of the property.
Examples
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Example 1: Multiple Brokers
Greg, a property owner, gives an open listing to three brokers: Alice, Bob, and Carol. If Carol finds a buyer first, Carol receives the commission, while Alice and Bob get nothing.
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Example 2: Dual Roles
Sylvia lists her commercial property under an open listing arrangement. Both broker Darnell and broker Frank work to find a buyer. Darnell finds a buyer whose offer is accepted by Sylvia. Despite Frank’s efforts, only Darnell receives a commission.
Frequently Asked Questions (FAQs)
What are the benefits of an open listing?
An open listing provides the property owner with flexibility and maximizes the exposure of the property through multiple brokers. This can potentially lead to a quicker sale as multiple parties are working to sell the property.
What are the drawbacks of an open listing?
Since the brokers know they are in competition, they may not prioritize your property and may invest less effort than they would under an exclusive right-to-sell agreement, potentially resulting in less marketing and exposure.
How do open listings compare to exclusive right-to-sell listings?
In an exclusive right-to-sell listing, a single broker has the exclusive right to sell the property and will earn the commission regardless of who finds the buyer. In contrast, an open listing involves multiple brokers and only the broker who finds the successful buyer earns the commission.
Can open listings be used for residential properties?
While open listings are more common in commercial real estate, they can be used for residential properties as well, although it is less common due to the competitive nature affecting marketing efforts.
Do property owners have any obligations to brokers in an open listing?
The primary obligation is to compensate the broker who successfully brings a buyer. There is no obligation to compensate other brokers who are involved but do not succeed in selling the property.
Can property owners sell the property themselves in an open listing?
Yes, property owners can also find the buyer themselves in an open listing and would not be required to pay a commission to any broker.
- Exclusive Right-To-Sell Listing: A listing agreement where a single broker has the exclusive right to sell the property and earns the commission regardless of who brings the buyer.
- Broker Commission: The fee paid to a real estate broker for their services, often calculated as a percentage of the sale price of the property.
- Listing Agreement: A contract between a property owner and a real estate broker authorizing the broker to act on behalf of the owner to sell the property.
Online Resources
References
- “The Language of Real Estate,” John W. Reilly
- “Real Estate Principles: A Value Approach,” David Ling and Wayne Archer
Suggested Books for Further Study
- “Principles of Real Estate Practice,” Stephen Mettling and David Cusic
- “Modern Real Estate Practice,” Fillmore Galaty, Wellington J. Allaway, and Robert C. Kyle
- “Your Successful Real Estate Career,” Kenneth W. Edwards
Real Estate Basics: Open Listing Fundamentals Quiz
### What is an open listing in real estate?
- [x] A non-exclusive listing where multiple brokers can represent the property.
- [ ] A listing where only one broker can represent the property.
- [ ] A listing guaranteed to sell the property within a time frame.
- [ ] A covert agreement between brokers.
> **Explanation:** An open listing allows multiple brokers to represent the property, and only the broker who successfully finds a buyer gets the commission.
### Who receives the commission in an open listing?
- [x] The broker who first secures a buyer.
- [ ] All brokers involved.
- [ ] The property owner.
- [ ] The broker with the highest sales.
> **Explanation:** In an open listing, only the broker who first secures a buyer ready, willing, and able to meet the terms of the listing receives the commission.
### What happens to an open listing when the property is sold?
- [x] It automatically terminates.
- [ ] It remains open.
- [ ] It converts to an exclusive listing.
- [ ] It goes for public auction.
> **Explanation:** The sale of the property automatically terminates all open listings.
### What is the primary benefit of open listings to property owners?
- [x] Maximizing property exposure with multiple brokers.
- [ ] Guaranteed property sale.
- [ ] Lower commission rates.
- [ ] One-on-one service with a broker.
> **Explanation:** An open listing maximizes property exposure through multiple brokers, potentially resulting in finding a buyer more quickly.
### What is a common drawback for brokers in open listings?
- [ ] Higher probability of earning a commission.
- [x] Lesser incentive to invest in marketing.
- [ ] Exclusive rights to sell the property.
- [ ] Guaranteed marketing support from the property owner.
> **Explanation:** Brokers are less incentivized to invest heavily in marketing efforts because they face competition from other brokers.
### Can a property owner sell the property themselves in an open listing?
- [x] Yes, without owing any commission to brokers.
- [ ] No, they must use one of the brokers.
- [ ] Yes, but must pay a commission to all brokers.
- [ ] Only if listed under multiple service listings.
> **Explanation:** In an open listing, property owners can sell the property themselves without owing any commission to the brokers.
### Which term best defines the compensation paid to a broker for selling the property?
- [ ] Listing Fee
- [ ] Finder's Fee
- [x] Commission
- [ ] Legal Fee
> **Explanation:** The compensation paid to a broker for their services in selling the property is known as the commission.
### Under what condition do brokers get paid in an open listing?
- [ ] When they first list the property.
- [x] When they successfully find a ready and able buyer.
- [ ] Upon signing the listing agreement.
- [ ] For each viewing or showing of the property.
> **Explanation:** Brokers get paid in an open listing only when they successfully find a ready, willing, and able buyer.
### How does an open listing benefit property exposure?
- [x] It allows multiple brokers to work on selling the property.
- [ ] It restricts brokers and prolongs the sale process.
- [ ] It bundles the property into fewer marketing channels.
- [ ] It limits buyer competition.
> **Explanation:** Allowing multiple brokers to sell the property enhances exposure in multiple market areas.
### Why might a broker not prioritize an open listing?
- [ ] Brokers prioritize open listings over exclusive ones.
- [ ] Open listings always pay higher commissions.
- [x] There is competition with other brokers affecting motivation.
- [ ] Open listings have fixed sales timeframes.
> **Explanation:** Due to competition among brokers, there is less incentive for any one broker to prioritize an open listing compared to an exclusive listing.
