Entering a real estate listing contract in Massachusetts is a significant decision for any homeowner. The type of agreement you choose and the terms you agree upon can directly impact the success of selling your property.

Before you sign, it’s essential to understand the different types of listing agreements, key contract terms, and what your agent will do to market your property effectively.

I will provide in-depth knowledge of everything you need to know about real estate listing contracts:

• The three main types of real estate listing agreements.
• Essential contract terms include length, commission rate, and cancellation terms.
• What will your agent do to market your home, and whether or not they practice dual agency?

Home sellers must know precisely what they agree to with an agent. From almost forty years of experience as a top-producing Massachusetts Realtor, I have first-hand experience talking to unhappy sellers. Folks who gloss over contract terms often find the hard way when an issue arises. They end up wanting to fire their agent.

Before making this vital commitment, let’s examine the details you need to know.

What to Know About Massachusetts Real Estate Listing Contracts

The Three Main Types of Real Estate Listing Agreements

When selling a home, you typically choose between three listing agreements: Exclusive Right to Sell, Exclusive Agency, and Open Listing. Each type of agreement has different benefits and limitations, so understanding these options is critical.

1. Exclusive Right to Sell Agreement

An Exclusive Right to Sell Agreement is the most common and comprehensive type of listing contract. This agreement grants the listing agent the exclusive authority to market and sell your property. The agents you interview will unlikely bring any other agreement with them to have a seller sign.

Here’s what this means:

• Agent Exclusivity: Only your selected agent can list your property, handle showings, and communicate with potential buyers.
• Guaranteed Commission: Regardless of how the buyer is found (whether by you, the agent, or another agent), your listing agent is entitled to their commission. This commission is typically a percentage of the final sale price, usually between 5% and 6%.
• Benefits for the Seller: Because the agent is assured of receiving a commission, they are highly motivated to invest time, effort, and resources into selling your home quickly and at the best possible price. This agreement often includes a comprehensive marketing plan, including online listings, professional photography, and marketing brochures.

While the Exclusive Right to Sell Agreement provides peace of mind and professional service, it also means that you are committed to paying the agent’s commission, even if you find the buyer yourself.

2. Exclusive Agency Agreement

An Exclusive Agency Agreement also provides one agent with the exclusive right to market and sell your property, but with a significant distinction:

• Seller Retains Some Rights: If you, as the homeowner, find a buyer independently (without any agent’s involvement), you are not obligated to pay the agent’s commission. This can save you money, especially if you have potential buyers in mind or plan to find a buyer proactively.
• Less Incentive for the Agent: Because the agent’s commission is not guaranteed, they may be less motivated to invest heavily in marketing or advertising your property than an Exclusive Right to Sell Agreement. Choosing an agent who is confident in their ability to sell your home and committed to your success is crucial.
• Flexible Yet Reliable: This agreement balances professional assistance and flexibility. It suits homeowners who wish to leverage an agent’s expertise while retaining the option to find a buyer independently. I have been willing to sign this type of agreement with the understanding the seller will pay the listing side of the commission.

3. Open Listing Agreement

An Open Listing Agreement is the most flexible and least formal of the three types. Most Massachusetts Realtors will not accept this type of contract.

• Multiple Agents: You can work with numerous agents, and the one who brings the buyer earns the commission. There is no exclusivity in this arrangement.
• Minimal Commitment: As the homeowner, you can market your property independently. Finding a buyer independently means you owe no commission to any agent.
• Lower Agent Incentive: Since agents do not have an exclusive right to sell, they may invest less effort and resources in marketing your property. This could result in fewer showings and potentially longer selling times.

This type of agreement can be advantageous if you are comfortable marketing your home independently and want to test the waters with multiple agents. However, it might not yield the most dedicated service from any agent.

Key Contract Terms to Understand

Before signing any real estate listing contract, you should review and fully understand several critical terms. These terms affect your financial obligations, the duration of your commitment, and your rights as a homeowner.

1. Length of the Contract

The length of the contract specifies the period during which the listing agreement is active. Most contracts range from three to six months, but this can vary based on market conditions and your preferences.

• Negotiability: You can negotiate the contract length. You might prefer a shorter contract if you are uncertain about your agent or market conditions. However, a more extended contract can provide more stability and time for the agent to implement a comprehensive marketing strategy.
• Re-evaluation Timeframe: A shorter contract period allows you to evaluate the agent’s performance and decide whether to renew, change agents, or attempt to sell the property yourself.

2. Commission Rate and How Fees Are Paid

The commission rate is a fee you pay your agent once your property sells. This rate is usually a percentage of the final sale price.

• Typical Rates and Variations: Commission rates typically range from 5% to 6% but can be higher or lower depending on your location, the agent’s experience, and market conditions. Some agents may offer lower rates to stay competitive, especially in markets where homes sell quickly.
• Commission Changes in Massachusetts: Commission rules have changed in Massachusetts. Understanding that some commission changes have occurred due to a lawsuit between the National Association of Realtors and the Department of Justice is essential. Some of the most significant changes include buyer agent commissions not being published in the MLS and the seller choosing to offer compensation to a buyer’s agent. These are vital discussions that should take place to understand the pros and cons of providing compensation for a buyer’s agent.
• Negotiable Terms: Do not hesitate to negotiate the commission rate. Be upfront about your expectations and ask about possible reductions, especially if you’re selling multiple properties or the agent has fewer expenses due to your independent marketing efforts.
• Clarify What’s Included: Ensure the commission rate covers all marketing expenses, professional photography, listing fees, and other associated costs. A lower commission may not always mean better savings if it excludes essential services.

3. Cancellation Terms

Cancellation terms outline the conditions under which either party can terminate the contract before the agreed expiration date. In many instances, a Massachusetts Realtor may not offer a cancelation clause.

• Cancellation Fees: Some contracts may include cancellation fees or penalties if you end the agreement early. Ask for clarity on fees and negotiate more favorable terms.
• Agent Performance Clauses: Look for performance-based clauses that allow you to cancel the contract without penalty if the agent fails to meet specific milestones, such as a certain number of showings or marketing activities.
• Mutual Agreement: Ensure the contract allows for termination by mutual agreement without additional costs, if circumstances change unexpectedly, or you’re dissatisfied with the agent’s efforts.

What Your Agent Will Do for Their Marketing Plan

Make Sure You Understand The Marketing Plan Before Signing a Listing Contract.

A clear and comprehensive marketing plan is vital for attracting potential buyers. Before signing a listing contract, ask the agent for a detailed outline of their marketing strategy.

Key components should include:

• Online Presence: Confirm your property will be listed on major real estate websites (like Zillow, Realtor.com, and the MLS) to reach the broadest audience. Professional photography and virtual tours are critical to making your listing stand out.
• Print and Digital Advertising: Understand how the agent plans to advertise your property in digital and print media. This could include social media ads and color brochures. For example, all of my client’s homes get a nice color brochure showing off the best features.
• Make Sure Open Houses Are Not a Focus: Many average agents will promote open houses as necessary. They are not and often encourage the wrong people to enter your home. The best agents will attract showings from other real estate agents with serious clients ready to buy. They are usually not worth it due to the inherent risks involved.
• Networking and Agent Outreach: Ensure your agent leverages their professional network, including other real estate agents and potential buyers, in their database. Networking can be one of the most effective ways to find serious buyers quickly.

A comprehensive marketing plan ensures maximum exposure for your property and demonstrates the agent’s commitment to actively selling your home.

Dual Agency: A Conflict of Interest to Avoid

Dual agency occurs when one real estate agent represents the buyer and the seller in the same transaction. While some states allow this practice, it can create conflicts of interest that do not benefit the seller.

I would highly recommend you avoid hiring an agent who practices dual agency. The only party who benefits is the real estate agent. Learn the downsides of dual agency and why it is banned in several states.

• Limited Advocacy: In a dual agency situation, the agent cannot fully represent both parties’ best interests. This lack of full advocacy may result in less favorable negotiations for you as the seller. By law, an agent can no longer advise a seller – that is why you hire an agent and pay them a significant amount of money!
• Lower Offer Potential: An agent practicing dual agency may push for a quicker sale rather than the highest possible price, benefiting from double commission but potentially lowering your proceeds.

It’s important to know if your agent engages in dual agency and to understand how it could impact your sale. Opting for an agent who does not practice dual agency ensures they are solely committed to representing your interests.

Kevin Vital, a twenty-four-year veteran Massachusetts real estate agent with Real Broker MA LLC, shared helpful advice.

Unfortunately, many buyers and sellers involved with dual agency do not understand that they are giving up many of the rights and services that can be provided by single-sided representation. You hired an agent to represent you and expect to be fully represented. Dual agency creates a situation where the agent cannot favor one party over the other, limiting how they can help and counsel you.

I do not promote dual agency, except in rare circumstances, because I believe a conflict of interest is created for the agent. Look at it this way. Can one lawyer represent a plaintiff and defendant in the same trial? No! It is a conflict of interest. Neither party can be represented to the fullest extent. If presented with dual agency, slow down and understand what it means.

The Extended Protection Period Clause

The Extended Protection Period Clause, also known as a “tail period,” is an often overlooked but essential term in many listing agreements.

• Protecting the Agent’s Commission: This clause allows the agent to claim a commission even after the contract expires if the buyer was introduced to the property during the listing period. This protects the agent’s efforts if a sale happens shortly after the contract ends.
• Specified Time Frame: The clause usually specifies a time frame, often 30 to 90 days post-expiration, during which the agent can still claim a commission. Ensure you understand this period and negotiate it if necessary.
• Know When It Applies: Ask for a clear definition of “introduction” to avoid disputes later. For example, if a buyer attends an open house but doesn’t make an offer until after the expiration, does this count as an introduction?

Reviewing and understanding this clause can help avoid unexpected commission obligations after the listing period ends.

Conclusion

Before signing a Massachusetts real estate listing contract, you must understand the type of agreement you’re entering, the key terms involved, and what to expect from your agent.

Your next step is to consult with potential agents, ask detailed questions, and review contract terms carefully. I highly recommend you interview multiple agents and ask them interview questions. Selling a house should never be taken lightly.

Understanding these elements will empower you to make the best decision for selling your property.