This article is written by K. K. Nishchita, pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho.

Introduction

If you are planning on selling your old property or any property in your name for that matter and you do not know how to find a potential buyer and are looking to rely on someone then you need to start by appointing a real estate broker. Now the question is why will a real estate broker find a suitable buyer for you. He basically works to receive a commission of certain fixed percentage when your property gets sold. This turns into an agreement between you and the real estate agent and that is where exclusive agent listing comes into the picture. An exclusive listing is basically a type of real estate listing agreement in which one specific agent is appointed as the seller’s sole agent. Under this listing agreement, the seller retains the right to sell the property without any kind of obligation to the agent. This article aims to shed light on every aspect of exclusive agent listing and bring a clear understanding to the reader. It focuses on bringing out the positive side of exclusive agent listing and how it benefits the seller.

What is an exclusive agent listing?

An exclusive listing is that kind of real estate listing agreement in which a property seller proceeds to appoint and specifically authorize one real estate broker to act as the seller’s sole agent. However, in an open listing, the seller retains the right to employ any number of brokers as agents. In other words, a listing agreement is a contract under which a property owner (called as principal) authorizes a real estate broker (called as agent) on his behalf to find a suitable buyer for the property on the owner’s terms, for which service the owner pays a commission. Section 2 (zm) of the RERA Act, 2016 defines who a ‘real estate agent’ is. Section 9 of the same act speaks about the registration procedure of a real estate agent. Section 10 emphasizes the functions of a real estate agent. 

How an Exclusive Agent Listing Works?

To apprehend how an exclusive listing works, it’s better and feasible to first consider open listings. In an open listing, the principal reserves the right to employ any amount of brokers as agents. The seller is required to pay a commission only to the broker who successfully produces a ready, willing, and able buyer. If the seller finds a buyer without the help of any of the brokers, the seller is not required to pay a commission to anyone.

An exclusive listing works in a different manner. In an exclusive listing, only one broker is particularly authorised to act as an exclusive agent of the seller. That means one broker has the sole right to market, show, and sell the property; other brokers are ruled out from trying to sell the property while the agreement is in play.

An exclusive listing can be simpler for the seller in that there’s only one broker to work with. However, an exclusive listing can result in less exposure for the property and, in turn result in  fewer interested buyers.

Importance of an exclusive listing agreement

1. Saving money: Exclusive listing agreement allows you to potentially save considerable sum of money. If you find the buyer for your home, then you do not have to pay any commission fees. If you already have someone in mind you know absolutely loves your home and is looking to buy, this might be the listing agreement you need to get right away.
2. Excess Control: Using an exclusive agency listing allows you to bring in buyers that you already know and trust. This lets you have an upper hand and increases your privacy as well as your control over selling your house. 
3. Professional marketing of your property: Under exclusive agent listing you get a detailed and systematic market breakdown of your property and the neighbouring area to figure out the best proposition for pumping up your gains.  The agent will not only put to use this mechanism but also estimate the top-notch and best use of the property to pin down the best marketing strategy.
4. Broker spending more time on the property: Exclusive listing agreement, helps the agent to invest more time and effort into understanding your property more seriously. As this business is all about commission, agents spend a great amount of time developing information on a property and market area.  Without an exclusive listing, the agent knows that another agent may try to grab the opportunity and go to the seller directly, excluding him out of the commission.  This makes it unworthy to spend time putting together all the information on an unlisted property and presenting it.
5. Complete information in the agency listing conserves time for property buyers and also their agents: When your land is listed with an able agent who has spent many hours involved himself in understanding every nook and corner of the property and the motives of the seller and then creating a detailed information package, it saves the buyer’s agent a huge amount of time. It also strengthens confidence that the information is precise and dependable. 

Important clauses and provisions of the agreement

No two exclusive agent listing agreements look exactly the same; however, there are some basic rules that every principal-agent contract should adhere to. 

Here are the basic constituents to be included: 

1. The names, addresses and other such contact information of both parties
2. Time duration: The duration of the listing period including the start and end dates
3. The listing price of the said property
4. The type of listing: Exclusive right to sell, open listing, exclusive agent listing
5. Terms of commission: About compensating the agent and other terms and conditions that could change their final commission amount.
6. These conditions are open to be negotiated to fit the specific and particular needs of the seller and agent.

Registration of the agreement

Every agent who gets registered according to the provisions under this statute is provided with a registration number by the concerned authority and the number issued by the authority needs to be referred by broker in every purchase or sale transaction facilitated by him under the compliance of this act. The registration identity of the agent is valid for a particular period of time as prescribed under the act, once the time ends then the agent needs to apply again to the appropriate authority for renewal of registration number on payment of prescribed fee with the particular period of time prescribed under the statute.
When a registration number is granted to any agent who has applied under this act and has later committed any fraud in any service provided by him opposing the rules and regulation of the act or there might be a situation that if any of the agent is granted registration number and later the authority is satisfied that the registration is taken through the medium of fraud or misrepresentation than the appropriate authority can cancel such registration which has come to their light and shall be suspended.

Implications of not getting into the agreement

• Agents will not give importance towards the selling of the said property, if they know that there is no competition for the amount of commission.
• The agent will not make any effort to get hold of the best possible price, as they will have ample time to make the sale of the property.
• The agent will not search for buyers with quality who are really interested and able to meet the price expectations of the seller.
• The agent will not be in a position to design an advertising and marketing strategy that positively promotes the property.
• To reach the best price, agents need to make use of all their securable resources to make sure the property is projected well.
• The agents will not advise the optimal time for open inspections.
• Agents will not do all the required tasks to make the sale of the property.
• The owner himself will have to put in all the efforts and search for suitable buyers.
• It will be a strenuous task and will lead to confusion.

Case laws

In the case of Khursheed Alam v. Asa Ram, AIR 1933 Lah 784 the issue that had arisen was regarding the reasonable amount of payment that was needed to be given to the agent by the principal who appointed him. In this scenario, the plaintiff was appointed as a broker by the defendant. He was asked to sell the property situated in Lahore to anyone and was guaranteed commission for the same task. The defendant had asked him to find out another customer for the sale of another land. In the meantime, the plaintiff sold his land to his brother. The defendant then refused to give commission to the plaintiff as he thought the plaintiff would purchase land for himself. The court finally held that if the second customer was plaintiff’s sibling it doesn’t imply that plaintiff was entitled to compensation and in the case of not having written a contract he would get proper compensation.

In such an other case of Vasanji Modiji v. Karsondas Tejpal, AIR 1928 Bom 270 a similar issue had arisen regarding the temperate amount of remuneration. The plaintiff was employed by the defendant as an agent for the mortgage of three different properties of the defendant. Despite negotiating done by the bank for the forty percent of the said value of property, the plaintiff had failed to negotiate the same with the defendant. After three months, the defendant again borrowed through another broker, Rs. 110000 from the same bank on a mortgage of one of his properties. 

In the exact manner, in the case of Hindustan Antibiotics Ltd v. Kohli Medical Stores, AIHC 2630 (MP) the defendant entered into a contract with the plaintiff for the supply of goods produced by the defendant. The plaintiff was entitled for commission as per the conditions. Later on out of the entire commission that was to be given, Rs. 38,073 was not paid to the plaintiff by the defendant. The court held that due to absence of any agreement of interest, the plaintiff had to be paid a reasonable interest of 6%.

Conclusion

 An exclusive listing agreement creates a path for both the seller and the agent to collaborate more effectively and efficiently towards reaching their final sale goal. This set up can be much better than a seller or mass listing agent trying to handle an already overflowing load of work.

All in all, there are many merits that an exclusive agent listing provides you. An agent will make use of every marketing tool available to sell your property victoriously. Agents not only spend a lot of time on your listing but all of the high technological resources cost a lot and even low tech utilities cost thousands of dollars.

References

1. www.casemine.com
2. www.mondaq.com
3. www.legalservicesindia.com
4. www.investopedia.com
5. www.investmentreality.com

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