In an exclusive listing, only one broker can be hired. The listing belongs to that broker "exclusively". Because only one broker can be hired, there must be a specific termination date, for example, "Not 90 days from the completion of construction, rather 90 days from signing."
If two exclusive listings are signed, the seller could be liable for two commissions. This is stated on the contract.
Remember that in a listing there should only one commission. The seller hires the broker to find a buyer. People think there are two commissions, one to the broker of the seller and one to the broker of the buyer; some people think there are four if you include the agents. But in actuality, there is only one, the broker of the seller. The broker of the seller gets the commission and then shares that one commission with the broker of the buyer for helping him or her find a buyer. The way that commission is divided must be disclosed to the seller. The brokers will then share that commission with the agent who facilitated the transaction on their behalf.
Exclusive Authorization and Right to Sell Listing
An exclusive authorization and right to sell listing is most commonly referred to as a "listing". When you see a one sign in front of the house with the broker's name on it on a typical Sunday afternoon, it is more than likely an exclusive authorization and right to sell listing.
The key element of this type of listing is that regardless of how a buyer comes to the conclusion that they want to buy the house, the broker is getting paid a commission. This helps avoid any potential conflict between the broker who is trying to solicit a buyer and the seller who hired them to list the property. The owner agrees to sell the property through the listing broker.
To put in more technical terms, the listing broker does not need to show that he or she is the "procuring cause" of the buyer.
Exclusive Agency Listing
In an exclusive agency listing, much like the exclusive right to sell listing, the seller would only work with one broker. However, there is one huge difference. In a exclusive agency listing, if the owner sells it themselves, the agent gets no commission. This means that the agent would have to prove that they were the reason the buyer is there to buy the house.
In terms of the real estate exam, "The agent would have to prove they were the procuring cause of the buyer."
Imagine there was a broker's For Sale sign in the front yard of the house, and right next to it there was a For Sale by Owner sign. Thinking about that image makes you realize why agents do not use an exclusive agency listing. If somebody is buying the house, the last thing you want to do is fight with the seller about who procured the buyer. Remember, if the seller can prove they brought them there, under an exclusive agency listing they will pay you nothing!
Imagine if a seller wanted to sell a house and a broker came up to him and said, "If I bring a buyer, will you pay me a commission?" and the seller said, "Yes, of course!" Then, 10 minutes later, another broker came up to him and said, "If I bring a buyer, will you pay me a commission?" and the seller said, "Yes, of course!" Then this kept happening over and over again, and the seller agreed to the same deal with all of the brokers! Most probably they would be using an open listing.
Does not sound like a bad thing, right? Whoever brings the buyer gets paid for it, as long as they are the principal in the transaction or have an active real estate license.
The problem with this is why would you, as a broker, spend time and money advertising somebody's house to find a buyer if there is a good chance somebody else will get paid and you will get nothing because the listing is not exclusive to anybody? You as the broker would have to prove that you were the procuring cause of the buyer. This can be very tricky to do. Imagine if every broker's sign was in the front yard. How would you determine which broker's sign drew that buyer in? This is just one of many complications with this type of listing, which is why you do not see it in a standard residential sale. However, there are situations where this type of listing is appropriate.
For example, a developer/builder may enter into open listings with brokerage firms in the area where they bring their buyers into the subdivision, and if their buyer buys, then they get paid. This would make it a non-exclusive listing, as it is not exclusive to any one broker.
A net listing is when an agent agrees to sell an owner's property for a set minimum price. Anything over the minimum price belongs to the agent as commission. Thus, in a net listing, there's no stipulated selling price and no stipulated commission.
For example, a property owner wants to obtain $500,000 for their property. If the agent sells it for $550,000, they make $50,000. Sounds great, right? The problem is that if the agent sells it for $500,000, the agent makes nothing.
This is why the agent would have to manipulate the list price in order to earn a commission, making it illegal in most states.