Open listing

Key Takeaways

• An open listing is nonexclusive, so a seller may sign one with several firms at the same time and may still sell the property without any of them.
• Under an open listing, only the firm that produces the buyer and is the procuring cause of the sale earns a commission.
• If the seller finds the buyer without a broker, no commission is owed under an open listing.
• In Washington an agreement employing a broker to sell real estate for a commission is void unless it is in writing and signed by the party to be charged, under RCW 19.36.010(5).

What It Means

An open listing is a nonexclusive agreement between a seller and a real estate firm. The seller may sign one with several firms at once and keeps the right to sell the property without a broker at all. Only one firm gets paid, and only if it earns the fee by bringing a Ready Willing And Able Buyer and being the Procuring Cause of the sale, meaning the reason a buyer was led to that particular property and the sale closed. A firm that advertised the property for months but had nothing to do with the buyer who closed collects nothing. If the seller finds the buyer, no firm collects.

That structure sits at the opposite end of the scale from an exclusive right to sell Listing Agreement, where the listing firm is paid on any sale during the term no matter who found the buyer. It also differs from a Net Listing, which is defined by how the broker is paid rather than by how many firms the seller may hire. Open listings turn up most often on land, investment property, and owner-marketed sales, where the seller wants to keep working the deal personally and is willing to trade marketing commitment for flexibility.

How It Works in Washington

Washington adds a writing requirement that catches anyone treating an open listing as a casual understanding. RCW 19.36.010(5) makes an agreement authorizing or employing an agent or broker to sell or purchase real estate for compensation or a commission void unless the agreement, or some note or memorandum of it, is in writing and signed by the party to be charged. A handshake open listing gives the firm that produced the buyer no enforceable claim to a commission.

Chapter 18.86 RCW then sets the paperwork. RCW 18.86.020(2)(a) requires a firm to enter into a services agreement with its principal before, or as soon as reasonably practical after, its appointed broker starts rendering brokerage services, and RCW 18.86.020(2)(b)(iii) requires that agreement to state whether the agency relationship is exclusive or nonexclusive. An open listing is the nonexclusive answer to that question, put in writing. RCW 18.86.080(7) closes the loop on the money: to receive compensation from any party or firm, the firm must have a services agreement setting out the terms of compensation, including the amount the principal agrees to pay and any consent to sharing compensation between firms.

Example

Gail Okada owns 20 acres outside Ellensburg and does not want to tie the land to one firm. She signs open listings with three firms, each one a written, nonexclusive services agreement at 3 percent, and prices the parcel at $400,000. Two of the firms run ads and get nowhere. A broker at the third firm, Tom Reyes, calls a builder he has worked with before, walks the parcel with him twice, and writes the offer.

The builder closes at $392,000. Tom's firm is the procuring cause, so it earns 3 percent, or $11,760. The other two firms earn nothing, even though both spent money marketing the land. Change one fact and the result changes: if Gail's neighbor had knocked on her door and bought the parcel directly, she would owe no commission to anyone, because no firm produced that buyer.

Common Mistakes and Exam Traps

• An open listing and an exclusive agency listing both let the seller sell without owing a commission, but an exclusive agency listing employs one firm while an open listing may be given to several at once.
• An exclusive right to sell listing pays the listing firm on any sale during the term, including a sale the seller arranged. That is the mirror image of an open listing.
• Open does not mean oral. Washington requires a signed writing before a commission agreement can be enforced against the seller.
• Procuring cause turns on the chain of events that produced the buyer who closed, not on which firm advertised the most or showed the property first.