An open listing is a non-exclusive authorization for brokers to find a buyer for your property. You can give as many brokers as you wish an open listing on your house. You're obligated to pay a commission to the first broker who fulfills either of the following conditions:
- Finds a buyer ready, willing, and able to enter into a contract that meets the exact terms of your listing.
- Procures the buyer whose offer you ultimately accept. If you find the buyer by yourself, you don't have to pay any of the brokers. And you can cancel an open listing any time you want without penalty.
If this arrangement sounds wonderful, think again. Smart sellers won't give brokers an open listing and good brokers won't accept them. Here's why:
- Limited advertising and marketing of your property: In many places, depending on the local rules, brokers can't put open listings into the multiple listing service (MLS). This restriction is a big disadvantage. The MLS is a highly effective tool brokers use to internally advertise listings to other MLS members who may have buyers for their listings. Nor do brokers produce fancy brochures or put big classified ads in the newspaper to tell the world about an open listing.
- Brokers only advertise or market open listings as a last resort: They disdainfully refer to open listings as pocket listings because brokers tuck them away "in their pocket" passively waiting for a buyer to come along.
- No control: If you give 10 brokers an open listing on your house, you'll end up doing work that a listing agent normally handles. All the agents will call you to coordinate showings of your property. You must prepare the house for showings. You also have to debrief agents after showings to find out if you're getting an offer and, if not, find out why not. If you like chaos, you'll like an open listing.
- Your broker is your competitor: Because you don't have to pay any broker if you sell the house yourself, brokers see you as a competitor. This adversarial relationship encourages brokers to work for buyers, not you.
An open listing is barely better than no listing at all. Unless you have an extremely compelling reason that you absolutely, positively must list your house with a bevy of brokers, you'll be better served with an exclusive listing.