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Information on exclusivity agreements and why (or why not) to sign them

Information on exclusivity agreements and why (or why not) to sign them

An exclusivity agreement is an agreement between two (or more) parties to purchase something solely from that specified seller. It does not require a law degree to realize that when you sign a document of this nature it comes with some inherent risks. Therefore it is the responsibility of the signer to understand just what it is he or she is giving up for this 'right'. Now, in some instances signing an exclusive agreement is sensible - but for the most part it is not.

So, why shouldn't you sign an exclusivity agreement?

Why shouldn't you sign an exclusivity agreement, - say to work with a single real estate agent? Well, most importantly it prevents you from pursuing other opportunities. Too, companies that require exclusivity agreements aren't doing so at any risk to them for the most part. They generally do not offer any incentives to get a client to sign on the dotted line. There are also legal implications and obligations that accompany the contract if the agent or agency behaves in a corrupt manner or does not otherwise behave ethically.

Many listing agreements give the agent the exclusive right to sell the listed property

Even so, many real estate listing agreements give the agent the exclusive right to sell the listed property. It strengthens the standing for the agent while locking the seller into the competency of a single representative - which may be good or bad.

There are certainly vocal arguments against buyers signing these agreements. Savvy property buyers have come to the point that they see the real estate agent as a facilitator, it is only the insecure real estate agent that seems to insist on these exclusivity contracts anymore.

Many first time home buyers will fall for signing an exclusivity contract

Usually it is the first-time home buyer who may be naive enough to sign this type of agreement but the seasoned real estate buyer understands how to do many of the tasks that the real estate agent would do - such as researching the market and identifying properties of interest. It is then and only then that many buyers will contact an agent and set up appointments to view a property or involve the realtor in the coordination of closing on a home.

When the buyer and agent start their collaboration they normally enter into a contract

When a buyer and agent begin their collaboration they usually enter into a contract that will legally define the relationship. It explains the responsibilities of each party. There are three basic types of buy-broker contracts that include non-exclusive not-for-compensation contracts, non-exclusive right to represent contracts and exclusive right to represent contracts. It is this final type that the buyer should generally avoid - the drawbacks totally outweigh any benefits.

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About the Editor

Arun Kumar

The old adage is that hindsight is always 20/20. Seven years ago, I embarked on a journey as a serial entrepreneur. I built my very first business in India and later expanded to the US. In weathering the ups and downs of several business brands, I discovered my passion for the digital platform.

I could see a huge opportunity to connect home buyers and sellers with quality information and service providers. That led to the birth and co-founding of

Arun Kumar
Co-Founder of HFMA

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