Option Listing
Definition and meaning of Option Listing in real estate.
An option listing is a variation of a listing agreement that contains a clause giving the listing broker the right to purchase the property themselves at a predetermined price. This agreement combines a standard listing contract with an option to purchase.
In more detail
Because this arrangement creates a potential conflict of interest, it is subject to strict ethical guidelines and legal regulations in most states. A broker could theoretically convince a seller to set a low listing price, then buy the property themselves and resell it for a profit.
To prevent this, brokers are typically required to disclose their intent to purchase, reveal their potential profit, and obtain the written consent of the seller. This listing model is sometimes used when a seller needs a guaranteed sale by a specific date and is willing to let the broker buy the home if no other buyers are found.
Key facts
| Category | Buying & Selling |
|---|---|
| Watch out for | Potential conflict of interest for the broker |
| Required by | Full written disclosure and consent from the seller |
| Regulated by | State real estate commissions and ethical codes |
A homeowner signs a contract with a broker that lists the house for sale and includes an option listing clause allowing the broker to purchase the home themselves if it does not sell within a typical ninety-day listing period.
Frequently asked questions
Why would a seller agree to an option listing?
A seller might agree to this if they need a guaranteed exit strategy, such as when they are relocating quickly and want the assurance that the broker will buy the home if it fails to sell on the open market.
Are option listings legal in all states?
While legal in many states, they are highly scrutinized and heavily regulated to ensure brokers do not take advantage of sellers, and some local MLS platforms ban them entirely.