Exclusive listing agreement

Definition

The contract making one broker the only one who can sell a business.

Why It Matters

It is the document a seller signs and a buyer never sees, and it sets three things that shape the whole process. The commission, how long the exclusivity runs, and the tail period. During the tail the broker is still owed a fee if the business sells to somebody they introduced. For a buyer, the tail is the clause worth knowing about, because it is why a broker who showed you a business two years ago may still be owed on it. For a seller, the length is the term to negotiate hardest, since an underperforming listing is otherwise locked up for its full run.

In numbers: An 8% success fee on a $4M sale is $320,000, and an exclusive owes it no matter who found the buyer.