When I was actively listing homes for sale (that was only a few days ago since I just recently made a switch) I offered my clients what is commonly known as an "Easy Exit Listing Agreement." Basically, although each of my listings was taken for a full year, I would allow my sellers to cancel at any time with a 15 day notice - and with no cancellation fee.
I rarely had sellers cancel a listing, so I always felt confident in offering them an easy way out. I believe that in many cases I was the chosen agent in part because the sellers didn't have to worry about being locked into a long contract. I understand that there can be a bit of fear on the part of the seller who is entrusting an agent to handle one of their largest financial transactions; what if that agent turned out to be less-than-competent? It is my opinion that as an agent, when you are confident about the level of service you provide, offering an Easy Exit Listing Agreement is no big deal.
As the market started to decline, there was quite a bit of talk around town among agents about the length of listing agreements. Agents were being asked by sellers to take 90 day or 180 day listing agreements and hated feeling under the gun as market times crept up. Many companies started adding cancellation fees (some as high as $1500) to their listing agreements to recoup some of the marketing costs already spent on the listing in the event of cancellation. I don't agree or disagree with the idea of a cancellation fee, except when agents have adopted the strategy that real estate is a numbers game.
I never thought of real estate as a numbers game. I told my potential sellers 
what they needed to hear instead of what they wanted to hear, and I encouraged them to properly prepare and price their homes for sale. If they were unwilling to work with me as a team, then I wouldn't take the listing. I'd rather have 10 listings I could sell, than 20 listings with only 10 of having the potential to sell. But some agents feel differently. They take on those 20 listings, knowing full well that 10 of them will eventually cancel or expire. They do not offer an Easy Exit Listing Agreement, and they charge a cancellation fee as well. One agent actually boasted about how he "earned" nearly $7000 over the year in cancellation fees alone! Yikes.
There isn't an agent out there that hasn't been burned at one time or another. I've worked my tail off and spent a lot of money promoting listings that later turned into a rental instead. I've had sellers decide not to move at all. I've spend many advertising dollars that I never recouped. It doesn't happen very often, but it does happen in this business. It is part of the risk/reward of earning a commission based income. But it seems to me that some agents out there are using the cancellation fee as simply another way to make money in this business. Do desperate times = desperate agents?
It makes me cringe. What about you? Are you seeing more cancellation fees in your marketplace? How do you feel about them?
Kelly, I have not seen them in NJ at all. Did you make the switch to working solely with buyers?
Never done it. I have always told every Seller that if they want out of the listing all they need to do is call. No need to get the Broker's permission, no need to pay a cancellation fee. Just call me and I will terminate the contract and you are free to go on to greener pastures.
I further follow up this with the following statement. " I can offer this without reservation as No one ever calls to cancel. Why? Because I deliver on my promises ."
You know, that really doesn't seem to be a bad idea. We out spend our competition when marketing our listings. The reason is to sell the property quickly for top dollar. We've never had a listing cancel, but if it were to happen we would be out a bunch of money.
I've used that same guarantee off and on, but need to be consistent about it. As far as cancellation fees, I've never heard of anyone in my market using them and would never think to charge a seller for it. If they don't want to stay with me, then I cut them loose with all of my good wishes.
ROBERT: I'm working as a referral agent now.
HERB: I think it shows confidence in your skills as a listing agent. Good for you!
ROB & JEANNIE: It is definitely part of the risk of being a listing agent. But since you've never had a listing cancel, you can offer this guarantee without worry and give sellers piece of mind and a warm fuzzy feeling about you.
LISA: I was wondering if other markets are seeing cancellation fees and glad to see that yours is not. It will be interesting to see if others weigh in and what the opinions are from market to market.
Kelly, There rare many companies that charge cancelation fees in my area. I don't. In fact I still offer 45 day listing agreements. I pitch it as a time to earn their business. They always extend... forever... after the first 45 days.
Now IF I had many agenst working under me and I was spending money on advertsing as their broker I may very well enforce a cancelation fee. I certainly have to think about it.
Kelly - I never had a cancel fee but I do like the idea. $1500 is a bit extreme though. Hey, maybe we should have fees charged to the seller for every month a house is on the market without a price reduction!
BRYANT: I'm not against the idea of a cancellation fee. However, I've heard agents say, "I took a listing today...it will never sell...at least there's a cancellation fee!" This is just unethical, in my opinion. I like your idea of a shorter listing time to earn their trust and their business. It's brilliant!
CAROL: It would probably be a good idea to get pre-signed price reductions from sellers at the time the listing agreement is signed. I know many agents who have done this with listings that are starting out higher than they should, so the agents are saying, "okay, we'll try your price for 10 days and then if we don't get showings, we'll reduce to $X".