The Importance of the Exclusive Listing
Suppose you own a clothing store on Main Street, and a friend approaches you one day asking you to sell her blouses for $100 each. The shirts seem overpriced, but she says you will earn a commission on each sale. Then she tells you she’s already made the same deal with six other clothing stores in town. You will be competing with all of them to sell the same merchandise. Do you say yes or no to the deal?
I hope you say no! Your main goal in sales is to turn your inventory into cash. If you are competing with everyone else in town to sell the same merchandise, chances are slim you will come out a winner. You’re much better off if you are the exclusive marketer of that particular product.
My husband, Jack, and I use this example to explain the importance of having an exclusive listing. We want to be the only real estate agents with the legal right to sell a piece of property. We need an agreement between us and the seller stating that we have the sole right to market the home and are guaranteed a commission when the property sells.
Some property owners are leery of listing a property exclusively with one realtor. Instead, they want to sell it as an “open listing” because they worry about missing an offer from another agent or they want to sell the property as “For Sale By Owner” (or “FSBO”, pronounced “fizz-bo”) to avoid paying any commission. In reality, though, exclusive listings often result in faster sales for more money. Here are four good reasons why this happens.
Lack of experience – The average homeowner has no experience selling anything worth more than a million dollars. There can be hundreds of details involved in listing a house, from timing to renovations to staging to marketing to photography. The list goes on until you reach the most critical decision: the asking price.
Most homeowners cannot read the market like a seasoned professional and arrive at just the right asking price. We find that most FSBOs price their house too high and then end up slashing that number when they realize their mistake, costing them thousands of dollars.
And if you are a homeowner trying to sell the house yourself, how do you market it? Only agents can list properties on a Multiple Listing Service (MLS), the primary, private database where realtors look for properties. Since realtors are constantly sharing information on an MLS, they reach many more potential buyers.
Panic when chaos sets in – An open listing allows many agents to list and show the house, each one of them trying to get the sale. There can be different prices, different hours for showings, and different agents showing it simultaneously. We once saw a house with more than 20 agents trying to show it. It was like a three-ring circus, and the homeowner was overwhelmed.
When the offers start coming in, the owner soon realizes they are in over their head!
“I’ll give you $1.9 million, with a conventional loan, an appraisal, and contingencies.”
“We can’t offer more than $1.7 million, but we can put 50% down. How’s that sound?”
“We can do $1.6 million in cash. Let me know by this afternoon.”
“We just accepted an offer on our house and can give you $1.75 million guaranteed in ten days with no contingencies.”
Without the help of an experienced real estate agent, most sellers have no idea how to tell which offer is the best one for them. They need the sound advice that only experience can offer.
This type of clown show also raises serious legal issues. In New York State, if there is no signed agreement between a buyer and an agent, the default assumption is that the agent represents the seller. With open listings, though, agents often ignore that legality and behave as though they represent the buyer in hopes of closing the deal.
Underestimating the benefit of a loyal agent – Most real estate agents deal with exclusive housing inventory and clients we know and trust. We spend hours on the phone or emailing or texting, or conferencing with clients. We are available 24/7 to answer questions. We spend money on photography, videography, and marketing because those things help us earn a profit when a property sells. We are laser-focused on selling a piece of property for the best price possible in the shortest time, and our loyal clients keep coming back time and again.
When a seller decides to sell their house on their own, that FSBO listing is like the blouse in the clothing store. Where’s the benefit to us in sinking a ton of time and resources into a potentially overpriced property we may or may not be able to sell? We may put some token effort into selling the property if we have the time, but we do that at the expense of our other listings.
Buyers prefer exclusive listings – Experienced buyers feel more confident making an offer on a property if they know an agent has an exclusive listing. It tells them that a professional real estate expert will be there for them when issues come up. And issues always come up!
Exclusive listings save money – This really is the bottom line. Most people listing a property as FSBO may think they are saving money. They forget the importance and expense of marketing and listing, photography, staging, closing costs, commission to the buyer’s agent, taxes, attorney’s fees, and more. Some of these costs may be included for free in an exclusive agreement with an agent. If they aren’t, the homeowner pays for them.
A FSBO listing may be able to avoid a percentage of the sale that would have gone to the listing agent, but according to the National Association of Realtors, FSBO homes sell, on average, for 11% less than homes sold by agents.
You trust your car repair and your dry cleaning, and your appliance maintenance to professionals. You ask doctors for medical advice and lawyers for legal advice. So why would you risk the most expensive and important asset you own to someone without experience?
Let a reputable broker do what they do best. They can sell your house for the best price quickly without the stress involved in a private sale or a three ring open listing circus. Buyers and sellers both want to complete a deal with goodwill and good fortune. An experienced and professional real estate broker can help buyers and sellers reach that goal.