This week I was burned badly by an exception I made to my personal rule of having all sellers I work with sign an exclusive listing agreement to market and sell their property. The person who burned me was a long-time family friend who made an honest mistake that ended up costing her a deal and me about $12,000 in potential commissions. This disappointment has served to reinforce my conviction about exclusive listings.
An exclusive listing means you sign a legally binding agreement with one brokerage to market and sell your real estate at a set price for a given period of time. There are other listing arrangements that are available to brokers and land owners, and a seller or broker is not obligated to use any one in particular. Here are a few of the reasons why I prefer and practice the exclusive listing arrangement.
- It brings clarity to the transaction. A document that is signed and dated by all parties spells out exactly what the terms of the deal will be. Not only does it solidify a sales price and terms, but it defines the services the broker will provide to the seller and the responsibilities the seller has to the broker. If any party to the deal forgets what the agreement was, they have a copy that they can go to for clarity.
- It commits the parties to each other and to the deal. When a seller is not motivated to sell, in my opinion it is usually better not to put a rural property on the open market. When you put it out there “just to see”, then you run the risk of stigmatizing the property when it does not sell in a reasonable timeframe. So when a seller signs a listing, they are generally agreeing to sell the property if they can receive a favorable price and terms. Not only does the seller make a commitment in an exclusive listing agreement, but a broker commits to provide fiduciary duties to a seller. Selling land can be fraught with pitfalls, and a skilled broker can provide advice to help a seller navigate those challenges. When a seller allows multiple brokers to advertise their property for sale, then no one is officially looking out for the best interest of the seller. That means you potentially have a group of brokers trying to put a deal together by whatever means necessary. This can leave a seller exposed to liability and at a disadvantaged negotiating position because the brokers have knowledge about their situation with no commitment to use that information in the best interest of the seller.
- It protects my compensation. One of the most important principles of business is that you have to know how you are going to get paid for the work you do. I have a proven system of marketing rural land that delivers results for my clients. That system involves me laying out a significant amount of money to advertise and show tracts of land. It is not prudent for me to outlay all of that money with no reasonable expectation of return on my investment. In my opinion, a land broker who does not routinely require signed listing agreements shows me that they do not place a high value on the services they provide. Have you ever met a doctor, attorney, or other professional who provides a specialized service that does not require payment for services rendered? Probably not.
Let me stress again that this is not the only way a land owner can work with a broker to sell their property. For my personal business, I find it prudent for both parties to sign a contract that outlines the relationship from day one. I believe in personal integrity and operating with “my word as my bond”, however it is too easy for either party to misremember or crawfish if negotiations get heated.
The best analogy I have for signing a listing agreement is the day I was married. My beautiful bride and I stood on stage in front of God and everyone we knew and took specific vows to one another. Even when we made such solemn oaths in public, the state of Alabama still made us sign a legally binding marriage license. The same is true when I list a piece of land. We are going to make a commitment to each other, and the proof is written in ink on a contract. It keeps everything clean and equitable, making successful transactions more pleasant and run smoothly for all parties.
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