Tuesday, January 15, 2008

Ask the Expert - Exclusive Listing = Good Deal?

Question: I want to sell my home and interviewed a couple of agents. One of them said he would list my home as an "exclusive" and charge a lower commission. I'm confused as to what this means. This seems to be a good idea since he says it will save me a lot of money in commissions. Is this as good a deal as it looks?

Answer: You are wise to be skeptical. Remember the old adage "if it looks too good to be true, it probably is"? That applies here. Contrary to what you may think, an agent's primary job is not to market your home to potential buyers. His job is to market your home to other agents! Why? Every agent has a "stable" of clients. At any moment in time, I have about a hundred qualified buyers with whom I am actively working who may be interested in your home. And if I got your listing, I certainly would advertise the home to them. But each agent also has their "stable". So when I interest an agent in your home, I am, in essence, contacting all her clients! When an agent lists a home on the multiple listing service, he is advertising to all other agents that the home is available.

Sometimes an agent will offer to cut his commission in exchange for being the only agent who can sell the home. As the seller, you see a dollar savings in the commission. What you don't see is how expensive this "savings" can be. First of all, it may take longer to sell you home since you have severely cut the numbers of potential buyers. And because the home is not being allowed to respond to market forces (i.e. the greatest number of buyers looking at the home), you will never know if the sales price you ultimately settled for is the best you could have gotten. The more agents involved, the more likely you are to get your highest and best offer. So if you agree to this agent's suggestion of an "exclusive", you may be invoking another old saying - "penny wise and pound foolish"!

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