There are scores of listings languishing on the market here in the greater Phoenix area. Thousands upon thousands of them. Many are overpriced. Many are in less than ideal condition. Many more are simply “okay” houses with “okay” prices. That won’t cut it in today’s hyper competitive environment. While these home selling sins are somewhat pardonable due to financial constraints, I still run across the occasional animal that should have gone extinct right next to the dodo bird … or 2006, at the latest.
I’m talking about the “Exclusive Listing.”
In better times for sellers, the exclusive listing is often wielded by a listing agent who wants to keep the whole commission pie to him/herself. Knowing that a property often sold before a sign was even planted in the yard, more and more agents began to horde their listings between 2004-2006. They didn’t want to pay a buyer’s agent because buyers were a dime a dozen.
You also had the sellers who thought they could save a few bucks by negotiating a slightly reduced commission by employing one agent to handle the transaction, and cutting out the perceived middle man (buyer’s agent). This was folly, of course, because it greatly reduced the pool of buyers coming through the front door. Reduced demand from potential suitors equals a reduced sales price. But even though the practice was of the “penny wise, pound foolish” variety, many such listings would still sell in the frenzy that defined 2005 Scottsdale.
Now it’s 2008. Instead of buyers mugging each other in the mad scramble to submit an offer on a property, any property, they are turning their noses up at the most pristine and reasonably priced homes on the market. Sellers are offering closing cost assistance, private financing, cars, vacations, agent bonuses and an evening with their wives to entice leery buyers … okay, maybe not the last one.
This being said, it was downright confounding when I occasioned upon one such relic from the glory days. Surfing a few websites this morning for properties that may not have hit the MLS yet, I stumbled across something that looked like a perfect fit for my client. As I was reading the description, I began to get excited. Mid-century modern construction with a contemporary flair in central Phoenix? This might be the ticket! Scrolling further down the page, I saw it.
“Exclusive Listing – Not in MLS!”
My initial ire faded to wonder. I stared at the antiquated words on my screen as I would the wildlife in the Galapagos Islands. Afraid to move for fear of spooking the endangered little creature, I picked up my phone ever so slowly. I dialed the listing agent. In hushed tones, I left a message requesting further information, and punctuated the call with the words, “You’re not really keeping a listing in-house in this market, are you???” My next three calls went to associates. I couldn’t wait to tell them that I had stumbled upon the Real Estate equivalent of a unicorn.
They do exist!
As I wait for the return phone call which will never come (prompting me to put the agent on speed dial), I sit transfixed by the sheer audacity. I’m dying to know if this exclusivity was the brainchild of the agent or the client.
“Hey, I’ve got an idea! Let’s make a property even more impossible to sell in this market!”
“Sounds great!”
“Just think of the money I’ll save!”
“Me too!”
Tell you what, fellas. Don't take all of those "savings" to the casino until you actually produce a sale for market value. Of course, if you are fortunate enough to procure a buyer, how will you know if you attain market value? You haven't tapped into the largest pool of buyers to test demand.
I have seen a few harebrained schemes in my day, but the exclusive listing is right up there with the best of them. Its only rival is the "home viewing allowed upon accepted contract only" listing.
Good grief. The things people do to themselves.
The Exclusive is surely a relic.
We have a team of agents in Potomac MD that list $1,500,000-$4,000,000 homes and advertise them only by direct mail. I got on their mail list when I sold a $5M home in the neighborhood. I get "private" e-mail when they have a listing.
I can imagine the presentation to the seller.
I still believe that selling real estate is in the numbers. The more prospective buyers that see the house, the more likely you'll sell it.
The only worse type of listing is the one that the listing agent keeps exclusive to themselves, but does not inform the seller that this is their modus operandi. In an appointment only market like mine, the home sits. Low and behold, it finally moves when the listing agent has a buyer. How can you sell a home without the biggest pool of prospective buyers seeing it? Sellers, pay attention and make sure you know what is really happening with your home.
First - Glad I caught your blog on the day you wrote it not three days later. I always seem to be a little behind...oh, well.
Second - seems like a not so smart move on the seller and agent's part in this market. I would assume the house is a real gem and one of a kind, otherwise it may take offering a night with the wife to get it sold. If not, good luck.
Paul, There was one home in my city that was an exclusive listing as well. It sat on the market for one year and now is been offered for rent!!!!!! I understand if the seller is trying to save all the $$$ the can, but sometimes spending a few more $$$ can bring greater results.
Paul I would think in this market an exclusive listing would be a thing of the past. I wonder if their Sellers are aware of their limited exposure to the market?
Lenn, it is my understanding the MRIS requires all listing to be posted within 48 hours unless the Seller requests otherwise. How do the Potomac, MD agents get around this? Unless of course they aren't members of the MRIS and have Seller approval.
Paul, exclusive listings remind me of Appointment Only in the MLS or the rider on the sign. Can we think up more ways to keep people away from showings? How about take the For Sale sign down? None of this makes any sense to me. Hey but I have rocket scientist background and usually like things to make sense. A people business. That's why it is so wacky.
I am still trying to get over "offering of the wives"... :-)
I can't remember the last time I saw an exclusive listing, but I do remember who had them...the same agents that put them in MLS with 1 photo, no description and leave the showings and open houses to the sellers. Yeah, that's a bargain.
That's definitely in the seller's best interest...NOT!
Kelly - Sure it is, provided that the seller doesn't really want to sell, nor care about commanding full market value. He might just be a sport who wants his Realtor to make as much money as possible.
I loved your copy: "I stared at the antiquated words on my screen as I would the wildlife in the Galapagos Islands." great visuals!
Mary - Thanks. The exclusive listing should be dissected and studied for clues about our past. Almost like an evolutionary hiccup, it has all but died an ignoble death in these parts. There is just the occasional holdout that doesn't know that its day has passed.
I have seen an exclusive listing one time in the past 5 years. The buyer was strong in her faith, and the listing agent was strong in her faith, and they prayed together on a regular basis for a buyer.
Me...I would have stuck it in the MLS and prayed less, but that is me.
Melina - I am with you on that. I don't know about you, but if I am stepping into the ring, I'd rather not do so with one arm tied behind my back. When our market was super hot, it was common practice here. Even at the time I thought it to be a losing propostion. Sure a sale would be produced, but not at the highest and best terms possible through full market exposure. I at least understood the mindset, though. To try it in today's market? Pass the cyanide, please.
Yep... that makes about as much sense as the 50 or so active listings in our MLS right now with snow covered front lawns...that, of course, being the only photo in the MLS. Pure marketing genius at work here. Wasn't this market supposed to weed these folks out of RE and back into paper hats?
Jesse - Good to see you around, big fella! It hasn't been the same without you. As to your question, I think the paper hats are filling up one pseudo-agent at at time, albeit still too slowly for my liking. Makes you wonder if this is the agent's only business of the year and he's gonna milk it for all the commission it is worth. Or he's just a big dummy. One or the other ;)
Paul, some Realtors are really starting to scare me. What were they thinking?
Carolyn: Beats me. I'd love to ask that question of the agent, but I have gotten no response yet after a full business day and two voicemails. Get the impression that I am being avoided despite the proclamation that I have a buyer whom I believe would be perfect for the property? I wonder if the seller has any idea that there is a qualified buyer who is being kept from seeing the property? Craziness.
It could be a combination of both - his only business of the year and a custom fitted dunce cap. I talked to an agent yesterday that hasn't had a closing since October '07. Not only would I be broke as can be... I would probably be in debtors prison if I were in their shoes. I would also probably be single... the boss does like her shiny baubles.
No closings since October??? Here I've been lamenting the fact that I haven't sold anything in three weeks! Sounds like it's time for your friend to move on, Jesse.
Agreed... but she has 27 listings.... and not a single one of them is less than 20% over market value.
Fluck
Paul - I like your analogy here. I don't know that I have come across very many exclusives EVER in my real estate career. If I saw one today, I think I might laugh in the listing agent's face, to be frank. I like the "Indecent Proposal" line that you used. Good stuff.
On another note, Jesse's agent colleague references above sounds like a plain and simple fool.
Jesse: Ah, the mass lister ... how quaint. I've never been one to take as many listings as possible, comfortable in the knowledge that some will sell and some will not. I never understood that mentality to be honest. Agents who take any listing at any price just so that a small percentage will actually stick will spend themselves into oblivion on marketing and opportunity cost in this market. Nope, not for me. I'd prefer to keep doing what I always do. List only those properties that I fully intend to sell. That means lesser inventory and more attention to detail, such as not overpricing the market by 20%.
Jason: I think the exclusive listing was more prevalent in the markets that had outrageous appreciation spikes. Not to speak for other markets, but I wouldn't be surprised if California, Nevada and Florida experienced similar phenomena at the peak of the frenzy. Not so much any more. I am selective enough over the properties I want to list right now. Cutting out the sales force is beyond ludicrous.
I don't get Exclusives at all. Even though they may be saving 3% they may lose more than 3% from lack of exposure. They may be good ONLY if you have a ready willing and able buyer at the MOMENT!!
Renee: I also think that the assumption of saving that percentage is highly optimistic as well. Without delving into specifics, I don't know too many agents who would multiply their workload to the xth power without charging more than a standard sale side. I certainly wouldn't. I'm guessing that such an agent would shave a percent or two, max, off their normal rate. I've turned such listings down not because I shun a little hard work, but because I will not list a property under terms which I think will be to the detriment of the client. Just not my style. The best argument I can provide for the power of cooperation is this. When I sell my own property, licensed agent and all, I never consider holding it off the MLS in an effort to find my own buyer. Trying to locate the buyer personally is always the goal, but cutting out the thousands of agents who have thousands of contacts in a misguided effort to save a buck is a fool's errand. Especially in today's environment.
Paul - Every now and then we still see a pocket listing - usually a very expensive estate property. It is crazy in thie msrket to limit you pool of potential buyers. You post is well written, and I loved the way your sense of humor came across.
Pam: Thank you much. I have to chuckle a bit, though, as this is as reined in as my disobedient sense of humor gets. The fun doesn't start until the internal censor goes out for a beer ;)
The equivalent in my market, a prime weekender location outside Manhattan, sellers list their properties with NYC agents (I assume for the cachet). The properties aren't listed on the MLS and therefore most local agents have no idea they're on the market.
Hi Paul, I enjoyed this post, You could have named Advanced Real Estate 101, for those that didn't get the first time. Since Brokerages opt in to using the MLS, they should actually be disbarred for carrying listing that they have no interest in sharing with the other brokerages that help keep them in business. Seems some want it both ways. An important aspect of this is that there should be within the real estate law books ( to protect the consumer ) (editorial comment: often from their own dumb decisions) a disclosure document that says they were advised against this practice since their best hope for a positive outcome will shortchanged with an exclusive listing withheld from the MLS and cooperative efforts of other brokers. We have brokerage document we use here in San Diego ( I usualy don't care much for these intrusive kinds of laws but just for the sake of having to read this disclosure would prevent many from making this poorly thought out decision. )
Paul,
I would never take that kind of listing. My seller deserves all of the exposure they can get. This should go the way of Dual Agency, sub-agency & open listings.
Hi Paul,
Great post ... I agree with you 100%, but I've been thinking more and more about this, as buyer representation becomes more and more accepted (which is great) - so I'd like to play devil's advocate.
In Massachusetts we always list using an "Exclusive Right to Sell." Then, in the MLS, we denote the buyer agent compensation (if there is a buyer agent). One of the big reasons that I need to make note of this is because many consumers (often those who turn FSBO) confuse the language and understand it as something similar to that which you have described. Ironically, many FSBOs ultimately sign an "exclusive" with and "entry only" company. (In my opinion, the best way to not sell a house and rack up days on market statistics.) It sounds like we use a slightly different language. I am sure that this difference can make it very difficult for the consumer as they discuss plans and processes with friends and family around the country.
It is interesting that in your area, you can see this type of listing in the MLS. Without going too deep here, I think that it shows that the MLS is no longer a tool for agent-to-agent data sharing, but rather agent-to-consumer (and other agent if they are quick enough). Personally, I have a real issue with the ability for a no-service company or FSBO to post on the MLS. In addition to admitted bias, I creates much more liability than most realize (due to lack of disclosure, etc.).
Back to a few scenarios that may warrant this type of listing. The first is arguable, in MA the buyer agency agreement includes a compensation line - similar to a listing agreement. This protects the agent from a pocket listing situation. At first glance, it may sound harsh. However, if a buyer agent has a contract to ensure compensation; it opens the door to more proactive buyer agent services, such as, seeking out FSBO properties, unlisted properties in desirable neighborhoods (via door knocking, phone prospecting, etc.) Unfortunately, I believe that most agents limit themselves to searching the MLS and automatic email updates. The second scenario may involve a short sale, or listing that is nearing its expiration. Sometimes, the seller truly cannot afford to reduce the price any further. In this case, when the clock is ticking, I think that removing the buyer agent compensation to effectively reduce the price and encourage an offer may be a smart move.
Based on your example, this is not the case - the seller is saving pennies to loose dollars. I had to share my thoughts because I am considering this strategy (with the seller's permission) as we near an expiration and risk moving into a short sale position. Besides, at this point, all the agents have had their shot at it.
Best regards,
Mike
You are brave. You correlate the dodo to the exclusive listing?!? I find the agents that still ply that Carnival trade more like tasmanian wolves and the sellers play the poor defenseless stellar sea cows.
Look up the quagga. Talk about an extinct animal with an identity crisis. Half horse and half zebra. It was fashionable though, matching solid colors with stripes.
Thanks for the hijack ____________!
Was that a Lenza sighting above?
Some agents make the listing effectively exclusive by the different way they enter comments in the buyer version and in the agent version of the MLS listing. A client recently got excited about a customer listing that described the property in glowing detail. The version for agents said it couldn't be shown for another week and beware of the dog. If we don't print out both versions, we'd miss that one. Another way to make it likely that other agents don't get in on the sale is to neglect to mention some special feature except in the advertisments to the public. The agent truly representing his seller should want all of us to know about the waterfront or whatever else is noteworthy. Sometimes I wish I could tell sellers what's happening to them - or why something is not happening for them.
Nancy: That practice is simply ridiculous at best. Why on God's green earth would anyone not want buyers to be aware that a home is for sale?
William: I agree with that. We have addenda for lead paint, mold, insurance, etc. That's great for buyers (as well as a little CYA for sellers and agents), but a specific addendum geared towards the seller's protection would prove useful. Our listings forms are too easy to breeze through for the unethical agent. I like the idea of spelling out exactly what level of exposure the property will receive on a separate document. This from a guy, like you, who is not a big fan of papering a transaction to death either.
Michael: Absolutely right. If you are an MLS participant, participate!
Michael: Our agreements are typically "Exclusive Right to Sell" as well, with similar entry fields for buyer agent compensation. The agent who opts not to enter the property into the MLS, and hold it in-house (I use the term "exclusive" generically, not legally) will simply put "0" in the cooperative broker compensation field and enter additional verbiage to the effect that there will be no agent to agent cooperation in selling the property. These listings do not appear on the MLS. The one I found was on a company website. There was no other trace of it. As to your scenarios above, the one thing that I would debate is the idea of lopping off a portion of the commission to make the price more attractive. One common misperception that the public has is that there are two commissions involved in a Real Estate transaction. There is one. I offer a portion of my fee to an agent than can produce a buyer for the property, but the total fee is the total fee. The lack of another agent in the sale does not correlate to a lesser service provided, and in turn, a 50% reduction in my fee. I don't want to turn this into a thread about fees, but I certainly wouldn't cut my fee in half to go it alone. We all do business differently, but if perform fully, I expect to be compensated fully.
Michael again: Just noticed the last part of your comment where you noted that there is a financial hardship and potential short sale involved. In that specific case, you can throw out everything I just said. I'd do whatever needed to be done in that instance to make the sale and get my clients off the hook.
Paul, I enjoyed the insightful post and, as usual, your funny take on the serious matters of selling real estate. Being AWAL from AR definitely has disadvantages, such as missing some of the wonderful writing here:) Exclusive listings seemed to be widely practiced in Manhattan. Perhaps, it's the Exclusivity (as the Geico's lizard in their commercials used t say).
Lenza: I knew I'd goad you out of hiding. You are the first blogger I know to put yourself on the endangered list, but you ain't quite dead yet. So I looked up the quagga ... I thought I was still on the thread with all of the Pink Floyd for a moment. That is one trippy mammal. Probably drew the short straw of natural selection by selecting to sit on the couch and watch "The Wall" 24 hours a day in an opiate haze of stripes and solids. That's an animal that needed killing. PETA called. They are okay with quagga fur coats.
As for the lovable sea cow, I will have you know that I was the proud sponsor of "Doc" the manitee for a year. Not sure how he is doing these days, but he will go the way of the quagga if he doesn't stop playing speed bump to motor boats. If you talk to her before I do, please tell Amanda to ease off the throttle in the harbor area.
Jason: That was either Lenza, a California Condor, spotted owl or Andy Dick's sobriety.
Mary: That is a great point and worthy of an entire post. There are many avenues an unscrupulous agent can explore when driven by self-interest. You just touched on one of the more unseemly methods. The "Unofficial Exclusive Listing" you might call it.
Faina: Very nice to see you on AR again. I've missed your insightful posts and comments. Some market do tend to breed exclusivity. There is a certain level of assumed sophistication or aire of increased service that permeates a luxury niche. It's grand illusion as far as I am concerned, but different strokes for different folks I guess. It's pretty simple math as far as I'm concerned, though. More agents = more buyers. More buyers = more offers. Thus, by the transitive property ...
Jason- It was an Andrew Lenza sighting:)
Andrew- Hi there, good to see ya! :)
Paul- We live in an area where this exclusive listing is used a lot. In our town you must be a member of FAR and NAR in order to be a member of the MLS as an agent or broker. There are brokers who do not belong to NAR and therefore do not belong to our MLS. They often cobroke if you bring them a buyer but this area is still not on the internet in the ways that the west is. There are a lot of what we call pocket listings. They are all sold word of mouth. But like Lenn says this is really in the multi milliion dollar homes and very exclusive polo communities where the community agent gets all the listings as per their HOA rules!
But for these high end homes they are sold by invitation only. That is a security thing and also to keep away paparazi and lookie loos. Fake buyers and the like. You must show your money before you even get an appointment. We work the luxury market and talk most of the sellers into letting us put their properties on the MLS with instructions that agent must accompany showings.
We also get certain land deals that are actually not listings but we have commission agreements. There are many prominant land owners in Florida that do not want the world to know their property is for sale.So we arrange a special commission agreement, a NCDC contract that all parties sign and this is never put in the MLS. We then do private mailings just like Lenn receives to certain individuals that this particular property is available.
SO there are different situations that warrant this. But in your case, that house was not fitting into these catagories as far as I could tell so this guy is just cutting off his nose to spite his face and end up with egg on it! Perhaps you can keep an eye on this listing and be ready to pounce when it expires:)
Katerina: The difference between the scenarios you outline and the typical exclusive listing that I take aim at here is that it appears the pocket listings in your area are still largely available for cooperating agents to show. They just don't appear in the MLS. An exclusive here basically means "Agents stay away. You will not be paid to bring me a buyer." Heck, even many FSBOs will pay a buyer's agent to bring a buyer, but for an agent to stonewall the salesforce completely? Nothing to call that practice but foolish.
Quick followup to the post: The agent has still not responded to several voicemails.
Your client can probably get a good deal on that home. I would knock 10% or so off the "market value" and have your buyer pay you 3%. Your buyer saves 7% and won't have any competition. Exclusive or not, I would think the fiduciary duty to have all offers presented should be there.
Pitch it as "the buyer is paying his own agent" when you call. Might work and I doubt other agents would try. You may even end up with a listing when the seller realizes what an idiot their agent is.
Sandra: Not a bad play, but I can't even get inside to view the property at this point. I'd be flying blind. My buyer would be taking a huge leap of faith, and I'd be taking a gamble on comping it sight unseen. Your logic is sound, but we need eyes on the property first. If the lister won't return the calls of a fellow agent, however, I might just have to go undercover.
Haha, Paul's going undercover. Bet he goes as an elephant bird.......
(My first sorry attempt at minor hi-jacking)
Thanks for an excellent, insightful yet entertaining post!
This is an example of doing what is best for the agent and not the client.
Paul - I am happy to see that your post clung tenaciously to the bottom of the AR homepage after the flurry of features occurred earlier.
I haven't seen an exclusive listing in quite some time. It doesn't seem to make sense in this market.
We had one of these turkeys dodo's in our Surprise neighborhood for over a year. HUH??? Go figure!
I can't believe that the Seller fully understands the implications of this type of listing.
"Pocket Listings" of high end homes are not unusual in my coastal town but these are generally Sellers not actively looking to sell, merely willing to do so with the right price and terms.
PAUL - These still exist around here as well. I have never thought that they were a good idea, even in the best markets. The only time that I've used the practice myself is if the listing is signed, and I'm waiting for the professional photographer to take the pictures. This allows me to input the listing, and then clone it and add photos. I have talked homeowners out of doing this before. I told them that my job is to get as much exposure as possible, and not being on MLS is cutting out the majority of the exposure.
Oh, heaven's, Paul- they're not "extinct". Their nesting place is right here on Long Island, and they enjoy the creature comforts offered by the Hamptons. Heck, signs even have "exclusive" riders on them when they're in the MLS. They've just decided to make their home here because they are in good company with the quiet support of the unethical agents. Hopefully, we'll get them to migrate to Siberia at some point (maybe they'll bring their agents with them), but for now...they're quite happy!
*with respect to "talking sellers out of it", I've never even spoken with a seller that has had a disclosure explained, much less comprehension of "exclusive listings"- they aren't well informed, because the exclusives don't like "noise".
Paul, pity the fool. In Texas we all get "exclusive listings" but that simply means we will retain a cut of the compensation. All of our exclusives are posted as 50/50 split in our MLS unless, of course, the agent is a dummy. Or crooked or stupid...
They say you just can't fix stupid.
Later in the rain~Deb
Hey Paul, Great post, very frustrating...and an impossible situation for that seller. Never ceases to amaze me...the crazy things that people do in this business...the agent should know better in this highly competitive market we are in today!
Hi Paul...It seems that defeats the purpose of the MLS. What's the sense of having it if you are going to keep pocket listings for yourself. When enough people do it, it can create a very unfair situation for those that don't.
I can never figure out how they convince the sellers it is in their best interest. I don't want to.
Kate
Good Grief is right! Amazing how greedy some agents are... Well...not really amazing!
Wayne: That's my take as well.
Jason: What can I say? I'm a fighter, and so is my little blog that could.
Christine: Nope. Doesn't make any sense whatsoever.
Kathy: It will stay on the market until the agent and/or the get tired of it, too.
Margaret: Such pocket listings do crop up in our luxury markets, but this is not the case here. Semi-distressed vacant property at a lower price point. Not a "I will move for the right price" type of scenario.
Adam: The delay that you mention serves the clients interests. The full blown exclusive listing scenario doesn't serve anyone but the agent, at least in theory. Even that is debatable as the possibility of an eventual sale is greatly diminished.
Options Realty: Disgusting practices you outline there. I'm all for shipping the agents involved to Siberia along with their exclusive listings.
Deb: You are referring to the "Exclusive Right to Sell." That is how we list property as well. That simply means that all transactions flow through the listing broker. When someone throws an "exclusive" tag on a listing here, they aren't referring to the exclusive right to sell. That rider means the property will not appear in the MLS, and there will be no cooperation with a buyer's agent.
Sandy: Some agents will still take any listing at any pricing and terms. Either the agent simply displaying avarice, or the only way he could secure the business was at a cut-throat rate (thus not leaving enough margin to offer a co-broke). Whatever the reason, it is foolish and nonbeneficial to either party.
Kate: There was a dark age in our industry before the MLS where every brokerage house clung tightly to its own listings. If we aren't careful, we may revisit that period at some point.
Christina: It would be bad enough if it were merely greed. It's the stupidity that galls me.
Hi Paul...That's all it would take for me to hang up my license.
I'm not the best driver when I'm in reverse and I'm sure not taking any chances going backwards in real estate. I love going forward.
Given the Internet, I think that if anything, the individual MLS may just be swallowed up by bigger and bigger ones until we just have one. That seems to be the tendency in so many industries.
Hey Jesse, keep your eyes on those 27 listings. As soon as they expire jump on them and talk sense into those Alaskans.
Kate
I agree this isn't the market for pocket listings... that being said I will offer myself up for sacrifice here to consider another angle: many listing agents hope to re-start the DOM clock (as if we can't just check the archive / history) or the property needs to be off market so that the bank can refi... in the meantime, the property continues to be listed, but not in MLS.
Are these justifiable reasons? Are there ANY?
Maybe I read the post incorrectly... so please don't shoot the messenger when you respond! :)
Lori
p.s. Sandra C. - I like the way you think!!!