Selling your property? Should you go with an Exclusive or non-exclusive Agreement?
Updated: Nov 23, 2020
As property owners or investors, there will be a time when you look at selling your property. One of the key decisions you will have to make is how are you going to sell?
Generally, there are 3 main ways of selling:
Selling it yourself - manage your own marketing and sales process.
Engage an agent on a non-exclusive listing.
Engage an agent on an exclusive listing.
Unless you are familiar with marking your own property and the entire sales process, engaging an agent to do it help sell your property is probably the only way to go.
Finding the right real estate agent is tough. As such, time-poor sellers wanting to engage a good agent, are turning to the services of a vendor advocate to help them source and engage a good agent.
You can do it either way, but each has its pros and cons. Here are the key advantages and disadvantages of exclusive vs non-exclusive listings, to help you understand and decide which method of sale is best for sellers.
Non-Exclusive (Open) Listing
A non-exclusive listing agreement means the responsibility of selling your property is distributed across multiple agents. When the property sells, commission is only paid to the agent who brought in the buyer.
Advantages of open listing
Creates competition between agents, and heightens the urgency to sell in theory. This is good for properties which are in demand, and which have to be sold in the quickest time.
More agents equates to more potential buyers. In theory, each agent and agency will have their own list of potential buyers. However, we all know buyers search across ALL agencies in the area. So, the same buyer will more likely than not, be in touch with all, if not most agents and agencies in the region. AND, there are more serious consequences, which may not be obvious to you. We will cover that in the section below.
You are not committed to using only one agent. You can part ways with no further obligations.
You are free to market the property yourself as well. And many times, you have to do that, as we will explain below. If you find the buyer on your own, you don’t pay commission to any of the agents.
Disadvantages of open listing:
Remember, the key advantage of a non-exclusive listing is to allow you to create a competition amongst the agents to sell your property faster. Each agent is, therefore, eager to bring a buyer to you, as you would commonly expect. Now, remember, also, the same buyer will be talking to a few agents in the area. So, two things can happen:
You might not get the price you want. Let's assume the best case scenario where the buyer is only interested in your property, out of the hundreds in the market. And if they become aware that your property is being sold by a few agents, a savvy property buyer will be talking to all of these agents. What is likely going to persuade them to buy from an agent instead of the other? PRICE. The lower the price, the easier it is to sell. Yes, you have just created a selling competition, with each agent bidding against each other to find a price (usually lower) that the buyer is willing to pay.
High risk of NO marketing from the agents. Consider the second scenario where the buyer is open to considering other similar properties. What would a smart selling agent do? They would usually use an open listing to lure the customer towards their exclusive listings. When this happens, the open listing is usually being painted as the 'lesser' property, so that the buyer will be persuaded to purchase one of their exclusive listings. Why would they do that? They know, their commission is tied to how the selling price. An open listing usually leads to a lower selling price, as there is risk that the buyer will purchase from another agent who can offer a better price. So, rather than actively marketing your property, the smart agent would encourage the buyer to look at one of his exclusive listings, as there is no risk that they would lose the commission.
As mentioned above, because agents know you can part ways anytime, with no obligations, they are unlikely to actively market your property. They are also unlikely to recommend your property, knowing the buyers can (and they usually will) approach another agent who is prepared to work against them. I.E, as cruel as it may sound, you are in charge of marketing the property yourself which can be a very difficult task, especially during a down market or if the property is not in demand.
Potential purchasers may interpret having multiple agents as a sign your property is difficult to sell, implying there is something wrong with it, or it’s overpriced.
It is not unheard of, for agents to prioritise their exclusive listings over the open ones (for reasons mentioned above). This means your property will be on the market for much longer, and in turn this may drive the price down. Not a good idea for a property that is not in demand in the first place.
An exclusive listing is whereby you grant a single agent and agency the right to sell your property. The real estate agent represents the vendor for the sale, and will work in the vendor’s best interests to get the best price possible for the property. A signed agreement will set out the length of time the agent has to sell the property – 30 days, 90 days, six months or one year - after which the agreement usually rolls into a non-exclusive arrangement, or you can cancel their services with no charge.
Advantages of an Exclusive Listing
You build a relationship with your agent. Your agent will be someone you trust and they will be working for you, rather than for the purchaser.
Working with one agent is much simpler and easier, as there’s only one person to discuss details with. You form a relationship with them, and you will be in constant contact. The agent will be open about how many people came through the property, whether any offers were presented, and whether an offer should be considered. Remember, the agent wants to get a better price for you, not a price the buyer is willing to pay, just to close the deal.
The agent will put more resources into marketing, managing and selling the property. The agent is guaranteed their commission, so will prioritise the sale of your property. And it is in their interest that your property is sold at the highest possible price.
The agent will go above and beyond to help ensure your property is ready for sale. This could mean they recommend ways to ensure the property is presented in the best possible form, and could mean recommending having slight touch ups, bringing in experts to help stage the property, to furnish and decorate the property.
It’s likely you’ll get a higher sale price as the agent is more eager works for you, and will be trying to find the best price, rather than the quickest price to close the deal. The buyer is also unable to shop between agents who are willing to negotiate the best price for them (yes, for the negotiating the best price for the buyer, not for you, the vendor).
You have more control over the sale, as your agent is working with you, not against you.
Disadvantages of an Exclusive Listing
When there is a down turn in the market it can be much harder for one agent to find potential buyers willing to pay high prices. This is also an advantage, as you do not have multiple agents trying to give the same buyer a better price for your property.
Sometimes there can be long periods of time without offers, if the property is not in demand, and the productivity of your agent can come into question.
If you find down the track you do not like your agent and wish to switch, you’ll usually have to wait until the agreed exclusivity expires to change agents without incurring a fee. You might still be liable for fees, if subsequent agents introduce the same buyer to you.
In summary, an exclusive listing allows the agents to work harder for you, not the buyer, as buyers are unable to shop across multiple agents. Exclusive agents are also more willing to put in more work to find the right buyer and the right price, and will not be concerned with just making a quick sale.
As buyer's agents working for the buyers, we know which type of listings we would target. Now you know. 😉
If you are planning to sell your property, get in touch to find out more about our vendor advocacy service, whereby we help you select the best agent to sell your property, at not cost to you.