Have you or someone you know ever used an exclusive listing to sell their home? Has a realtor ever suggested this method? An exclusive listing simply means that a property is not going on MLS (Multiple Listing Service aka Realtor.ca), making the realtor solely responsible for marketing the home.

An exclusive listing is typically laborious for the realtor. It starts with them picking up the phone to invite trusted realtors and clients to view the property. With the seller’s permission, it can extend  to additional marketing efforts such as personal websites and social media platforms, just to name a few.

So why do sellers agree to an exclusive listing?

Three main reasons for an exclusive listing:

• Maintaining privacy
• Testing the waters
• Realtor request

Privacy

The simplest reason is privacy. Often privacy is required for delicate situations such as a career change or a divorce. In this case the realtor’s marketing is limited to reaching out to potential buyers one-to-one. This can result in a long listing period, but given these circumstances it is preferred when securing top dollar is not the most important issue.

Testing

The second reason is related to testing the waters. It is not uncommon for a realtor to secure a listing that is most likely priced too high for the general market. The seller hopes the realtor will sell their property to an eager buyer. Often the seller wants to get a sense of just how high they’re priced through buyer feedback. It is done with the understanding that they will sharpen the price prior to listing their property on MLS.

There are two main reasons why a seller asks for a high price.

The most common is what we realtors affectionately refer to as “Seller Assisted Pricing”. The seller has decided for various reasons that they either need or want a certain price. If they don’t get it, then they won’t sell. The seller may believe that their home is unique making it more valuable. It could be that they have just built a new home and want top money for it. Perhaps they are only half committed to selling and will only move if they see dollars worth moving for.

The latter is the most common and the most challenging for a realtor. They have been saddled with the time-consuming task of marketing privately along with promoting a property that most buyers instantly recognize as overpriced. Even if an offer is made it will likely be for the market value which will not tempt the seller.

Another reason realtors test the waters with an exclusive listing is not to ‘leave money on the table’. Every so often I come face-to-face with a property that is so unique, a property that deviates from the pack that it’s truly hard to price. In this instance my favourite approach is to ask the opinion of several realtor friends from different brokerages in advance of establishing a price. That is not always an option, so I will go it alone and price the home at the top of my estimated range because I do not want to risk underpricing. Therefore, it makes good sense to list the home exclusively while securing feedback on pricing.

As more invited realtors move through the home, I start to get a sense of the market value and can make adjustments if needed.

Realtor Request

The third and last reason homeowners list exclusively is their realtor advised them to. This is where the homeowner wants to be very clear as to why the realtor suggested it. Though we discussed several suitable reasons, there are two unsavory reasons why your realtor may advise you to list your home exclusively.

The first, it’s good for the realtor and their buyer but not necessarily the seller. It’s two birds with one stone. I don’t mind being blunt when I say that I find nothing more annoying, and quite frankly tacky than finding out a realtor sold an exclusive listing to their buyer for what was clearly below market value!

You would be surprised how often this happens.

I will never know what reasons those realtors used to convince homeowners to list exclusively, but I’m going to bet that they dangled a reduced commission in front of the homeowner. The seller believes they’ve saved money, when in fact they’ve lost far more by selling their property likely below market value than they gained through accepting a reduced commission.

The last reason is one that my colleagues and I are increasingly finding ourselves in. In my trading pocket, homeowners often meet with several realtors because they believe their home’s value is subjective.

Pricing techniques are not solely rooted in making comparisons to recent sales in the area, so it makes sense to solicit opinions from several realtors. The issue is that the homeowner has now brought several professionals into their home and all of them want to be the one who brings a buyer.

If the homeowner selects a realtor to work with then great. If not, that’s where things can get tricky. Sometimes the homeowner isn’t pressed to choose a realtor because they won’t be selling for a while. However, a growing trend are homeowners who believe they benefit by suspending their decision on who to work with. That by not making any commitments they’ve indirectly enlisted several realtors to work on their behalf. This just isn’t true.

Inevitably one of those realtors will get the homeowner on paper and often does so exclusively.

How do they do this?

While the tactics are numerous and many legitimate, a homeowner ought to be aware of what we call “Buying the Listing”. This is when the realtor reduces their commission to the point where the homeowner believes they would be a fool to not list with them, or perhaps the homeowner pressures each agent to reduce their commission and the lucky agent is the one who went to the bottom. With the realtor’s integrity out the window, the realtor is now operating on the premise that something is better than nothing.

The problem, the realtor wants to be compensated for the reduced listing commission by doing what they can to represent the buyer . They do this by listing the home exclusively. Now the homeowner has a realtor who is only motivated to sell the home to their own buyer. That buyer may as well be a needle in a haystack.

More often than not the property simply doesn’t sell. If it does, the seller will never know what they could have sold for had they come to open market through MLS by establishing a two-way street of trust with their realtor.