In the real estate industry, the term “exclusive” has a very specific meaning. While the vast majority of homes are listing on the local real estate boards Multiple Listing Service (MLS), there are some properties that are for sale but do not get listed on the MLS.
Such homes are considered to be exclusive listings and while they may have a For Sale on the front lawn, they may not and neighbours may have no idea the home is even for sale. Such listings are relying not on overall market exposure, whether it is through people browsing Realtor.ca or driving by and seeing the sign, but on their listing agent marketing the property to an exclusive list of individuals.
Given the length of time we’ve been working in real estate in our team, we have literally thousands of agents who we have interacted with over the years. Almost every day we receive a number of emails from agents promoting their newest listings, some of which are exclusive and not on the MLS system.
One question that we’re often asked is why a seller would choose to forego market exposure and list their home for sale exclusively. There are, in fact, a few good reasons why it may make sense to a seller to decide to go this route.
When you list your home on MLS, privacy pretty much goes out the window. While in theory you can restrict the address for the public facing MLS (i.e. realtor.ca), it drastically limits the interest in your property if a potential buyer can’t see where exactly the house is located. If you ever see a listing on realtor.ca where it doesn’t state the address, it is because the seller has decided against providing it.
In the vast majority of cases, properties on MLS have their address listed and if they want to actually attract buyers, they included a number of photos including the exterior. Virtual tours are very common and a properly prepared listing on MLS includes floorplans, measurements, details on any updates and renovations.
All of these things that are done to make the house sell quickly require the seller to give up privacy. Anyone with an internet connection can see their furniture, their design choices, what they have done to keep up the house and what they haven’t done. It is taking a very private space – your home – and making it very public.
Some buyers choose to list on an exclusive basis because they want to keep a modicum of privacy. They don’t want just anyone to see their home. By listing it exclusively, the seller and their agent control who sees the home and when, as opposed to an MLS listing that is subject to the rules and regulations enforced by the local real estate board. These include availability for showings, length of the listing period and so forth.
When an agent signs an exclusive listing, they generally undertake to find a buyer from their connections rather than the general public. By its very nature, such listings are more likely to result in no other Realtor being involved.
When a listing agent brings their own buyer to the table, there is often an agreement that the commission being paid will be lower than if another Realtor is involved.
The discount is agreed upon between the seller and their agent and could reduce the full commission from 5% to 4% or even 3.5%. This can result in significant savings on the commission paid.
There is a strong debate as to whether the lower commissions paid come at the expense of a lower sale price due to lack of market exposure and therefore fewer competing bids on the property. The vast majority of exclusive sales involve only one buyer making an offer and we rarely see multiple offers on exclusive listings. They just aren’t designed to foster that situation, unlike MLS listings where a greater pool of potential buyers increases the changes of more than one offering party.
Testing the Waters
In some circumstances, exclusive listings are used as a precursor to the public MLS listing. When sellers and their agent are debating listing price and strategy, an exclusive listing allows the home to be marketed to a select group and to test the results.
Such a strategy can pay dividends in multiple ways. If the listing receives strong interest from a number of people who view it during the exclusive phase, it is likely that listing on MLS at that price will cause a great deal of interest and multiple offers. If the listing doesn’t elicit much excitement or interest, then the price, photographs, staging and overall strategy can be adjusted to deal with what is causing the lack of interest.
In either case, the seller has the opportunity to test the waters without having a permanent record on MLS. There is only one opportunity to make a first impression and if a seller or their agent take the wrong approach, the listing can be perceived as stale or stigmatized in some way, resulting in fewer offers, longer time on the market and a lower eventual sale price.
When we discuss exclusive listings with our seller clients, we go through these three reasons why it may make sense and review their particular situation.
While privacy concerns are legitimate, it is a matter of how much your privacy is worth to you. We have had some clients who have a sale price in mind that would make them happy, who were pleased to sell at that price and not give up their privacy. For many others, while they would prefer to maintain their privacy, they are willing to temporarily open up their home in order to get the most exposure and the highest sale price.
The lower commission rationale is not often one we find makes sense for our clients. It is a net lower amount of fees for them, and a net higher commission for us, but what if the price is lower than what they could get on the open market? It many cases, that is true and as such we often suggest it is better to net a higher final amount by selling for enough you more than make up the higher commissions resulting from having a buyer’s agent involved.
The only reason from the three above that we regularly find makes sense is the final one of testing the waters. It means we need to be confident in our pricing strategy so that we’re not leaving money on the table by potentially accepting an offer before we list on the MLS.
In some cases, we have seen buyers who are so eager to avoid the competition and stress of a multiple-offer situation they offer our sellers a price that is too good to refuse. While anyone can say “But what might happen if we listed and got full market exposure?” our job as your listing agent is to be able to tell you when an offer is legitimately likely to be the best you’ll get for your home. Whether it comes now or later, if it is an amazing offer, it still is an offer worth considering.
If you’re considering selling and what to discuss whether an exclusive listing makes sense in your situation, don’t hesitate to get in touch with us to discuss next steps.