"Why do I have to sign a listing agreement?" is a question that we are often asked when meeting with a landowner about selling their land. Earlier this year I was burned badly by an exception I made to my personal rule of having all sellers I work with sign an exclusive listing agreement to market and sell their property. The person who burned me was a long-time family friend who made an honest mistake that ended up costing her a deal and me about $12,000 in potential commissions. This disappointment has served to reinforce my conviction about exclusive listings.
An exclusive listing means you sign a legally binding agreement with one brokerage to market and sell your real estate at a set price for a given period of time. There are other listing arrangements that are available to brokers and land owners, and a seller or broker is not obligated to use any one in particular. Here are a few of the reasons why I prefer and practice the exclusive right to sale listing arrangement.It brings clarity to the transaction. A document that is signed and dated by all parties spells out exactly what the terms of the deal will be. Not only does it solidify a sales price and terms, but it defines the services the broker will provide to the seller and the responsibilities the seller has to the broker. If any party to the deal forgets what the agreement was, they have a copy that they can go to for clarity.
It commits the parties to each other and to the deal. When a seller is not motivated to sell, in my opinion it is usually better not to put a rural property on the open market. When you put it out there “just to see”, then you run the risk of stigmatizing the property when it does not sell in a reasonable timeframe. So when a seller signs a listing, they are generally agreeing to sell the property if they can receive a favorable price and terms. Not only does the seller make a commitment in an exclusive listing agreement, but a broker commits to provide fiduciary duties to a seller. Selling land can be fraught with pitfalls, and a skilled broker can provide advice to help a seller navigate those challenges. When a seller allows multiple brokers to advertise their property for sale, then no one is officially looking out for the best interest of the seller. That means you potentially have a group of brokers trying to put a deal together by whatever means necessary. This can leave a seller exposed to liability and at a disadvantaged negotiating position because the brokers have knowledge about their situation with no commitment to use that information in the best interest of the seller.
It protects my compensation. One of the most important principles of business is that you have to know how you are going to get paid for the work you do. I have a proven system of marketing rural land that delivers results for my clients. That system involves me laying out a significant amount of money to advertise and show tracts of land. It is not prudent for me to outlay all of that money with no reasonable expectation of return on my investment. In my opinion a land broker who does not routinely require signed listing agreements shows me that they do not place a high value on the services they provide. Have you ever met a doctor, attorney, or other professional who provides a specialized service that does not require payment for services rendered? Probably not.
