Dear Ali: I am just beginning the process of putting my home up for sale. I have been talking to a few real estate brokers who each want an exclusive. However, one of my friends told me that I should give the listing to several brokers, and then they could fight it out -- with the broker that brings in the deal getting the whole commission. I like the idea of a competition that produces a winner -- is there any reason I wouldn't want to do this?
A: There are two reasons. One is that you're pushing back more safety and security problems onto yourself. Are you going to hand out five sets of keys and five security codes? What if one agent wants to show at 10 a.m. on Sunday and one wants to show at 3 p.m. Are you going to be interrupted twice during your day? (There is a reason agents cluster showings). Or what if two agents each want to show at 6 p.m. on a Tuesday?
The other has to do with the agents themselves.
Let's say you've got a $700,000 property, and you're going to pay a commission of 5.5 percent (this is hypothetical, commissions are always negotiable). The total commission pot is $38,500. Since the home will probably sell co-brokered, that's $19,250 to the selling broker's firm.
Let's assume the firm takes about half; the listing agent will make about $10,000 for the sale.
The market is slow; here in my neck of the woods, it takes about six months to sell a property. Now, agents do work on several listings at once in real estate -- let's say four. So a broker who could get four listings like this every six months and be sure of selling them would make $80,000 a year.
Well, in our hypothetical, you own a $700,000 property, so you make more than that, so it certainly makes sense for you to outsource the work.
However, does it make sense for an agent in a multiple listing situation to take it?
Remember that there are no guarantees in real estate (I once worked for two years on a sale that fell through post-contract -- instead of getting forty thousand bucks for my time, I got zero).
So anyone who really IS good enough to get and sell eight listings a year isn't going to want to work on your listing given the strong chance that they'll get nothing. (Heck, there's probably a 20% chance that an agent ends up with zero on a six-month exclusive -- why make the odds worse?)
Now let me introduce one more stat -- working on eight co-brokered deals -- here in the trade we'd call that eight "sides -- was the median performance of an agent in 2007, the last year the National Association of Realtors has data.
So you can see that any agent who doesn't normally expect to do eight sides will be lower than the median -- in other words, agents who will be eager to take your bet will generally be poorer performers. (That reminds me of my dad's old joke: "fifty percent of doctors graduated in the bottom half of their class in medical school.")
Of course it's your choice whether you want to hire one really good salesperson, or an array of worse salespeople, but if I had an asset that could only be sold once, I'd take the really good salesperson.