In case you had not noticed, we appear to have a thin level of inventory for buyers to choose from in Ann Arbor. As the level of inventory continues to remain stubbornly low, an insidious real estate practice gains momentum.
This past week, I witnessed an example of this practice called an “exclusive listing.” An exclusive listing is a property offered for sale, not through the Multiple Listing Service, but through that agent and their individual brokerage. Thereby restricting potential purchasers to only working with that agent or brokerage to purchase the exclusive listing.
For buyers, it is easy to see how this can limit their ability to view, experience, and purchase a new home. In order for buyers to experience these exclusive listings, they need to be connected with, and likely a client of, the agent or brokerage offering the home for sale. For buyers that do purchase a home in this manner, the lack of the open market weighing in on the value of the home may mean that they’ve overpaid for the exclusive listing. It also puts the buyer into a tentative agency relationship with the listing agent or brokerage. In order to purchase the exclusive listing, the buyer’s agency relationship will be secondary to that of the seller’s agency relationship. While representing two parties in one transaction can be done, and is legal in the state of Michigan, the appearance of impropriety and the potential to abuse the relationship is tremendous.
For sellers, they are not getting the full opinion of the open market on the value of their home. This means that the sale price of their home could be well under the market value of the home. In addition, sellers are being limited to their listing agent’s sphere of influence to find a buyer. This creates a high potential for that conflict-of-interest ridden practice called dual-agency.
To be sure, there may be good reasons that a seller knowingly selects to have an exclusive listing with an agent. But my experience has been that most sellers do not grasp just what an exclusive listing means, and how it frequently benefits their agent, more than their own interests.
While these are good reasons for sellers to be wary of the exclusive listing, there is another, larger point that I think is being missed by all parties involved.
Real Estate’s Stone-Age
This exclusive listing practice is a holdover from the day of real estate antiquity; when agents held listing information close to their chest like a royal flush and you needed to press hard on the contract so your signature went through all three copies of the purchase contract.
Prior to buyer agency relationships and an electronic multiple listing system, buyers were limited to viewing the homes listed by their agent’s brokerage. If the agent was extremely well-connected and respected, they could even show buyers homes listed by other brokerages. The commoditization of real estate listing information has meant that any agent that is a member of the local real estate board, can show, and attempt to sell, any other agent’s listing.
Really?! We tolerate a practice that drags us back to the real estate stone age? Pass out the beepers!
In an era of free flowing real estate information and clearly defined agency relationships with consumers, why does the real estate industry tolerate such a neanderthal approach to sales?
Silly me! It’s all about the dollars, of course.
Yet, for all of our fancy “agency relationships,” disclosures, and attorney-drooled-upon contracts, real estate transactions still rely on human beings executing the wishes of other human beings. Which, in theory, sounds grand. Let’s face facts, though. When faced with more dollars in one’s pocket, altruism (the drive to put others’ interests first) frequently goes right out the window, in spite of any code of ethics, moral belief, or agency relationship.
Look. Real estate agents have earned a huge black eye on how we have historically treated our consumers. While the real estate industry has made some huge strides forward – making the transaction more transparent, making access to real estate information easier, clearly defined agency relationships – we still tolerate and allow antiquated, agent-centric practices to survive. Without the real estate consumer, we cease to exist. The saddest part of all of this is that in many ways, the consumer does not know about many of these shenanigans. The only ways for the real estate consumer to learn about these practices is to either experience them first hand, learn about how a friend ran into the practice, or hear/read about them from an agent.
I will always be happy to shed light on the real estate practices that put the agent first, at the cost of the consumer’s goals.
Here’s a quick video summarizing why I think this is a poor standard of practice for sellers in today’s competitive marketplace:
Hand Crafted Real Estate – this is my standard of practice for clients, where they can effectively utilize my expertise in the real estate industry to accomplish their real estate goals. What kind of experience do my clients have? I am glad you asked! Check out the testimonials and ask yourself if these words reflect what you are looking for in your next real estate experience.
I have fashioned myself a Destroyer of the Real Estate Fortress of Suckitude, and aim to bring that to every transaction my clients invite me into.