Ok, so you are driving along in your Aston Martin somewhere in beautiful downtown 716 land and you pass by a few houses and you notice a house or two that has a sign in front of it that indicates it is For Sale. That’s simple enough. Then You turn the corner and you head out on a more commercial strip. You see a building that has not one sign in front of it but multiple signs, all by different companies, indicating that the same property is for sale. What does that mean? If I call one company as opposed to the other one, will I get a better deal? Is each company offering the property at the same exact price and terms? If I work with one of the companies does that mean that all of the companies take part in the sale or share the same commission? What’s going on here?
As an insider, let me give you the skinny. The commercial property is more than likely being presented to you as an OPEN listing. There are essentially 3 different types of listing agreements Brokers enter into with their clients. The Open listing is the simplest. This means that the seller has agreed to sell the property at a stated price and terms, and for a specific commission. How the broker chooses to split a commission with a subsequent brokerage is the broker’s business. In this scenario, if the seller secures their own buyer, nothing is owed to any of the brokers. Then we have the office exclusive listing which is where one company will be chosen to represent the seller. So you wouldn’t see multiple signs on a property. Then finally we have the Exclusive Right to Sell listing. This is exactly what it sounds like. It grants the Exclusive right to sell the property to the broker. If the seller finds their own buyer, they still need to compensate the broker. Why? Because the broker is the only one that is legally allowed to sell the property as the agreement stipulates. This sounds pretty one sided to me so why would anyone agree to this? The simplest answer is that it is the only way to take advantage of a Multiple Listing Service(MLS), if you are fortunate enough to have something like this in your area.
There are so many benefits to having a multiple listing service so let me spell them out for you with just one of them. If you have a house listed with a Realtor in 716 land, by virtue of the fact that they are members of the Buffalo Niagara Association of Realtors, that Realtor has agreed to a unilateral agreement of cooperation with all of the nearly 3600 members of the association. Because they will be providing all of the pertinent information about the property, how to gain access, and how much they will be compensating Buyer Agents, transactions move quickly and efficiently between the various brokerages that may choose to work on a potential transaction for YOU. In the previous paragraph, I indicated that not all areas offer this valuable service. If you go to NYC, most of Manhattan does not provide one and you will frequently see Open Listings only. When this occurs, if you want to see a unit that is not listed with the agency you are working with, your agent has to call to see if the other agent is willing to cooperate and then they have to agree on compensation terms. The “listing agent” can also choose to NOT cooperate. I recently heard a person who was trying to buy a house in Italy balk at this practice because that’s how it works there as well. That’s the way it is. When I first started in this business, I was working in downtown Brooklyn. The only listings you would wee were OPEN and I never had access to a multiple listing service and I did very well for myself. Having gotten used to the MLS service in WNY, I can see that if you make it easier to access the property, it provides more opportunities to buyers and increases the potential for more showings for the seller. Having said this, I am of the opinion that ultimately this system works better for all consumers and I am glad that it exists in our market.
In the meantime, I may have some extra signs for you in various pastel colors if you want to decorate the outside of your house.
Check out our blog at:brendan.husvarre.com
Hey, I wrote the book on Real Estate, literally.”
Author Brendan J. Cunningham is a New York Licensed Associate Real Estate Broker, lead of the Platinum Team at HusVar Real Estate, as well as an accomplished writer, Shakespearean trained professional actor, and podcaster.
Start your home search now at www.husvarre.com