Sellers have two primary avenues in which they can work with real estate brokers. They can work with them on an exclusive basis or an off-market deal. The question is, what is the difference?
Off-market listing versus exclusive
Working with a client who has signed an exclusive listing is a preferred method for any seller. This means that the client has signed an agreement that provides the broker proprietary rights to market and sell his property, based on the terms and price that the two parties agree upon. When a seller signs an exclusive agreement, he will generally pay a fee to the broker working on the deal; this fee is to help ensure that the seller is going to get the best representation, terms and price for the property they are selling. The broker is then working for the client’s best interest.
An off-market listing, however, is when someone permits a broker to show a property without an exclusive agreement. Despite the connotation that off-market deals are “secretive” opportunities or for highly-sought properties, off-market listings generally only best serve the interests of the broker that ultimately lands the deal. In this situation, the broker has high hopes of representing the buyer and the seller during the transaction.
Sometimes, there’s good reason for an off-market listing. If there’s family contention regarding the sale of a property, the seller may ask for discretion on the sale. Other times, employers prefer to not alert employees to sale. This is frequently seen with hospitality properties, multifamily properties and institutional properties.
Off-market May Not Be In the Seller’s Interest
A seller choosing to work with a broker in an off-market listing may not be represented and may risk leaving money on the table.
But, here’s the rub. Brokers control relationships with BOTH sellers and buyers in approximately 85% of commercial real estate transactions. Controlling both sides of the deal is most profitable to the broker and can hurt the seller in a number of ways:
· Brokers do not market to other brokers
· No one broker can identify every potential buyer
· 65% of buyers come from outside of a broker’s region or country
· Off-market properties sell for almost 10% less than cooperative deals
· Broker has no or limited fiduciary responsibility to their client
Ultimately, Free Markets Should Persevere
The truth is that there are more buyers in the market than there are sellers. That means, sellers control the supply and in general should receive maximum value for a property. Typically, brokers don’t want the seller to know this, because they are eager to own both sides of the deal, maximizing their own profits.
Sellers want the best representation. They want their property marketed thoroughly and broadly to the broadest pool of prospective buyers. Even though signing an exclusive may seem like a significant commitment, it usually nets the best deal for the seller. A broker that is truly concerned about his client will proactively promote properties and share fees with outside brokers to ascertain the highest selling price. If the seller is concerned about discretion and doesn’t want the property blasted on websites such as LoopNet, they should work with their exclusive broker to ensure this. Ultimately, the broker should work to increase competition, generate greater numbers of offers and achieve above-market sales prices.
SVN-MILLER COMMERCIAL REAL ESTATE
SVN - Miller Commercial Real Estate, with offices in Salisbury, MD, Easton, MD, and Seaford, DE is a financial services firm specializing in commercial real estate. We provide advisory, brokerage, consultation, leasing and asset and property management services to clients in the Mid-Atlantic Region. We combine a comprehensive national footprint with local decision making, expertise and market-leading execution. We maintain an unequivocal commitment to our clients and community (#SVNgivesback).
SVN - Miller is an Accredited Management Organization® (AMO). Our team of dedicated professionals with market-leading knowledge includes a highly-trained staff of Certified Property Managers® (CPM®), Brokers who hold the prestigious Certified Commercial Investment Member (CCIM) designation, and members of the Society of Industrial and Office Realtors (SIOR).