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Overcoming The Too-Short Listing Term

Oct 10, 2014

Posted by

Laurie Moore-Moore

Laurie Moore-Moore is the founder and CEO of The Institute for Luxury Home Marketing, an international training and membership organization for agents who work in the upper tier. The Institute offers Read more

Here’s a problem you may have encountered.  The owner of an expensive residence listed with you for just a few months and is now renewing for just a month or two at a time.  You’ve invested time, effort and dollars in marketing and don’t want to lose the listing.  At the same time, with short term renewals, it is hard to justify doing more marketing.  The question becomes:  Can you create a “win” for the seller with a longer term listing renewal?

Here is one possible approach for negotiating a longer listing renewal.

Take the price range in which this property falls (for instance, $700,000 - 750,000).  Then analyze the statistics for this price range.

• How many homes are currently on the market in the relevant price range?

• How many sales (real buyers) have there been in the last six months?

• How many month's worth of inventory now exist?

• What is the median days-on-market statistic for properties which have sold in this price range?

• What is the full range of days-on-market for the sold properties (from ___ to ____ days)?

• What percent of the list price did the sold properties sell for?

• How many sales are pending?

If your listing term to date is less than the median days on market, that means you haven’t had a fair chance to sell the home.  And remember that the median days on market is a middle figure, half of the sold homes took longer to sell than the median. Make some charts to share the reality of the market with your seller.  Even if you’ve done this already, do it again.  Send your seller the market update.

Then, sit down with the seller and say, “You and I have the same goal—to sell your home as quickly as possible for the highest price the market will pay.  I have spent thousands of dollars toward that goal and my team has spent countless hours working for you.  We are committed to continue until the job is done.  We are aggressively working for you and we will sell your home.  Hopefully we are close to the right deal.  It is listing renewal time, so let’s discuss three options.

Option one:  “You can start all over with another agent, but you will lose ground by starting over.  This is dangerous in a declining market and you won’t find anyone more motivated to sell your home than my team and I are.  In fact, if you decide to change agents, please know that I might consider taking your listing in the future if and when you decide to change real estate professionals again.”

It is important to start with this option so your seller knows you understand it is an option. You have the advantage by putting it on the table first.  

Option two:  “You can renew for the short term.  However, please understand that if you do that, you are shifting all the risk to me and this also is a negative for you.  Here’s why:  You are asking me to continue to invest more time and more money in a month-by-month marketing plan.  In your business would you be willing to make a significant long term investment for a client who renews their contract with you month-by-month?  Probably not. If you want to continue to renew every couple of months, we can do that.  I will commit to implement the marketing plan which we agree is most likely to accomplish your objectives, and we can agree upon the budget. We’ll just shift to a standard seller-funded marketing model.”  (At this point, you may need to say, “Wait, hear me out on all three options here—there will be one you’ll like.”)  “With the short term listing and seller-funded marketing arrangement, I’ll agree to refund ___% of the seller-funded marketing costs at closing.  (This, of course, assumes that you are the closing agent, so you’ve created a golden handcuff!)

Option 3:  “The last option (unless you have another to propose) is that we continue to work together with a listing term that reflects the reality of today’s market, and gives my team and me a fair chance to sell it, so that I can invest in the marketing of your home and have the necessary time to work the active buyer prospects we have.  I’ve written XX months in the listing extension agreement.  That seems fair to both of us.”  (Be sure to give yourself adequate time based on the market conditions. Remember that an average days on market calculation—whether its mean or median—is an average and many properties will take longer than the average.)

“What would you like to do?”

Obviously there is some risk of losing the listing, but the higher risk is spending lots more time and money and still losing the listing.  It’s time for the seller to get serious about selling the home.  If the seller expects an agent to upfront the marketing time and dollars without a fair chance of getting the home sold, he or she is really not going to get anyone’s best effort – the risk for the agent is too high.  The seller needs to understand this and recognize that he wins with an agent who can afford to make the investment of time and dollars necessary to successfully sell the home.

Educating your seller about the reality of the market and explaining why it is in the seller’s best interest to agree to a listing term that allows you to invest the time and dollars necessary to get the job done are key to a relationship where everybody wins.