Doesn't it sound appealing? Having multiple agents working for you to generate competitive tension and sell your property? The option to replace any agent if they don't meet your expectations seems like a great advantage, right?
However, the reality often differs from this ideal scenario. Our experience indicates that using two or more agents can lead to significant issues for the seller.
An open listing, as the name implies, allows you to engage any number of agents of your choice. At first glance, it may not seem like a bad idea, as you retain the option to discontinue any agent's services at your discretion and only compensate the one who successfully closes the sale. Even more enticing, if you manage to sell the property independently, you avoid any payment altogether. Sounds like a win-win situation, doesn't it?
The main problems with this method, and they are serious ones, are:
1. You will reduce the chance of achieving the highest sale price
2. The agents will almost certainly make little or no effort to sell your home.
The impact an open listing can have on the final sale price is significant. With multiple agents involved, buyers have the freedom to select the agent they prefer for property inspections. This competition compels agents to strive to attract buyers by offering incentives. The primary leverage they have in this scenario is the financial aspect, utilizing your money as the ultimate bait.
How is it accomplished? They might indicate to the buyer that they could potentially acquire the property at a price that is appealing to the buyer.
Let's be a bit clearer... buyer asks... how negotiable are they?
Agent 1 says...
"look they are negotiable, you'll probably get $5,000 off."
The smart buyer then calls another agent who has the property for sale and asks the same question.
Agent 2 thinks... I know other agents have got it for sale, I really want them to come to me so I can show them through and get the sale.
Agent 2 then says...
"I know they are keen to sell, I think you're in for a chance at maybe $75,000 less than what they are asking."
Now put that buyer's hat on again... which agent are you going to make an appointment with to inspect the home... ?
Agent 1 who said you might get $5,000 off or, Agent 2 who said you'd get $75,000 off?
This is reality, it does happen. And now the agent is under pressure to perform, but not for you the seller, for the buyer. See the agent now has to deliver on the $75,000 off!
Serious buyers will
always notice that you are listed with numerous agents. They will investigate with all the agents, one by one, their thoughts on a possible sale price and they will always choose the one that will save them the most money on the purchase.
The primary cause of diminished exertion arises when managing multiple agents to sell on your behalf. Typically, agents prioritize promoting properties exclusive to them, as it ensures their compensation. In contrast, under an open listing, no payment is received unless you are the selling agent.
Essentially, employing multiple agents does introduce competition, yet regrettably, the seller ends up losing out financially, as the primary emphasis shifts to securing the sale rather than maximizing the buyer's offer.
Many home sellers are not always properly informed about the binding nature of accepting an offer to purchase, and don’t understand that they have signed a legally-binding document. This can open the seller up to legal action in the case where multiple agents are marketing the property should the seller accept two offers from two different agents. Can this really happen?
If a seller accepts an offer on their property from one agent that has conditions like perhaps "subject to finance" or "subject to a building and pest inspection" or "subject to the sale of the purchaser's property". The contract should stipulate a clear time frame in which the these conditions need to be met.
Another agent then comes in with a cash offer which is far more appealing to the seller as they don’t have to wait for any conditions to be met. They accept and sign the cash contract thinking it means the first contract falls away. This is not the case.
The first offer always takes precedence. The agent with whom the seller signed the second contract to purchase can sue the seller for the full commission should the suspensive conditions on the first offer be met. Furthermore, in this case the purchaser who made the second offer could also have claims on the seller for creating false expectations.
It is the seller’s obligation to make sure they have a copy of the first contract they signed in order to determine the terms and conditions, and to be upfront with all the agents marketing the home about any offers they have accepted or rejected as soon as it happens.
