Benefits of Exclusive Representation
Imagine for a moment, you own an apartment building and it is time to sell.
What are your options?
You could try to sell the property yourself.
You could inform multiple brokers about your intention to sell.
You could hire one broker to represent you in the transaction.
How you present your property to the market significantly impacts the value of your investment.
The people who hire one broker on an exclusive basis often get the highest price and have the least headaches navigating the sale process.
Unfortunately, many apartment owners misunderstand the benefits of exclusive representation and miss out on its advantages.
Too many try to sell the property off-market, putting themselves in a weak negotiating position with limited leverage.
Or they think it would be better to have every broker in town working on their sale, not realizing that those brokers won’t take the listing seriously without an exclusive compensation agreement.
So let’s first explore the pitfalls of off-market and non-exclusive sales. Then we’ll look at the benefits of exclusive representation.
The Pitfalls of Off-Market Sales
Sellers often feel they can sell their property without the expertise of a professional broker.
Maybe they know someone who wants to buy apartment buildings. Or maybe they have received inquiries from buyers hoping to make an offer.
By going directly to the potential buyer, these sellers often feel they’ve made a savvy business decision to save on brokerage commissions. But in reality, they’ve put themselves in a weaker negotiating position and signed up for more work than they bargained for.
In an off-market transaction, the buyer knows they have limited competition. This has important implications for the deal.
Direct buyer-to-seller transactions are often characterized by:
Lowball offers.
Lack of enforced timelines.
Higher chance of re-trades.
Back-and-forth negotiations to nowhere.
Higher chance the deal falls out of contract.
The lack of an organized go-to-market strategy means these sellers don’t control the sale process.
This risk is mitigated by hiring a qualified broker to represent you in the transaction.
The Pitfalls of Non-Exclusive Listings
Apartment owners often think having multiple brokers working on a sale increases exposure. In reality, it’s often the opposite. It leads to less effort from each broker and significantly less overall exposure.
I’ve heard this many times.
“Why would I hire one broker, when I can have every broker in town working to find me a buyer?”
This reasoning quickly falls apart when you think about the broker’s incentives.
The broker has no guarantee of being paid for their work. Why would they spend their time marketing your property?
Without an Exclusive Right to Sell agreement, we won’t be making hundreds of phone calls, sending thousands of emails, and posting the opportunity online.
At best, each broker will call a handful of their best buyers.
Meaning, your property will be seen by far fewer people than if you hired one broker who has a comprehensive marketing plan.
The Benefits of Exclusive Representation
Hiring one broker benefits sellers interested in simplifying the sale process and achieving the best available price and terms.
Here are two important benefits you get through exclusive representation.
1. More market exposure
By giving the broker the exclusive right to sell your property, you align their incentives with yours.
They are contractually guaranteed a commission when the deal closes, giving them ample motivation to ensure every potential buyer sees your property and understands the value.
They will make sure no stone is unturned. Their marketing strategy will include hundreds of phone calls, emails to thousands of investors, and posts to online marketplaces and social media.
Your property will receive more attention from interested buyers, giving you more options and negotiating leverage.
2. A trained professional organizing the process
We have experience marketing assets similar to yours. We know how to present your property in the best possible light to get investors excited to own your asset.
We have an organized process to facilitate property tours, answer investor questions, manage information transfer, and control the bidding timeline.
By controlling the sale process, it levels the playing field for buyers. The only way for them to stand out is by making a competitive offer.
By hiring a broker to represent you on an exclusive basis you will have more control and ensure you don’t leave money on the table in your transaction.