I am considering listing my home this year, but I’ve heard different things about how long of a listing agreement I should sign. I would only want to sign for maybe three months, and if things aren’t going to my liking, be able to terminate and find another agent. I’ve been told that that isn’t really long enough to get a house sold, but how long does a good agent need?
—Sean, West Hollywood
I’m glad you asked this question. I just had this come up last week with a potential seller. The short answer is, three months is not long enough. Consider this: When I take a listing, I provide the seller with a 16-point marketing plan of how I will get the house sold. It covers everything from professional photography to creating a website, getting the word out to all the other agents in town, holding open houses, brokers opens, contacting my client list and other well connected agents I know who might have a buyer, etc.
The ramp-up time on this particular listing (about $2 million, if the seller has his way), is at least a week or so before all cylinders are firing. There is marketing material to be designed and printed, ads to place, copy to be written and more. On a listing of $2 million, I can expect to spend anywhere from $2,500 to $5,000 on marketing and advertising. For all of that time, energy and expense, I need to know that I’m being given sufficient time to find the right buyer for this property (“right” meaning one who is ready, willing and able to close the deal).
If the house is extremely well priced and thus not on the market long, it could be significantly less than 90 days. But let’s be specific and talk about this exact listing I interviewed for. The house should be priced at no more than $1.75 million in my opinion, and based on comparables in the neighborhood.
Thus, barring a miracle, there is not going to be much action on this house beyond an initial burst of interest at the beginning. So I am going to invest thousands of dollars into marketing a house that I only have 90 days to sell, at an overinflated list price. Keep in mind that every penny of those marketing costs comes directly out of my pocket. Every penny. Now, that’s all fine and good if the house sells. It was an investment in the listing, and that’s just the cost of doing business in real estate. But as a listing agent, if I’m going to invest that kind of coin into selling your house, I need to know I am going to have a fair shot at selling it. Otherwise, I never see those thousands of dollars again.
Without question, I will give it everything I have in me to get it sold at that $2 million price, but I have to operate on the assumption that people will do their homework and come to the conclusion that it’s not worth that amount. That leaves me with the potential for that listing to become stale and a need for a price reduction within a few weeks.
Now, all of the above notwithstanding, here are a couple of other things to take into consideration. First, if your concern is being able to break ties because you are not happy with the agent’s performance, have that conversation. Most agents aren’t going to force you to stay in an agency relationship you don’t want to be in, but keep this in mind. Do not mistake an overpriced listing for inadequate performance on the agent’s part. A listing agent can only use the tools he or she has to work with, and the most important one—the one that matters over all others—is a properly priced listing. All the marketing, advertising, wining and dining in the world is not likely to bring you a buyer who’s going to pay 10 or 15 percent over the home’s value. If you’re getting lots of showings and no offers, take note. You are very likely overpriced.
If you are the type of seller who is confident enough in your agent to let them recommend the price (and let’s face it, if you aren’t, why in the world did you hire them?), and they say they’re comfortable with the price you’re listing at, then ideally it shouldn’t take three months to sell. But pricing a home correctly is both an art and a science, and sometimes we’re off a little in what we think a home should command. If you want three months and the agent wants six, maybe a compromise is in order—perhaps four or five months, or three months with an option to extend. But at the end of the day, I have to recommend that you give the agent you end up choosing adequate time to do their magic. Trust me, you both want the same thing, which is to get the house sold. They are going to do everything in their power to put it into escrow as soon as is humanly possible.
Jefferson Hendrick is an L.A.-based Realtor with Keller Williams. Contact him with questions, concerns and real estate inquiries at [email protected] or facebook.com/jeffersonhendrickrealtor.