Putting the Seller’s Interests First
Mark Schnurman Jan. 20, 2014, 10:14 a.m.
Brokers must put the Seller’s best interests first and decide on the optimal marketing approach to maximize a property’s value. A flexible, robust brokerage platform that allows for both quiet, targeted, off-market deals and exclusives with a full blown marketing rollout allows Brokers to create customized marketing plans to meet a seller’s needs.
This is important because the belief has grown in recent years that exclusives achieve a higher price for the owner; they do not. While there is a lot of debate about the best method of maximizing sale prices, an analysis of NYC sales transactions identified no pricing differential for exclusives over off-market deals. Therefore, marketing a property to 25,000 people is useless and unnecessary if they are not active buyers. So many exclusives sell short of their listing prices that often it seems higher prices are promised to secure business.
What actually creates premium and benchmark pricing is the Broker’s ability to market a property appropriately, to the “right” buyers and negotiate effectively on behalf of the owner.
Let’s turn to the different marketing methods.
Off-Market: The ideal property for a quiet off-market approach is one where the probable buyers are easily identified and the owner wants the potential sale handled discreetly or executed quickly. For example, an owner who is concerned about tenant’s reaction to a listing and does not want signs, broad exposure and buyers traipsing through the property would be better served with an off-market listing.
Here is why the off-market pitch, in appropriate circumstances, makes a lot of sense. If a Broker knows the 8-10 investors most likely to buy a property, the broker can get a quick deal at top dollar. Buyers are willing to pay top dollar to have first shot and to keep a deal “off the market”. Additionally, many buyers just do not get involved in public auctions. Off-market listings are fast, discreet and efficient and allow the seller to avoid a long, time-consuming process that will eventually lead to the same sales price from buyers that were originally identified. Further, the length of an exclusive listing process can also alienate time sensitive buyers (think 1031) who either prefer or must act quickly.
Not all firms are capable of executing off-market deals and they are only an effective option when a firm works closely with buyers and knows what the most active, best-capitalized buyers are seeking.
Exclusives: In contrast, exclusive listings are a great option where the owner is comfortable with a full blown marketing plan that includes unlimited distribution and showings of the property. When a property is unique, it is difficult to understand and/or buyers are not easily identified so marketing it broadly to maximize exposure is the best option. The process of broadly marketing a property can uncover new and different buyers and leave the seller with the confidence that no stone has been left unturned.
All exclusives are not created equal and not every firm executes exclusive marketing plans with equal élan. To maximize the return on exclusive listings a firm must have a large, dynamic relational database of local, national and international buyers. Further, a team of dedicated analysts, marketing staff and an experienced Broker to develop a strategy and quarterback a deal are critical; otherwise, exclusives are really just off-market listings in disguise. Exclusives should not be about controlling a deal but about ensuring the seller does not leave a dollar on the table.
In contrast to many firms, Eastern’s platform was developed to support both marketing methods and is world class at both off-market and exclusive marketing processes. This allows Eastern Brokers to do what benefits their clients.
Both off-market and exclusive listings are effective in the right situation. Most important in the decision is choosing the approach that makes the most sense for the seller.