I have been a bit negative about exclusive listings in the past. My attitude towards these is now changing and, if anything, I’d say I’m a bit positive towards them now – with caveats.
The Exclusive Listing is a hybrid business model between the existing Costa Rica non-MLS model, and the Multiple Listing Service model that so many are accustomed to in the U.S., Canada, and elsewhere. I have recently learned that England does not have an MLS and, get this, that Mississippi doesn’t have an MLS. The point about England came from a reliable source. The one about Mississippi was chit-chat. I did a cursory study of the Mississippi matter on the internet and found a little bit of information but it’s still unconfirmed.
In my previous article I considered the workings of the standard Costa Rica real estate model – the Open Listing.. If you haven’t read it (and would like to) you can by clicking here.
Realtors in England are called “Estate Agents” and the term “Real Estate Agent” is looked down upon. The non-MLS model has been used forever in the UK and they are quite settled with it, thank you very much. In a single yard of a house for sale you can see numerous signs to the various agencies that have the property listed. The typical commission paid to an Estate Agent in the UK is 1.5%
The exclusive listing attempts to provide buyer/seller representation in the Costa Rica market place.
The Way it Works
You approach your favorite real estate agent. You give that agent the listing for your property. That agent then takes the full responsibility of marketing your property so that it receives the broadest possible exposure. Sounds good right? Well, it is, but…
This reliable agent that you have selected to represent your property to the marketplace is now expected to get the other agencies in the area to:
- List the property on their website
- Present the listing to appropriate prospective buyers, be they walk-ins or referred clients, or e-mail inquiries.
Here in Costa Rica’s southern Pacific zone, 8% is normal for a raw land sale. Some remote properties and larger farms pay a 10% commission. Over $1,000,000 houses will sometimes offer a reduced commission in the 6% & 7% range.
In the exclusive listing model, the full commission is paid to the listing agency. The listing agency can decide how much of the commission to offer out to other agencies. The standard would be the 50% / 50% co-broke.
One primary concern is related to the commission. As we consider this, please keep in mind that this is not an MLS system. Currently the majority of listings in the agency’s databases are open listings that pay the full commission to the selling agency. So, the concern to the seller is that the various agencies be motivated to present their property to prospective buyers. With an exclusive listing, only the listing agency will receive what is perceived here in Costa Rica as “full commission”, everyone else will view the commission as “shared”.
Human nature being what it is, we brokers are, at the very least, influenced by this point. Of course, the ideal is that we present the property that is best for the client, strictly based on what is most appropriate for them, and not what pays the highest commission to the agent. However, if we agents have 4 properties that could be appropriate to show a buyer, and of the 4, 3 pay full commission and one is shared, guess which 3 get shown first. Its just the way it is, and it is one of the downside components of our non-MLS model.
The commission split can be tweaked a bit by the listing agent to reduce this concern. Or, the seller and the listing agent can work together to tweak it up a bit. Here are some possible commission splits that have worked that differ from the straight 50/50 split between listing and buyers agents. I’ll use 8% as the base commission in these examples.
- 5% flows to the selling agency and 3% to the listing agency. This slight difference from the straight up 50/50 can go a long way in making the difference.
- The seller can kick in an extra 2% so that they are now paying out 10% commission. The selling agency gets the normal 6% and the listing agency receives 4%
- I have heard of the above strategy going up to 12% so that the selling agency gets full commission and the listing agent is covered.
- The seller offers a higher commission of examples 2 & 3 above if another agency sells the property so that the listing agency gets their cut, and the selling agency gets a good commission. If the listing agency also sells the property, then the commission would be 8% paid out to the listing agency.
Listing Agency’s Concerns
All of the time that we realtors currently spend in listing a property could very well be for naught. In the common “Open Listing”, we visit the property, learn where the boundary lines are, understand the water and electrical services, understand the road maintenance arrangement for the property, take photos, contract with the seller and then post everything to the web site. This can take half a day, sometimes an entire day. We are not sure our time will be compensated in the non-MLS Open Listing. This is yet another reason why the MLS model is superior to the non-MLS model. The listing agent is sure to be compensated for his/her time, effort, and expense.
However, there are some concerns to taking on an exclusive listing.
Does the agency have the necessary time to handle the responsibility of the exclusive agreement? Handling an exclusive listing correctly is an obligation not to be taken lightly by the listing agency. In my office, we have turned down more requests for exclusive representation than we have accepted for this very reason.
The sell ability of the property is also a concern to the listing agency. The agency might determine that the property is just not that desirable and hence difficult to sell, so they are not interested in the obligation as respects that particular property. Or it may be that the seller is in the “we know we’re high, but we’re not in a hurry to sell. The market will come up to our price someday. Meanwhile maybe the buyer will come along” group. Its highly unlikely that an agency will take such a listing on as an exclusive.
Obviously, if the property is a screamer, unique and well priced, we’ll all line up to get a crack at the exclusive listing. Shameless plug: we just got one of those. Click here to check it out, complete with video.
I stated out the outset of this article that things are changing around here. This change comes in the way of the forming Southern Pacific Association of Realtors or SPAR as we are calling ourselves. The support of SPAR has taken off beyond what we expected. The ultimate goal of SPAR is to have a Multiple Listing Service here in our corner of Costa Rica, but that is both an involved and expensive objective, and so it remains yet in the future.
In the meantime, the interest on the part of all the real estate professionals in the area is to improve the quality of the industry here in our zone. We have all recognized and discussed how it is imperative that we present the listings that other real estate agencies give us, even though the commission structure is “shared”. This is extremely good news for sellers of property in our area.
The exclusive listing answers a lot of the concerns of the open listing. Its still not perfect, but there is
movement in this topic now, which is a good thing. If SPAR continues to develop, there is basis for optimism about real estate as a profession here in Costa Rica.