It is common to think that you know all about how to sell because of your experience in real estate in another land. In Costa Rica real estate, this type of thinking can be a real hindrance.[/caption]
We have posted quite a bit on this blog about seller’s options in Costa Rica and in particular, The Zone. In this article I will list the pros and cons of the various Seller’s Options and hopefully help to unravel some of the perplexing issues presented by the lack of representation for the seller.
How to do an effective Open Listing:
For a raw land listing, here is a list of what you’ll need:
- The survey (plano) of the property.
- Information on the various fees associated with the property, ie. taxes, road dues, water, monthly maintenance.
- Current photos of the property and its view.
- Creative write-up
For a house listing you’ll also need, in addition to the above:
- A description of the house – number of bedrooms, baths, square footage, if there is a pool, garage etc…
- Who built it and when.
- Disclose any details about the house that the buyer has the right to know.
What you do with all this:
- You start working all of the real estate agencies and disbursing the materials.
- You make appointments to show your property to each agency. Conversely, you can make some other arrangement by which the various agencies and their agents can know where the property is located and the property’s various details.
- You establish the method for showing the property and local contact information if appropriate.
- You wait a week or two and check the websites to verify that your property has been posted there.
- When you see that your listing is not yet posted, you call, e-mail or stop by again and cordially nudge.
- Once you see it posted, send a thank you note and remind them that you are available for any help if needed (of course, for absentee owners, you are limited in what you have to offer.)
- You pay out the full commission (generally 8%) to the selling agency.
Sounds like a lot of work, right? Right, it is. This is because this in an Open Listing. That and the fact that there is no Multiple Listing Service (MLS) in Costa Rica.
In your homeland, it is likely that you’ve got an MLS. The procedure there is simply to work with the real estate agent of your choosing, and this agent will do all of the above for you. The “listing agent” is motivated by the 50% share he/she will receive when the property sells.
Sellers that live here in The Zone sometimes choose the “Open” listing option since they are in a position to manage their own listing. Absentee owners are another case. Enter the…
This option is gaining some ground (no pun intended) here. The exclusive listing is an imitation of the MLS model that is practiced in most other countries of Planet Earth. Exceptions that I know of are England and the state of Mississippi. I understand that when a property goes up for sale in England, multiple For Sale signs appear on the property due to the fact that it is an open listing.
In the Exclusive Listing, you provide some of the above materials to one single real estate agent, and that agent does the rest. He/she is entrusted with the work of notifying all the agencies in The Zone with the materials. They are also responsible for making sure that the agencies know where the property is and the specific details of the property. These exclusive agents are available to ride along with the other agents and their clients when the agent is not already familiar with the property. It may even be advisable for the Exclusive Listing Agent to do an open house, complete with wine & cheese.
The commission is generally split 50/50% with your agent (seller’s agent) and the agent that brings the buyer (buyer’s agent) receiving their respective percentage.
With the Open Listing, the agencies and their commissioned sales people are optimally motivated by the full commission aspect of this type of listing.
The downside of the Open Listing is that it requires a lot of time and effort to present and follow up on the presentation. There also is no representation with the Open Listing. This is an important point. You may not know the agent that you end up working with on the sale of your property. The agent represents both sides of the deal. This is no problem if you have a trustworthy agent, but there is room in this construct for less than optimal disclosure.
Another downside aspect of the Open Listing is the quality of service you can expect from the agents who take your listing. They/we are keenly aware of the fact that we may do all the listing work, and receive nothing for it. Someone else may sell your property and then they/we get nothing for the work invested.
With the Exclusive listing you get all of the services performed by the listing agent, and that agent is compensated and motivated to get the listing out to the other agencies. For the absentee seller, this has an obvious appeal. Also, you get representation, just like in the MLS model of the U.S. and other countries. You just deal with one agent, and he/she is only concerned with taking care of your interests in the deal. The buyer’s agent will provide representation to the buyer (hence the name :o). You can expect better service from your Exclusive Listing agent than your Open Listing agent for what are now, obvious reasons.
The concern you should have in giving an Exclusive Listing is that your listing agent may not do the work of getting your listing out to the other agencies. It can end up being that you are essentially only listed with the one agency. Some sellers are concerned that the shared commission will not compare well with other full commission options that the agencies no doubt have in their inventories. I feel that this used to be a problem, back when Open Listings were the norm and Exclusives the exception. The majority of the real estate deals that happen now are shared commission deals and so we’ve all grown accustomed to this arrangement.
To this point there is an ethical point made in its defense. “The agent should be primarily concerned with finding the best property for their client, and have the commission as secondary to that.”
These words will be said by any ethical real estate agent. But, they will also be said by any real estate agent.
Imagine: the realtor has 5 properties that satisfy the buyer’s criteria. Of the 5, 4 are open listings and pay a full commission to the selling agency. 1 pays a shared commission due to its being exclusive with another agency. Well… you can play out the rest.
I can attest to the fact that I have witnessed a genuinely unbiased presentation of properties here in The Zone by the various real estate agencies, regardless of whether the property is Open or Exclusive. The concern comes when one considers what I like to call “human nature”.
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