Every real estate investor has to sell a property at some point. But how do you sell it? That's another story. Your typical homeowner would go the traditional route: They'd call a real estate agent (probably a friend or acquaintance), give them the exclusive right to sell their home, and that'd be that. The home would hit the market, the agent would snag that hefty commission, and they'd all call it a day.
But investors have bottom lines to think about, and sometimes, an exclusive right-to-sell agreement can get in the way of that.
Are you prepping to list a property? Not sure giving an agent exclusivity is the right move? Let's dig in.
What is an exclusive right to sell?
"Exclusive right to sell" is a type of listing contract you enter into with a real estate agent. Put simply, it says that the signing agent is the only person allowed to market and sell your property for a certain amount of time. Generally, these agreements last anywhere from one to six months.
Exclusive right-to-sell agreements also dictate a commission -- usually around 6% of the sales price -- which you'd pay to the agent if the property sold during the specific time period even if they didn't find the buyer.
Pros of an exclusive right-to-sell agreement for investors
The biggest benefit of entering an exclusive right-to-sell arrangement is that your agent is motivated. They know a commission is on the line, and they're going to work hard to get your property sold within the designated time frame.
It also takes the work off your shoulders. You're not stuck marketing the property, showing the home, or hitting the pavement trying to find buyers. Instead, you're free to focus on what you do best while the agent does the same.
Finally, there's a chance you might see a faster sale due to the agent's involvement. Real estate agents are highly tuned in to the local market, so they'll likely know the best pricing and marketing strategies to draw attention in your region. This might mean a faster sale or, in some cases, even a higher selling price.
Cons of an exclusive right-to-sell agreement for investors
Clearly, the major downside with an exclusive right-to-sell contract is that you're on the hook for a hefty commission no matter what. If your home sells within the specified contract period -- by any means -- then the agent gets the fee, plain and simple.
This is pretty risky if you're an experienced investor, especially one with a lot of agent and industry connections. If you've been at it a while, there's a good chance you might find a buyer on your own -- or through your network. If that were to happen, you'd still be out that commission fee, whether your listing agent did any work or not.
The pros and cons of an exclusive right-to-sell agreement for investors