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September 12, 2012


Mastermind for September 12th. Recouping Marketing Costs from a Seller.

by mark mclean

Years ago, I took an overpriced listing. I knew it was overpriced, but as I was trying desperately to establish myself in the neighbourhood, I took the listing anyway. It was one of the first multiple million dollar listings in the hood and if by some wild chance someone would pay twice what it was worth the sale would literally put me on the map. So I guess I was a little star struck by the sale price. It wasn’t as if I didn’t try to reason with the seller. I told him what my opinion of fair market value was but he didn’t care. In his mind the place was worth much, much more. Yes, I should have walked away but when the owner offered to pay for the marketing costs if it didn’t sell in six months, I truly thought I had nothing to lose. So I would be out some basic costs, big deal. For those six months I would have the most expensive residential property for sale in the neighbourhood.

 I tell this story because in Mastermind last week we talked about marketing costs and whether it is fair to ask a seller to reimburse us if they terminate the listing or don’t accept a fair offer. An agent in my office said that the practice was part of his listing presentation. It seems valid. Most of the cost of listing a home comes before the property even gets to MLS. We spend a lot of money on pictures, video, floor plans, pre listing inspection, staging, flyers and property brochures. So what if after the first week on the market, the Seller decides not to sell?  Does the agent deserve to be reimbursed? What if the Seller does not get the wildly over asking offer? What if the whole listing process was just a way to get an accurate appraisal for the bank or some crazy fishing expedition to figure out what the house was worth?

 Last year, a similar story appeared in the Toronto Star. A Toronto man was sued by his agent for the costs associated with staging his home. The owner was quoted as saying that selling his house at the price offered would mean taking a $50K loss and apparently he felt it was wrong for the agent to sue him knowing he would lose money. In the end, the owner settled out of court for around half, claiming that the cost of small claims court and legal fees would have cost him more. Well it was clear that listing a home to figure out what your house is worth may not be the best idea but what is interesting is that the listing agent suspected from the start that the owner wasn’t really serious about selling.

Obviously a marketing contract could be a useful thing but the question remains, do you think you would lose out on a listing if you insisted on having sellers agree to this? Is it possible that if a client refuses to repay you he probably never had any intention of selling in the first place? Food for thought.

3 Comments Post a comment
  1. Agnes
    Sep 12 2012

    With a clause like in the listing agreement would bring more respect to our industry.
    Don’t you agree?

  2. chris
    Sep 25 2012

    for sure since it would weed out someone who is actually serious from someone who is just fishing for that price that may never be realized…then again that comes down to our ability to qualify the seller in the first place

  3. Nov 28 2014

    A lawyer would demand a retainer. Why not real estate agents? The amount paid as a retainer could be deducted from the proceeds at closing on a successful transaction.


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