Reserving buyers in a listing agreement- The Pros and Cons

By
Real Estate Agent with RE/MAX Real Estate Concepts

When listing a property for sale many brokerages allow for the possibility that a seller can "reserve" a buyer, meaning the seller can create an option in the listing contract that if this certain buyer decides to buy the property, the seller will be able to sell to the prospect directly and save on paying the listing commission.

To enact this process the seller needs to provide the first and last name and contact information of the prospect. The reserve buyer's information is then written into the agreement. If during the listing period the buyer decides to buy the property, the seller can cancel the agreement and sell directly to the buyer without the aid of the listing broker. This arrangement is then noted on the MLS so that showing agents are aware of the possibility of a sale to a reserve buyer. Sellers generally cannot reserve buyers after the listing has been put on the market.

There are pros and cons to this process

PROS

  • Seller can save money that might have been paid to a real estate broker.
  • A prospective buyer may be able to get a property below list price.

CONS

  • Seller will be unrepresented and will likely need to hire an attorney to handle parts of a sale.
  • Buyer will be unrepresented and will likely pay more out of pocket for legal fees.
  • Some agents will not show the property for fear that a seller will present an opportunity to the reserved buyer to buy the property at a more competitive price.
  • Only a small fraction of reserve buyers ever buy the home.

For sellers considering reserving a buyer the best bet would be to contact the prospect well in advance of the listing date and give the buyer a deadline to decide whether they want to buy the home. That way the seller knows if the prospect is motivated or just wasting everyones time.

If the buyer professes to need more thime then the seller can reserve the buyer, but should time out the reserve period. For example, if the property goes on the market February 1st, the seller can time ou the reserve period at say March 31st. That way they give the buyer the opportunity to buy, but they don't hobble themselves for the entire listing period with a buyer that is not a serious prospect.

In the seven years I've been listing homes I've had at least a dozen or more sellers reserve prospects. In no case has the reserve buyer ever brought the home. A seller should consider carefully whether a person who expresses interest in buying the home is a bona fide purchaser or just a wishful thinker who may hampers their ultimate goal of getting the porperty sold.

 

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Contact Matt Grohe Realtor® RE/MAX Real Estate Concepts - 3125 Douglas Ave #205 Douglas Ave. Des Moines, IA , or call 515-988-3726 to list your property for sale or to purchase a property in Des Moines, West Des Moines, Windsor Heights, Clive, Johnston, Urbandale, Ankeny, Waukee, Norwalk, Carlisle or surrounding areas.

Online at: http://www.MyIowaHome.com

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Rainer
96,920
Tricia Pearson
Tricia Pearson - Pearson Real Estate - Texas Hill Country - Boerne, TX
Real Estate Broker, San Antonio/Hill Country Homes for Sale

Hi Matt,

When I take a listing and the Seller has a reserve Buyer, I write in the listing agreement that the reserve Buyer has a drop dead date to make an offer to the Seller for the property (usually 3-5 days).  After that date, they will be treated like any other Buyer, and all commissions will be paid according to the listing agreement.  It doesn't make any sense for me or another Agent to bring a Buyer and have the Seller make a deal with his reserve.

Like you, I have never had a reserve Buyer purchase the property.

Mar 08, 2010 09:09 PM #1
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Patricia Kennedy
Evers & Company Real Estate, Inc. - Washington, DC
For Your Home in the Capital

Matt, there are many ways to structure these arrangements.  I put a short time linit on the exception and/or agree to handle it at a somewhat reduced brokerage if the excepted buyer does come through.  But you know, I've never ever seen one of these guys actually come through.

Mar 09, 2010 09:14 AM #2
Rainmaker
131,339
Michele Reneau
Certified Staging Professional (CSP) Elite Instructor - Summerville, SC
Realtor, GRI ~ Charleston, SC Relocation Experts Team

I agree that excluding prospects can have pros and cons. I agree with Patricia in putting time constraints on the prospect. On the very few times a seller has excluded a buyer, I've never had one come through either.

Mar 19, 2010 05:49 PM #3
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Rainmaker
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Matt Grohe

RE/MAX Des Moines
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