Negotiating contracts with Limited Service v Exclusive Right of Sale

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Services for Real Estate Pros with ADDvantage Real Estate Services

The most important difference between a limited service (usually flat fee MLS) listing and a traditional “Exclusive Right of Sale" listing is that with Exclusive Right of Sale, buyers’ agents cannot go directly to the seller and discuss terms of an offer.  Then why does this happen on a regular basis?

I believe it is because some agents get carried away and forget that it is a clear ethics violation and on top of that little break in the chain of command, it is a remarkably stupid negotiation strategy.

These unethical renegade agents, in essence, are attempting to pre-negotiate an offer with a represented seller.  When a seller is self-represented, as they would be if they did a flat fee MLS listing with a discount broker, this would of course be perfectly kosher.  But when a seller has hired an agent, this practice is unethical and can hurt negotiations.

For example, if a buyer’s agent asks a seller if they would consider an offer at “x” price or particular terms, the seller could say, “no, I want full price.” The point is when speaking directly with the person that can both make a final decision and has the power to do so, the one asking the question is no longer in a position to negotiate. At best, they have degraded their buyer’s chances of getting the best deal possible.

What is causing a Realtor to dismiss ethical practices and circumvent the listing agent is a mystery.  One might theorize that they have experienced negotiating with flat rate MLS listing sellers and have gotten used to this strategy and forget that it’s not permitted with a full service listing.  Either way, perhaps this is something that needs to be addressed more in the Realtor education system.

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discount real estate
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Rainmaker
1,368,226
Richie Alan Naggar Author PEARLS SERIES of books
People first then business! Ran Right Realty Riverside, Ca - Riverside, CA
on LIFE and LOVE plus Real Estate too!

If we don't maintain order, don't act surprised when chaos comes a knocking...Stick to standard operating procedures

May 25, 2012 06:55 AM #9
Rainmaker
315,692
Dave Halpern
Keller Williams Realty Louisville East (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

Buyer's agents tend to blow up transactions when they speak directly to the seller (when they just happened to be "passing by the house")

May 25, 2012 11:27 AM #10
Rainmaker
550,854
Holly Weatherwax
Momentum Realty - Reston, VA
Moving Your Dreams Forward...

Like the others, I do not see buyer's agents going around me to the seller. If anything, I have occasionally had buyer's  calling me, as the listing agent, directly without the knowledge of their agent. As I always tell my clients, it is important to keep your 'cards close,' when dealing with the other party to a transaction.

The flip side of this is being a buyer's agent working with an unrepresented seller (not as common in our area, but it happens). They often expect advice and are unclear on how the process goes. They can 'shoot themselves in the foot' by  forgetting for whom we are working. A good agent will do what needs to be done so that their buyer gets the property they want, but it can be a big (unpaid) pain!

 

May 26, 2012 06:06 AM #11
Ambassador
1,300,345
Loreena Yeo
3:16 team REALTY ~ Locally-owned Frisco TX Real Estate Co. - Frisco, TX
RealtorĀ® | Frisco TX Community Ambassador

As others have mentioned, I think this practice depends on the area also. Like yours, the FLAT FEE/ DISCOUNT or I should say LIMITED SERVICE agents always ask buyers' agents not to negotiate directly with sellers (because they have been warned by our local boards that it is clearly a violation). They ask BA to fax in offers directly to sellers, and copy the listing agent. Then guess who responds to the offer?

Sellers fail to see how this impede a successful negotiation. Clearly no knowledge of how the system works (most sellers I would say).

May 26, 2012 06:09 AM #12
Rainmaker
547,960
Pat & Wayne Harriman
Harriman Real Estate, LLC (203) 672-4499 - Wallingford, CT
Broker/Owners, Wallingford CT Real Estate

Gotta echo the others, it's just not done here. Even the most incompetent agent should know that that's a no-no and could result in major damage to their career. Hopefully this is an isolated incident for you and won't happen again.

May 26, 2012 06:28 AM #13
Rainmaker
843,163
Lyn Sims
RE/MAX Suburban - Schaumburg IL Real Estate - Northwest Suburbs of Chicago - Schaumburg, IL
Schaumburg Homes

Every once in awhile we see these listings but I didn't know the practice was going on. Maybe the agents don't want to know the rules here? They think it is part of their job?

May 26, 2012 06:40 AM #14
Rainmaker
996,914
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Keith, I will echo what just about everyone else has said above.  I have been a Realtor for tens of years, and I have never had it come up that a Buyer's Agent went and tried to negotiate directly with a seller whose home I had listed with an Exclusive Right to Sell listing... not a limited services one.  Honestly, I am wondering if you just made this topic up to have something to write about.

May 26, 2012 06:54 AM #15
Rainmaker
709,063
Rob Arnold
Sand Dollar Realty Group, Inc. - Altamonte Springs, FL
Metro Orlando Full Service - Investor Friendly & F

A buyer agent should know better than to talk directly to a seller about price and terms.  Clearly unethical. 

May 26, 2012 07:21 AM #16
Rainmaker
307,520
Diana Zaccaro - Your Coastal Connection
Realty 2000 One - Cocoa Beach, FL
for Cocoa Beach and the Brevard County Beaches

I have never heard of this happening here and any agent who did this would have a complaint filed against them.

Karen Anne - it's an ad disguised as a blog...check out his profile and click on the links in the blog...

 

May 26, 2012 07:22 AM #17
Rainmaker
996,914
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Diana... that is so funny.  This post is simply an ad that he has re-printed... and then equally funny... is that the first comment is a drag-and-drop serial comment that I have seen the commentor make time and time again... night after night.

And these people think we don't NOTICE silliness like this ?

Diana... thanks for the heads-up.  I should have known... but it was pretty early when I made my comment.  It usually takes me awhile to wake up.  Hope you are well... my friend and former Mentor'ite.  :)

Oh... and to make it even funnier... the post gets a Gold Star.  Uh huh.  Right !

May 26, 2012 08:30 AM #18
Rainmaker
346,808
John Juarez
Prudential California Realty - Fremont, CA
CDPE, ePRO, SRES, GRI, PMN

A Realtor who goes around the seller’s Realtor is in clear violation of the Realtor Code of Ethics and should be held accountable.

A client should be counseled to refer any inquiries from buyers or agent to their own Realtor.

May 26, 2012 08:51 AM #19
Rainmaker
307,520
Diana Zaccaro - Your Coastal Connection
Realty 2000 One - Cocoa Beach, FL
for Cocoa Beach and the Brevard County Beaches

Karen Anne - LOL! Knowing you as I do, you would have come back later to read the comments and figured it out on your own...it was actually your comment that prompted me to check the profile and links as I was saying to myself "@#$%^&*!@#%%^" (nothing I can type here...)...

And don't even get me started on the serial commenters! You have to get up pretty early in the morning to fool these old former Mentor-ites!!! The Gold Star on this amazes me...I am still scratching my head trying to figure out the feature system...Hope you are doing well, my friend...

 

 

 

May 26, 2012 09:50 AM #20
Rainmaker
387,412
John DL Arendsen
ON THE LEVEL General Contractor, Crest Homes Factory Built Housing Dealer & Developer & TAG Real Estate Sales & Inves... - Leucadia, CA
Contractor, RE Brk, Factory Built Home Dealer/Devl

I haven't experienced anyone trying to pull an end run on me. Is this perhaps a more localized occurance?

May 26, 2012 09:53 AM #21
Rainmaker
572,816
Gary Frimann
Eagle Ridge Realty / Signature Homes & Estates - Gilroy, CA
California Broker and REALTOR

Good point.  I think most agents do not realize that one has a contractual relationship to represent the seller, and what you describe is a tortious interference with a contractual relationship, which is actionable in law.  If the other agent is a Realtor, it can be handled through the Pro Standards committee of you board.

Go get them...  I also think that the general public does not understand the laws of agency as well...

May 26, 2012 10:21 AM #22
Ambassador
1,004,432
Dagny Eason
Dagny's Real Estate - Wilton, CT
Fairfield County CT, CDPE Homes For Sale and Condo

I haven''t seen that in my area.....

May 26, 2012 07:23 PM #23
Rainmaker
1,286,050
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

I don't see this a lot.  The big danger is when the seller is present while showing and then some agents/buyers fish for info.  Keep the Seller out of the house.

May 26, 2012 09:39 PM #24
Rainmaker
276,637
Paddy Deighan JD PhD
Aston McLaren Inc - Vail, CO
Paddy Deighan J.D. Ph.D

things like this happen because of greed and because in desparate times, people do desparate things

May 27, 2012 01:08 AM #25
Rainmaker
650,237
Stephanie/Bob The Ruiz/Miller Team
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Hi Keith, excellent post.  So far I have never found myself in a limited service agency.  Hopefully never will.

May 27, 2012 06:50 AM #26
Rainer
19,164
Keith Gordon
ADDvantage Real Estate Services - Miami, FL

I had this happen with 2 different clients within two weeks...one was in Sarasota, the other in Clearwater.   Both were exclusive right of sale listing clients.  I have over 50 Exclusive Right listings so maybe I have more exposure because of this.  However, it should not ever be happening.   I did report the agent who had made repeated contacts with my client of which he informed me.  Since the MLS clearly states the listing type there is absolutely no excuse for this. 

 

May 29, 2012 04:29 PM #27
Rainmaker
131,925
Matt Robinson
Professional Investors Guild - Pensacola, FL
www.professionalinvestorsguild.com

Keith, I can honestly say that after almost 11 years, and over 50 million in transactions, I don't remember a single time when a buyer's agent tried to go around me as the listing agent to negotiate directly with the seller.  If this happens as frequently in the Miami market as you insinuate in your post, I am extremely glad I don't work or live there!  God bless your heart for putting up with those kinds of agents...

May 07, 2013 10:43 AM #28
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Rainer
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Keith Gordon

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