When listings are scarce, one-party listings can be a powerful tool to locate properties that are not currently listed but whose owners might be willing to sell if they receive the right offer. Here’s a solid strategy to turn unlisted properties into done deals.
With more than 1,000 Inman posts, Bernice Ross is a long-time contributor whose weekly column on real estate trends, luxury, marketing and other best practices publishes every Monday.
When listings are scarce, one-party listings can be a powerful tool to locate properties that are not currently listed but whose owners might be willing to sell if they receive the right offer.
In a one-party listing agreement, a seller agrees to list their property with a brokerage for one specific buyer. The seller is obligated to pay the broker commission at closing only if that specific buyer purchases the seller’s property.
Unfortunately, very few agents have perfected an effective system for using this powerful tool in their businesses. Here’s how to make it work.
How can you go about finding these reluctant sellers who might be candidates for a one-party listing? A great place to begin is with buyers who have made offers on other properties and lost out in multiple offers.
Here are the steps to follow:
Start by taking your buyers out and asking them to identify the properties they would like to see based on the outside of the property or any other information you can provide.
Draft a letter (not a postcard) that includes information about what the buyers want as well as their price range, and send it to the owners.
Here’s an example:
My buyers are serious buyers who have lost out in multiple offers on two homes similar to yours. They are pre-approved for a purchase price of up to $400,000. They have driven by your home and have expressed an interest in seeing it if it were ever to come on the market.
If you would be interested in having your home shown to buyers, I would be pleased to meet with you to discuss a one-party listing for these buyers only. Please note, the agreement only applies to these buyers. You are under no obligation to pay my company a commission if you sell the property to someone else.
In addition to including a business card, be sure to hand sign the letter and hand address a plain white envelope. People are more likely to open letters that are hand-addressed.
Do not use your company stationery, which can cause the recipient to toss the letter without reading it.
Where to locate unlisted sellers
1. For-sale-by-owners (FSBOs)
For over 50 years, agents have been using one-party listings as a way to be compensated if they sell a for-sale-by-owner (FSBO). One of the obvious places to search is on FSBO websites. Other places include local newspapers, Craigslist and Zillow’s “make me move” properties.
2. Prospect lease expireds
Lease expireds can be an excellent source for locating owners who have multiple properties. If your MLS provides this data, search for properties that were leased or expired eight to 10 months ago.
Because most lease agreements are for one year, these properties might be coming back on the market in the next few months. If the owner has had a difficult tenant, the owner may decide to sell. The tenant, on the other hand, might also be ready to buy.
3. Pull up active ‘for rent’ listings
Websites that list “for rent” listings include Craigslist, HotPads, realtor.com, Trulia and Zillow. You can also check Oodle.com and Facebook Marketplace for their rental sections.
Be sure to check with your local title company as to who owns the property because with one search you might identify up to 10 or more investments held by the same person. You never know when one of them might want to sell or do a 1031 tax deferred exchange.
At the appointment
To effectively use one-party listings to convert unlisted seller leads, you must be able to explain how the process works.
Here’s what to say when you approach a potential seller:
Sellers, a one-party listing is only for the one buyer designated in the contract. Once we have agreed on the price and the commission, I will show your property to the buyers. If they are interested in making an offer, we will begin negotiations.
If the negotiations are successful, your property will be placed under contract, and we will move forward with inspections and the other steps required to close the sale.
If the buyers elect not to write an offer, the one-party listing expires in 30 days. If these buyers were to purchase your property anytime during the next year, however, you will be obligated to pay my company a commission.
If you are considering purchasing a different property, it would be my pleasure to locate current listings that meet your specifications or introduce you to a top agent where you are relocating.
Pitfalls to avoid
Under no circumstances do you show the property prior to obtaining a signed one-party or an exclusive right to sell agreement plus the agency documentation. Clarifying the exact nature of the agreement and addressing the required agency issues is critical to avoiding potential litigation.
One of the biggest risks in using one-party listings is creating a dual agency situation. There are several ways to address this, depending upon the agency laws in your state. If dual agency is allowed, then you can represent both the buyer and the seller. If this is the case, ask for a full commission, not just the buyer’s side commission.
Alternatively, you can represent the buyer exclusively, but it’s easy to fall into a dual agency situation. Please note that the moment you step into an advisory role for the seller, you become the seller’s agent in most states.
Before you have the owners sign the paperwork, be sure to explain that you represent the buyer exclusively and that you cannot advise the sellers on transaction-related matters. Instead, they should seek the advice of a real estate attorney.
Does this strategy work? It has for over 25 years. The agent who first shared this strategy with me back in 1993 was facing a strong seller’s market where there was no inventory.
The agent had three buyers and sent out three different letters describing what each buyer wanted to purchase. He had one direct sale and obtained two listings that sold as soon as they hit the MLS. That’s an excellent return for very little effort, especially since each of those listings sold for over a million dollars!
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Bernice Ross, president and CEO of BrokerageUp and RealEstateCoach.com, is a national speaker, author and trainer with over 1,000 published articles. Learn about her broker/manager training programs designed for women, by women, at BrokerageUp.com and her new agent sales training at RealEstateCoach.com/newagent.