This short cartoon is an example of how to “walk away” from an unrealistic client.
On a raining morning this past week I decided to watch a television show called “Million Dollar Listing” where these young, hot shot real estate brokers work on luxury residential deals in L.A. Reality TV isn’t really my thing, but this one caught my attention.
In this particular episode, this guy named Josh started by talking about a $5,000,000 listing that he had. In giving his commentary on this listing, he emphasizes that the house is “way over priced” and that he didn’t think that anything in that market had ever sold for more than 3 or 4 million dollars. He also said that the seller was difficult and eccentric but was “a really good person” for reasons I’m still not particularly clear on. After hearing this, my first thought was “so why did you take the listing Josh?” I assumed that since this was reality television, Josh was probably going to pull a rabbit out of his hat and find the perfect buyer who would pay full price and set a record for highest sales price in that market. The whole dissertation about the property being way overpriced was just a setup for the happy ending right?
Josh and his co-listing partner get an offer for $3,000,000 from an investor who wants to refurbish the property and is willing to share the profits with the seller. They decide to meet the seller to present the offer and before meeting him Josh says to his partner “you know he’s not going to like it and it’s going to get ugly” to which his partner replays “yeah, it’s going to be a blood bath”. Ah, c’mon they’re just building the drama for the big negotiation and deal that’s about to happen, right? Um, no.
They present the offer and the seller simply says “no”, that’s all he said, and Josh tries to convince him that this is the best offer he is going to see. This is where it got interesting for me. The seller somewhat angrily reminds Josh and his partner that they agreed to take the listing at $5 million and he expected them to sell it for $5 million. He hammers home his point by telling them that he STILL expects them to sell it for $5 million and storms out of the restaurant with a few words that got bleeped.
Now the camera shows Josh and his partner red faced and complaining about how the seller is delusional. The partner says “we have to give the listing back”. Josh agrees and adds a few more derogatory adjectives describing the seller and how “out of touch with reality” he is.
HEY JOSH…..WHY’D YOU TAKE THE LISTING IN THE FIRST PLACE?? Agreeing to take a listing that is grossly outside the range of comparable sales in the market creates the expectation with the client that you can perform by selling that property. Logic should tell you that you are doing both the client and yourself a serious disservice. When developing an inventory of exclusive listings, it is of paramount importance that you protect both your brand AND the efficiency of your business activities by focusing on HIGH PROBABILITY assignments. Taking overpriced or undeliverable listings damages your reputation in the marketplace, with your brokerage peers, with clients and prospects and within the industry. Don’t fall into the trap of convincing yourself that once you start marketing the listing, you’ll be able to convince the seller to “chase the market down”. This is a terrible practice that creates ill will between you and the client. Here are 3 things to ask yourself before accepting an exclusive assignment:
1. Is the client realistic about meeting the market? If you’ve done a good job in the proposal process, you’ve shown the client tangible market data that support your recommended listing price. Make sure the client is aligned with your assessment of the data as it relates to the listing price and get agreement.
2. Are the client’s motivations compelling enough to create a high probability of a transaction. In other words, does the client have a compelling reason to enter into a sale or lease as opposed to testing the market or going on a “fishing expedition”. You must dig deep in the discovery process by asking pointed questions of the client regarding the client’s true motivations for entering into a transaction.
3. Is the agreed upon listing price likely to generate multiple offers within the first 45 days of the assignment. Yes, I understand that the market has been challenging, but a properly priced listing which is properly marketed should generate competitive offers within the first 45 days of the listing period. Competition tends to push prices to the higher end of the range and you must articulate to the client the market dynamics of creating a bidding environment vs. overpricing and chasing the market down.