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Friday, February 26, 2010

How Long Should a Listing Contract Be?

Realtors' Investment?
Skill, Time, & Marketing $$

How long should a listing contract be?

The short answer:

Long enough to sell the property being listed.

How long that is -- assuming that the home is well-priced, staged, and marketed -- is typically a function of price.

Under $200k in the Twin Cities today, you'd estimate 2-3 months of market time.

For a move-up home ($250k - $450k), 3 - 5 months.

As homes cross mid-six figures ($500k-plus), average market time locally can easily be six months now; double that for homes over $1 million.

For each of the above categories, add extra time for properties that are especially unique, or only appeal to a narrow slice of the market (automatically the case for homes over $1 million).

Step 2

Step 2 of calculating a contract term is to allow additional time for the home to close, once it's under contract.

From the time the last addendum on the Purchase Agreement is signed off on, that's typically about 10 days to remove the Inspection Contingency, than another 4-6 weeks for the home to appraise and the Buyer's loan to be finalized.

Bottom line: to sell a $399k Twin Cities home today, just as an example, I'd typically ask for a six month listing.

Listing Contract "Subtext"

Why not a shorter listing contract?

Or none at all?

That's certainly possible, but that really isn't fair to the Realtor -- at least one who is conscientiously doing their job.

That's because much of the Realtor's investment of their time (and marketing dollars) is made upfront.

That's when the Realtor conceives and implements their marketing plan -- making sure the home is staged to maximum effect; professionally photographed; and all the marketing materials proofed (and re-proofed a couple more times).

Of course, before any of those things happen, many Realtors work closely with their clients making sure that their home is in good repair, and advising "strategic" (cost-effective) updates, if that's indicated.

While all that's going on, a good Realtor is already doing what's called "pre-list marketing," i.e., promoting the home to prospective Buyers, and building market awareness.

Sprint -- or Marathon?

Hopefully, all those efforts produce a quick sale at a good price.

If they don't, however, it is the Realtor's job to support the listing with ongoing marketing.

That means making sure that the home continues to look fresh -- both online and in-person; and keeping the home in front of prospective Buyers by continuing to "plug" it at Realtor meetings, through email, ads, etc.

Too, it is incumbent upon the Realtor to tell clients when a price reduction is indicated -- then aggressively market the new, lower price.

It's certainly possible to have a client extend an about-to-expire listing in the middle of all that.

But it's preferable -- and easier -- to simply ask for the right amount of time in the first place.

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