I’m sure we’ve talked about this before on TRB at some point in the last fourteen years, but short of Googling “Toronto Realty Blog” and “exclusive listing,” I can’t recall when.

Not only that, the reasons for using an exclusive listing, not to mention a “coming soon” sign, have changed dramatically over the last few years so it’s time for a refresh.

Once upon a time, before the advent of the Internet and before listing brokerages “cooperated” with each other, all listings were pretty much exclusive.  A property owner would pick a real estate brokerage with whom to list their property in hopes that the brokerage could find a buyer.  Back then, buyers would go directly to a brokerage and essentially ask, “Which listings do you currently have?”

Think about the real estate offices on the main drag of your neighbourhood.  Bayview Avenue, Yonge Street, Queen Street, Roncesvalles Avenue; wherever you live, I’m sure you walk past a real estate brokerage and see listings taped to the shop window.  Back in the day, this is how real estate was bought and sold.  Taping photos of a house with a “blurb” about the property to the glass was the best advertising out there!  That was how you get eyes on the place!

At some point down the line, brokerages began to cooperate, and agents could expect to show and sell another brokerage’s listing.

Up until this point, all listings were essentially “exclusive” in that you could only buy that particular property from the listing broker.

This was an incredibly inefficient way to sell real estate, whether you’re the seller, the listing agent, or a potential buyer.

I think if a seller had the choice, back in those days, they’d choose not to list exclusively, but that’s just how the industry worked.

Once the MLS system was invented, sellers had a choice: they could list “exclusively,” or they could post the property on the MLS system and allow cooperating brokerages to show and sell.

For those of you who see that stupid phrase “show and sell” on MLS and wonder what it means, why agents write it, or what the origin is, now you know!  When MLS started to take off, and agents began cooperating, they’d write “show and sell” as a way to convey that the listing wasn’t exclusive, they wanted to cooperate, and they would offer a commission to a buyer broker from another brokerage.

Why agents still write “show and sell” on MLS listings, I have no idea.  While some of those agents might be in their 70’s and have used this term “back in the day,” I think other agents have no clue what it means.

So fast-forward to 2021 and ask: “what is an exclusive listing, and why would a person sign one?”

In short, I have no idea.

My cynical side says that it offers no value to the seller, and the advantage is given to the listing agent, but I suppose I’ll have to explain…

Let’s say you own a house on the east side that’s worth somewhere around $1,300,000.  You call up your local “area expert” who has his or her face on a few garbage bins on the main drag and flyers the hell out of your mailbox.  This agent says, “Let’s sign an exclusive listing, I think I can sell this myself.”

Why in the world would anybody say “yes” to that?

Let’s say that this agent has a long list of buyer-clients looking in the area, and/or the proverbial “Rolodex” that every agent claims to have.  Even if that were true, why wouldn’t the seller expose the property to the open market?

Sometimes, it’s about the commission.  Let’s say the area-agent says, “I’ll sign up an exclusive for 3.5% so you save 1.5%.”

Even if that were the case, I still think it makes more sense to take the property to MLS and the open market.  The listing agent might have a client or two that would buy the house, but at what price?  Saving 1.5% of $1,300,000 is peanuts compared to what the open market might bear.  What’s to say the open market doesn’t produce an offer of $1,400,000?

The same commission-based argument can be made with respect to listing with this agent versus that agent.  I’m always amazed when people list with an inferior agent for a reduced commission and think they’re coming out ahead.  The “value” of real estate in Toronto in 2021 is far from established and a top agent can sway the price 10-15%.  But that’s a topic for another day.

In any event, I remain unconvinced that signing an “exclusive” listing with an agent at a discounted commission, in hopes that the agent can provide a buyer, is going to net the seller more money.  Not only that, what about the conflict of interest that exists?

If you’re on the open market and your listing agent happens to have a buyer for your property, his or her buyer is still going to compete against the rest of the buyer pool.  So when you list your house for $1,099,900, and six offers are presented, if your listing agent presents an offer on behalf of his or her buyer for $1,300,000, you might still get an offer of $1,350,000 from another agent’s buyer.

If you’re signed up to an exclusive, you have no clue what the open market would bear, and if your agent brings a buyer, you can’t be certain that he’s representing your interests first and foremost.

Ironically, exclusive listings don’t really come down to commission.  I find that more often than not, it’s just a listing agent duping a seller from the get-go.  “Let me try to sell this on my own first, that way you don’t have to go through the rigours of being listed on the open market.  You don’t want people trekking through your house.  I know I can sell this.”

Then the “FOR SALE” sign goes up on the front lawn with the words “EXCLUSIVE” underneath, and the expectation on behalf of the listing agent is that members of the general public will call.  If an unrepresented buyer calls, then the listing agent can represent buyer and seller.

Voila!

That, in my opinion, is why most listing agents sign exclusive listings.

I honestly believe that there’s zero upside for the seller.

Once in a while, you’ll see an exclusive listing where the listing agent is cooperating with other brokerages.  There’s one of these in my neck of the woods right now and it’s been on the market since July.  It’s over-priced for sure, and there’s a tenant attached.  So why would the listing agent put an “EXCLUSIVE” sign on the lawn, not post the property on MLS, and agree to pay buyer agents who cooperate?

I have no idea.

None.

And therein lays the confusion about exclusive listings for many agents, both listing agents and buyer agents alike.

There may be other instances where an exclusive listing really, truly does make sense.  Perhaps with commercial transactions.  Maybe with rural or cottage.  And perhaps there’s the odd outlier case.  But in Toronto in 2021, an exclusive listing does absolutely nothing for the seller.

So what about the “COMING SOON” sign?

What’s this all about?

Well, here’s the funny part: many of the TRB readers have commented in the past that they think these signs are only put on lawns so that the listing agent can solicit cold calls from the public and sell the property representing buyer and seller.

But what if I told you that wasn’t allowed?

Last year at some point, a reader pointed the finger at me and argued that my “COMING SOON” has nothing to do with marketing and everything to do with double-ending the deal.

I argued to no avail.

Short of swearing on my children’s lives, I don’t know what I can say to convince you that the only reason I put up a “COMING SOON” is for exposure and marketing.  That’s it, folks.

For those of you that still think the purpose of the sign is to attempt to double-end the transaction, listen to this…

A “COMING SOON” sign is put up on a lawn for a house in Toronto.

One of the neighbours down the block is interested in the house and calls the seller.  The seller says, “We’re coming to market next week, call my agent, or if you have an agent, have he or she call my agent.”

The neighbour decides to simply wait until the property hits the market.

Another interested person who lives in the area calls the listing agent and asks to see the house and that person ends up buying the house, through the listing agent, while the “COMING SOON” sign is still up.

The property never comes to market.

The first neighbour complains to RECO.

RECO fines the listing agent and makes them take a course on ethics.

If a listing agent puts a “COMING SOON TO MLS” sign on a lawn, then that property had damn-well better come to MLS!  Otherwise, there’s going to be a problem.

RECO is in charge of protecting the public and as a result, they hold that if a “COMING SOON” sign is posted then the public is led to believe that the property will come to market.  Anything short of that would be misleading.

To post a “COMING SOON” sign and then sell privately, off market, and not bring the house to market, is false advertising.

RECO has consistently held that selling a house during the coming soon period is “intentionally misleading” to the consumer.

The truth is, this sort of thing happens all the time.  But it’s only when a complaint is lodged that the listing agents are going to get dinged.

In recent months, we’ve found RECO to be terribly inconsistent.

Case in point: we have an office in Cambridge and recently, one of our agents reached out to a listing agent who had a “COMING SOON” sign on her lawn and that seller said, “We’re coming to market next week.”

The next week, that sign was taken down, and the property never came to MLS.

Our agent called the listing agent and asked why the sign was down, and when the property was coming to MLS.

The listing agent said, “We actually sold the house last week.”

Our agent filed a complaint with RECO.

RECO ruled that it’s “seller’s choice.”

It’s not unlike a government body to be inconsistent and, at times, incompetent.  But now the Toronto Real Estate Board has decided that they need to act and as such will be putting out their own rule regarding coming soon signs and what they mean.

There’s an existing rule that “COMING SOON” cannot appear on it’s own, but rather it has to say “TO MLS” or “TO TORONTO MLS.”

And I might also add there’s a danger, for some buyers, to purchasing a house during the “COMING SOON” period, since some lenders require the property to be listed for sale on MLS, and thus won’t treat a private purchase the same way.  I haven’t personally come across this, but it does make sense in a way.  An MLS listing details all sorts of information that is essentially warrantied by the seller, ie. the number of bedrooms, or type of heating, etc.  This can’t really differ from reality, otherwise, the listing agent would be guilty of false advertising.  So a lender would essentially “trust” the MLS listing in a way that they would not if a buyer purchased privately and simply stated house features on their own.  All properties require an appraisal, but buying a property off market would result in far more diligence on behalf of the lender, and some lenders have significantly more stringent criteria for private deals.

Lastly, let’s consider that a “COMING SOON” actually is an exclusive listing.

In order to erect that “COMING SOON” sign on the lawn, you must have an exclusive listing signed.

I suppose we’ve come full-circle now, haven’t we?

If you’re a consumer, you need to know what all of this means.

As a seller, I see no reason why you would ever consider an “exclusive listing.”

As a buyer, you need to believe that a “coming soon” will actually hit the market, and if it doesn’t, then file a complaint!

As an agent, just know that people are watching…