Real Estate Talk: Broker exclusivity

Why brokers require exclusivity in a brokerage contract

By Joseph Marovitch

Updated March 13, 2024

James the broker signed a non-exclusive brokerage contract with Mr. and Mrs. Xavier Hosempepper for a six-month period. James then proceeded to take photos of the house and measurements. James prepared a beautiful listing for Centris over a two-hour period.

Over the next three months, James placed twelve ads in various papers, performed six open houses where he provided several listings to all the visitors, and had eight showings with various potential buyers. James amassed a list of potential buyers who called because of his advertising campaign and whom he spent hours calling. In the first three months of the campaign, James spent over $2500, between ads, gas, licence fees, telephone calls, etc.

One day Mr. Hosempepper calls James. Mr. Hosempepper, all proud of himself, tells James he sold the house to a friend or another broker sold the house. The buyer saw the property on Centris, which James placed, or the buyer noticed an ad that James created and paid to have published and then proceeded to call Mr. Hosempepper or the buyer’s broker.

If the broker does not sell the property on or before the expiry of the brokerage contract, all the time and money spent on advertising, open houses, material, gas, office space, office rent, and much more will not be compensated.

Unlike other professions, brokers incur expenses before receiving funds. There is no deposit or partial payment along the way like contractors and lawyers. If the broker does not sell the property on or before the expiry of the brokerage contract, all the time and money spent on advertising, open houses, material, gas, office space, office rent, and much more will not be compensated.

Brokers take a gamble, which is why brokers must be smart. They must price the property properly to sell, and sufficiently advertise in the right mediums to attract the right buyers. When a broker signs a non-exclusive brokerage contract with an owner-seller, it means the owner-seller can use the broker’s services to sell the property, but he or she can also use the services of other brokers or sell the property on their own.

The broker pays the photographer to take professional pictures of the property. Then the broker spends time driving to the property and takes another hour or two to take the measurements of each room. Following photos and measurements, the broker spends another hour or more to enter the pictures, measurements and information from the deed of sale, certificate of location, and municipal documents concerning servitudes and rights, onto the Centris system so that local and international buyers can have access to see the property.

‘If an experienced broker assumes a non-exclusive listing, the owner-seller can be sure the broker will not market the property nor spend a cent unless it is to advertise to other property sellers that he or she is busy.’

The broker then spends more time preparing ads for the local papers and websites and then places those ads into the papers, on the websites, and in newsletters along with prepared flyers that are sent out via snail mail. By the time the first week of the campaign passes, the broker has spent hundreds if not thousands of dollars on the property and hundreds of working hours.

If an experienced broker assumes a non-exclusive listing, the owner-seller can be sure the broker will not market the property nor spend a cent unless it is to advertise to other property sellers that he or she is busy. After all, ads mainly attract other property sellers who assume the broker is busy if he has listings. Amassing buyers is not selling properties. If an experienced broker accepts a non-exclusive listing, he or she is doing this for themselves. There is no commitment to the seller since there is no commitment from the seller.

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Next article: Prepping for the spring market – like a boxing match

State of the market

Bank of Canada interest rate: 5 %
Canadian prime rate: 7.2%
Canada inflation today: 2.9 %

Current 5-year rates at 5 main banks
BMO: 4.68% – TD: 4.5% – RBC: 5.59% – CIBC: 5.64% – Scotia Bank: 6.79%

As you can see, despite the inflation rate at 2.9%, the Bank of Canada rate is unmoved at 5% and the prime rate is still at 7.2%. The major banks have lowered their lending rates in simple anticipation that the Fed will reduce the Bank of Canada rate from 5%.

Economists from every walk of life have differing opinions. Some believe the market will take off this spring, others believe that if the Bank of Canada reduces the rate, it will be like lighting a match to a dynamite stick, opening the gates to a flood of buyers and increasing property values.

Then other economists worry that if the Bank of Canada rate is lowered without a long enough and consistent inflation rate of 3% or less, the reduced Fed rate will cause inflation to skyrocket, in which case we will be back where we started in a recession.

‘It is only long-term consistency that allows one to make decisions with less risk. Currently, we do not have long-term consistency and consensus in government, politics, economy, environment or anything else. So, we make decisions and work with what we know.’

My bet is to acquire a current low-rate pre-approval with few conditions and buy now. I would purchase at a fair and good price with expenses I can manage. I prefer to work with what I know now than what I might know later.

If rates drop and inflation rises, I will have missed a bullet. If rates rise and inflation lowers, I will have missed a bullet. There are too many variables in the equation. The same applies to sellers, their values go up and down with variable interest rates and inflation.

It is only long-term consistency that allows one to make decisions with less risk. Currently, we do not have long-term consistency and consensus in government, politics, economy, environment or anything else. So, we make decisions and work with what we know.

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