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Mentioned in this Article:
Stephen G. Kliegerman

Stephen G. Kliegerman
President of Development Marketing

Brick Underground

Ask An Expert

Carving a neighbor out of the listing agreement

by Teri Karush Rogers

Q. After learning that we are planning to put our apartment on the market, a neighbor made us an offer that we decided was too low. We haven't yet signed with a real estate broker, so what my husband and I are wondering is this: What if our neighbor comes back with an offer we would like to accept after we put our apartment on the market?

Is there any way to carve this out of the listing agreement so that we don't have to pay a commission? Or maybe get the broker to accept a reduced commission in that case?

A. A listing agreement that pays your broker nothing if your neighbor buys your apartment is not going to be very motivational for your broker, nor is it necessarily fair, as you will be "using the expertise of the broker you hire to assist you in evaluating future offers from both outside buyers as well as your neighbor," notes Stephen G. Kliegerman, a BrickUnderground expert and Halstead Property executive director of development marketing.

He recommends a strategic compromise that balances interests on both sides.

"I would suggest that you list your neighbor as an exception to the exclusive you sign whereby if the neighbor purchases the unit within the first 30 days, you pay a half commission," says Kliegerman, likening the arrangement to the traditional commission split between on a sale with two brokers.

If your neighbor bites after 30 days, suggests Kliegerman, you might agree with your broker in advance to pay one point less commission (eg 5% instead of 6% commission) than you would if an outsider bought your apartment.

"This way your broker has an incentive to assist you in all negotiations and will not feel you are using them to evaluate the market and make a deal with your neighbor," says Kliegerman. At the same time, "your neighbor has an incentive to act quickly as your bottom line may be more flexible should you sell it to them with a lower commission involved."

Tuesday, April 26, 2011