Like it or not, ‘open listings’ in commercial real estate are generally a great waste of time. You have no control over the client, the listing, or the negotiation. It is very difficult to grow your market share on the basis of open listings. You should only accept open listings at the beginning of your career whilst you are endeavoring to prospect for high quality clients and good listings.
Recently an agent friend told me that she had 60 listings. I was impressed only for a short period of time, and only until I asked her a few questions. When I asked her about what the listings actually were and where they were located, it was apparent that the listings were of poor quality, located all over the city, and every single listing was ‘open’. In further questions I had determined that the closure rate on her open listings was very low and in this case below 30%.
That is exactly what happens when it comes to working with open listings in commercial real estate brokerage. You might score a few deals over time with the occasional open listing due to ‘luck’, but the conversion rates are very low and the clients involved in the property have little or no commitment to work with you or listen to you in a negotiation. Generally speaking, these clients will disregard valuable market information and transaction feedback.
So what was wrong here? This agent was spending a significant part of every day travelling all over the city picking up open listings, and chasing the needs and requirements of generic property buyers and tenants. Nothing was exclusively committed and the deals were very hard to put together. In finding a property that may have suited and existing buyer or tenant enquiry, she would make contact with the relative party only to find that they were working with a few agents at the same time and had looked at similar properties elsewhere.
When you have little control over the listing, the momentum of the negotiation is hard to achieve. It is far better to work with 10 to 15 exclusive listings as opposed to 50 or 60 open listings. Your conversion rates will always be higher and more effectively driven from a base of exclusivity; that then is the ‘golden rule’ of commercial real estate. Learn how to pitch and present your services professionally so that you can convert more ever more exclusive listings and stay away from open listings.
So how can you do this? Make sure that your services are so specialized that the clients locally cannot ignore your skills and knowledge; if they really want to sell or lease their property, they just have to talk to you. Make sure that your marketing is of the highest standard with every high quality listing. When you achieve a successful deal in either sales or leasing, put out ‘success letters’ to the local area to tell them about the property result and the stages of the transaction.
Problems with Open Listings
These the problems with taking on open listings:
- The client has very little commitment work with you as the local property agent. They probably have little regard for your skill and expertise. To them, you are likely to be just another agent touting for their business. This then cheapens the services that you provide, and makes it hard for you to achieve a reasonable commission.
- A client with an open listing will very likely spend little or no money at all on the marketing their property. They will assume or believe that the agents they choose to work with should provide the marketing initiatives and coverage at no cost to the client.
- Any negotiation on an open listing is usually quite slow and challenging. The client will usually be talking to other agents at the same time in seeking market information or negotiating on other offers. That then means your negotiation will be impacted by all that misinformation coming from competing agencies and brokerages.
- The client of that openly listed property is likely to be less motivated and realistic when it comes to a deal or a transaction. Their impressions of market price and or rent will be a significant hurdle to overcome.
- Openly listed properties remain on the market for a long time. They are also poorly marketed given that most agents will not want to spend time on a listing they cannot control. That then leads to a low rate of inquiry and lengthy negotiations with any potential buyers or tenants.
You have very little influence over a client in these situations. That then makes every deal more difficult and challenging.