During economic periods of high buyer demand and home prices — a seller’s market — some owners list their homes solely to profit from elevated prices. But when property values drop, these financially motivated sellers may abandon their listings to await a more advantageous real estate market.

Real estate agents who enter into listing agreements with sellers who are not committed to their home sale may waste valuable time and effort marketing a dead-end listing.

With today’s sellers believing now is the time to sell but lacking confidence in future pricing, agents need to take additional steps to vet potential seller-clients and choose listings that will stick.

Assessing the seller

Safeguarding a listing requires evaluating a seller’s motivation prior to accepting the listing and entering into a listing agreement. [See RPI Forms 102 and 102-1]

The following warning signs indicate a seller may not be fully motivated to sell their home:

  1. The seller is resistant to lowering their listing price. A seller who rejects the agent’s pricing advice — or any other advice from the agent — is likely more focused on obtaining a specific price than selling their home. Their opposition to the agent’s market analysis suggests they are not prepared to adapt to the current market, making their home sale an uphill battle for the agent.
  2. The seller has a strong emotional attachment to the home. A seller who is overly emotional about their home sale will struggle to see the sale as a business transaction. High emotions interfere with the seller’s receptivity to the agent’s guidance, and create conflict when buyers begin to critique the home and submit offers.
  3. The seller is not financially able to sell. When the seller’s finances cannot support a sale or purchase of a new home in the current market, the seller becomes extremely limited in the terms they can accept.
  4. The seller has no plans or time frames in mind. A seller who prefers to “go with the flow” is typically not confident about selling. Failure to plan properly indicates the seller wants to test the market and is more likely to back out of a listing when the selling process does not meet their expectations.
  5. The seller has a family conflict that may interfere. For example, divorcing spouses may disagree over the details of the sale. Sellers who often argue and are not on the same page make for a precarious listing.
  6. The seller is opposed to staging and inspections. A seller uninterested in making their home presentable or properly investigating the home’s condition is likely not committed to selling.
  7. The seller has listed and unlisted their home many times. A listing that has been on and off the market is a sign the seller is indecisive or uncompromising about their home sale.

To help an agent determine whether the above warning signs are present with their potential seller-client, these questions may be useful:

  • Why are you selling?
  • How quickly are you looking to sell the property?
  • What is your ideal closing date?
  • What are your plans after the property sells?
  • What are your plans if the property does not sell?
  • How much is your outstanding mortgage balance?
  • How much money do you have for a down payment on a new home?
  • Have you spoken with a mortgage professional about how much you can afford to buy once you sell?
  • Have you considered the costs associated with closing your home sale?
  • Are you prepared to inspect, clean and stage your home?
  • How long have you lived in your home?
  • What is the lowest price you will accept?
  • Is your target price flexible?
  • How did you arrive at your ideal listing price?

The seller’s answers may also introduce new circumstances the agent will want to question further (e.g., the seller presents a specific reason for selling).

When the seller provides answers and information that indicate they are undecided about their home sale or unwilling to put in the effort to close the sale, the sales agent is advised to either reject the listing or be prepared for some challenges.

Agents who seek more expedient and high-volume business will likely want to turn these listings down. Here, the agent can discuss the selling process in more detail to help the seller re-evaluate their decision to sell. The agent may even suggest the seller think it over and postpone their sale until a later date.

Sales agents seeking to build their client base and gain more experience may find it worthwhile to take on these risky clients. However, agents who accept precarious listings do so with the knowledge that the seller may later cancel or present difficulties when selling the property.

What happens when a seller cancels a listing?

An agent who has already evaluated their seller and entered into a listing agreement is faced with a much different dilemma when the seller later seeks to cancel the listing.

Importantly, cancellation of a listing does not mean loss of a broker’s fee. The withdrawal-from-sale clause in the listing agreement entitles the broker (and their agent) to be paid a full listing fee if, by actions of the seller during the listing period, the property is:

  • withdrawn from the market;
  • transferred to others;
  • further leased without the broker’s consent; or
  • made unmarketable. [See RPIForm 102 §3.1(b)]

The separate termination-of-agency clause also entitles the broker to collect a full listing fee if the seller cancels the broker’s employment during the listing period, whether or not the seller intends to continue to market the property for sale. [See RPI Form 102 §3.1(c)]

Ultimately, the fee paid to the broker by the seller may be negotiated by the agent and seller on the seller’s cancellation.

When the seller, by word or conduct, clearly indicates they no longer intend to sell the property, the agent needs to prepare a Release and Cancellation of Employment Agreement form for the seller to review and sign. [See RPI Form 121]

This release and cancellation agreement becomes a new contract between the broker and the seller, effectively replacing the listing agreement. The release and cancellation agreement may call for immediate payment of the full broker’s fee agreed to in the listing agreement in exchange for mutual cancellation of the listing.

Alternatively, the broker may elect not to collect a fee at all, collect a partial fee or negotiate with the seller for the future payment of a broker’s fee in the event the property is:

  • placed on the market for sale;
  • sold;
  • exchanged;
  • optioned;
  • refinanced (if the broker was retained to arrange new financing); or
  • leased to anyone within a specified time period after the date of the agreement.

A cancellation agreement may also call for the seller to reimburse the broker for the agent’s time, effort and expenses expended during the employment under the listing. Here, the client and broker may negotiate an appropriate hourly rate at the time of settlement.

However, the broker will be unable to later collect a fee if the seller sells the property since the broker settled for a lump sum amount to end the relationship and eliminate all claims under the listing.