I received an email and an invite to beta test a new site by Realty Baron called Listing Hedge. As a former stock broker and financial anaylst, I am intrigued by the concept of hedging the risk associated with taking a listing that might not sell.
According to Realty Baron, Listing Hedge will allow an agent to pay a small fee (premium) to protect themselves against the likelihood of a listing not selling. If the listing does sell, the fee is taken off of the commission. If the listing expires, the agent is paid an amount that supposedly will cover the cost of listing the property. It is important to point out that the hedge is paid only if the listing expires according to the blog post. I am sure you do not get the payout if the listing is withdrawn prior to expiration.
Some other points regarding the Listing Hedge that are important. First, you have to have an agent rank with Realty Baron. Last year I had the agent rank and updated it for a while but it became too time consuming to keep it updated and it soon expired. I haven't had a reason to go back an update it until now. Second, the amount of the hedge premium will depend on your agent rank and market conditions. I am not sure what algorithm they are using but it will have to be pretty complex. Third, one of the variables uses to determine the hedge premium is the length of the listing agreement. This time frame is preset at 6 months but I am not sure if you can go for a shorter term and obviously pay a higher premium and potentially get a lower payout. Perhaps someone from Realty Baron can answer that.
I can see this being a great tool for agents that sell a lot of listings but on occasion run into a listing that they know is going to be difficult to sell due to market conditions, property location or a customer's unrealistic price expectations. I can easily tell which of my listings will be more difficult to sell and could hedge just those listings but I assume I will pay a higher premium once they figure out I only hedge the borderline listings.
I am sure it is not as simple as the blog will have us believe. I have a lot of questions about this concept and will have to actually try it out to see if it in fact works in real life.