This doesn’t make sense.

[Blaise Peterson]

My sister in law wants to sell three sf rentals in Spokane. Her management company is telling her that listing the property using an outside agent means the property is being represented by two agents—the PM and the sellers agent. The manager said this isn’t allowed and that she would need to terminate the management agreement before it’s listed.

I’ve sold a fair number of properties that are professionally managed and it’s always been a cooperative arrangement between the PMand my agent.

Can someone please help me understand what’s going on?

[Andrew Bosco]

It depends on their contractual management. They may need a notice to quit their services, which may include listing. better to follow up on documentation to verify. 

[Blaise Peterson]

Quote from @Andrew Bosco:

It depends on their contractual management. They may need a notice to quit their services, which may include listing. better to follow up on documentation to verify. 

Her management agreement says the PM gets 1% of the sales price is she sells it. This 1% is waived if it’s sold using the PMs broker. 

[Phil Wells]

Quote from @Blaise Peterson:

My sister in law wants to sell three sf rentals in Spokane. Her management company istelling her that listing the property using an outside agent means the property is being represented by two agents—the PM and the sellers agent. The manager said this isn’t allowed and that she would need to terminate the management agreement before it’s listed.

I’ve sold a fair number of properties that are professionally managed and it’s always been a cooperative arrangement between the PMand my agent.

Can someone please help me understand what’s going on?

I haven’t seen it personally but I imagine it’s some kind of “use us to sell or pay a penalty” clause. Terminate the contract and sell. Seems like a no brainer. 

Not legal advice, you do you.

[Theresa Harris]

I'd read their contract, but your sister hired the PM to manage her property, not to sell it.  If it says they get 1%, then that is what she agreed to.  What happens if she fires them and then lists it?  Does she still have to pay that 1%?

[Blaise Peterson]

Quote from @Theresa Harris:

I'd read their contract, but your sister hired the PM to manage her property, not to sell it.  If it says they get 1%, then that is what she agreed to.  What happens if she fires them and then lists it?  Does she still have to pay that 1%?

The contract says that if she sells it within 90 days following the termination of the contract, she owes 1%. 

[Blaise Peterson]

I’m confused by the PM’s statement that the property would be represented by two agents, which is not permitted. To me, the Agreement’s 1% clause implies that an outside sellers agent is permissible. 
I only do commercial RE and don't have experience with SFs. Is this an NAR rule that applies to SFs? Is it a Spokane thing?

[Joe Norman]

It sounds plausible to me, if PMs are required to be licensed real estate broker/salesperson in WA, that the Property Management Agreement may include an Exclusive Right to List. This is probably a good question to take to a local real estate broker.

[Jaron Walling]

No offense but that clause is a genius by the PM company. Nobody wants to willingly hold a vacant property for 90 days before selling. 

[Drew Sygit]

@Blaise Peterson from a PMC point of view:

If the property is vacant, we'd just terminate the contract, because there's nothing really to manage and we don't just want to be used cut the grass.

If tenant-occupied, there's a host of liability issues for a PMC if owner hires another agent to list for sale:

1) Who knows what transgressions the Owner's agent will cause with the tenant while showing it, possibly resulting in the owner and the PMC getting sued.
-Why would a PMC want to assume the risk of a lawsuit?

2) The Owner's agent will want to show the property at a moments notice, which sellers bend over backwards to do, but tenants have no incentive to cooperate with. Depending on how abrasive the agent is, this may have a major negative impact on the PMC-Tenant relationship.

3) In general, the Owner's agent will throw the PMC under the bus for everything they can to avoid accountability.

So, there's often a conflict of interest and a smart PMC will look to terminate their management if an owner hire's another agent for a sale.

[Blaise Peterson]

Quote from @Drew Sygit:

@Blaise Peterson from a PMC point of view:

If the property is vacant, we'd just terminate the contract, because there's nothing really to manage and we don't just want to be used cut the grass.

If tenant-occupied, there's a host of liability issues for a PMC if owner hires another agent to list for sale:

1) Who knows what transgressions the Owner's agent will cause with the tenant while showing it, possibly resulting in the owner and the PMC getting sued.
-Why would a PMC want to assume the risk of a lawsuit?

2) The Owner's agent will want to show the property at a moments notice, which sellers bend over backwards to do, but tenants have no incentive to cooperate with. Depending on how abrasive the agent is, this may have a major negative impact on the PMC-Tenant relationship.

3) In general, the Owner's agent will throw the PMC under the bus for everything they can to avoid accountability.

So, there's often a conflict of interest and a smart PMC will look to terminate their management if an owner hire's another agent for a sale.

 Great answer. Thanks Drew

[Bruce Lynn]

Quote from @Blaise Peterson:

That's a pretty common clause I see in PM contracts.  I get it.  The PM is dealing with the tenant while another party is trying to market and show it to buyers.  Nobody is probably happy with that arrangement...PM, listing agent or the tenant.

I'm thinking you have 2 choices.  Either terminate the PM (and potentially pay a termination fee.) or use them to list and sell the property.

[Hersh Shah]

Quote from @Blaise Peterson:

My sister in law wants to sell three sf rentals in Spokane. Her management company is telling her that listing the property using an outside agent means the property is being represented by two agents—the PM and the sellers agent. The manager said this isn’t allowed and that she would need to terminate the management agreement before it’s listed.

I’ve sold a fair number of properties that are professionally managed and it’s always been a cooperative arrangement between the PMand my agent.

Can someone please help me understand what’s going on?

 There usually is a clause in most agreements that the PM gets to charge a commission if the tenant buys the property. Verify that the 1% applies to any and ALL transactions. If that is the case, then those are the terms your sister agreed to. Is it right? Not in my opinion.

I've sold plenty of properties for clients who have management agreements in place and they are always cooperative. My property managers will also send the client back to us because we originally referred them for the management.

Different models for all. Find a way to work with them and if they won't have it, work without them.

[Bill B.]

Is there a reason she doesn’t want to list with her PM? Mine offers a discounted rate when I used them. (On both the buy/sell commissions and 6% of rent collected vs 8% on the newly purchased property.)

They’ve got marketing down, they’ve got the pictures and the contacts. 

[Blaise Peterson]

Quote from @Bill B.:

Is there a reason she doesn’t want to list with her PM? Mine offers a discounted rate when I used them. (On both the buy/sell commissions and 6% of rent collected vs 8% on the newly purchased property.)

They’ve got marketing down, they’ve got the pictures and the contacts.

 My understanding is that the PM she originally signed on with was a do-all shop. A few years ago, it was bought by a PM franchise. Of course the franchise is owned by a broker but there is no indication that he/she has ever sold a property. 

[Henry T.]

For me, who has never used property management, this is very enlightening.  I never considered this could be an issue. I always assumed ending a PM contract would be a no brainer, but here you're on the hook if you have plans to sell.  Yikes.

[Blaise Peterson]

Quote from @Henry T.:

For me, who has never used property management, this is very enlightening.  I never considered this could be an issue. I always assumed ending a PM contract would be a no brainer, but here you're on the hook if you have plans to sell.  

 Two of the three houses she wants to sell have tenants so she is kind of forced to sell to an investor/wholesaler unless she wants to wait til next year when the leases are up. This is a lot less money than if she were to sell to  a homeowner. She doesn’t want to wait til next year so it is stressful that her PM isn’t being friendly. Shes been with them since 2009 so you’d expect a little help. 

[Theresa Harris]

Has she talked to them about selling the place?  She can ask them for copies of properties they recently sold, list price, sales price and days on the market.  I'd get another realtor in to also do a market comparison and compare what the two say.