I'm talking to a broker about selling my HVAC company. He's pushing hard for a 12-month exclusive listing agreement. Says it's standard and protects his investment in marketing. I'm not comfortable being locked in that long if he doesn't perform. What have others done here? Is 12 months really normal?
Broker Contracts
My broker wants an exclusive contract for 12 months
12 months is on the long side for a business this size. I'd ask for 6 with a performance review at 90 days. If he won't budge, that tells you something.
We did 12 months and regretted it. First 4 months were basically silence. Felt like we were just a line on his spreadsheet.
That's my worry. What did you do when it went quiet? Did you have any out clause?
No out clause. We just waited it out. Bad setup. Make sure yours haas a termination for non-performance.
A 12-month exclusive isn't unreasonable if the broker is actually investing real money in a marketing package and has a track record in your sector. The problem is most don't. Ask him to show you the last three HVAC businesses he sold and how long each took. If he can't, the length of the contract is a distractionn.
negotiate a 6 month exclusive with an automatic rollover only if he hits agreed mileestones. put the milestones in writing. viewings, buyer outreach numbers, whatever.
Does he want exclusive on the sale only or also on any buyer he introduces? I'd check the tail period. Some contracts let them claim commission months after you've parted ways.
Tail period is 12 months after termination. That seems aggressive.
That's a red flag. A 12-month tail on top of a 12-month exclusive means he could tie up your sale for two years with almost no effort. Push the the tail down to 3 or 4 months with named buyers only.
12 months is common in my area for main street businesses. Not Not saying it's good, just common. The brokers around here won't take a listing without it because too many owners use them to test the water then sell to a friend.
Had a 12 month with a regional firm. Sold in month 5. The contract itself wasn't the issue, the broker was decent. But I negotiated a 30-day cancellation with written notice and no penalty. They grumbled but signed.
The get-out clause matters more than the headline term. Ask for 30 days notice after month 3. A confident broker shouldn't fear that.
I asked about a 30 day out and he said it shows I'm not serious. Is that a real ar gument or just pressure?
Pressure. A professional doesn't need to shame you into a contract. You're allowed to be cautious about the biggest transaction of your life.
Also read the exclusivity scope carefully. One I saw covered any sale of the business within 18 months, even if the buyer came from a totally different broker. That's not a listing agreement, that's a leash.
If he's a good broker, 12 months gives him room to run a real process. If he's not, 12 months gives you a very long headache. You already know which one you think he is.