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Don’t Be The Victim of a Listing Agreement When Selling Your Practice

By May 18, 2021September 10th, 2021Michael's Operatory, Selling A Practice

The dirty secret in the dental industry that is if you use a real estate salesperson (known in the dental industry as Brokers, but who we refer to as “Broke-Ers”) to sell your dental practice then they are almost certainly going to INSIST you SIGN an EXCLUSIVE LISTING AGREEMENT.

DANGER !!! You do NOT want to sign a listing agreement. Let me tell you why:

  • An Exclusive Listing Agreement prevents you from using anyone else to sell your dental practice AND requires you to pay the Broke-Er a big commission when they sell (e.g. 10% of the sale price – yes, you read that right, 10%).
  • An Exclusive Listing Agreement locks you into paying the Broke-Er the commission if they sell your practice during the term of the Agreement, which is typically for 12 months (although it could be 9 months if you push hard).
  • An Exclusive Listing Agreement also FORCE YOU TO PAY the COMMISSION even if the Broke-Er could NOT sell your practice but you sell it on your own (or with another agent) after the END of the listing agreement term. This is called the “Holdover Period” and is usually anywhere FROM 6 months to 18 months AFTER the listing agreement is over. Don’t believe me, read these court cases HERE! Poor dentist!
  • In exchange for their commissions (which on a 2 million dollar sale would, at 10%, be a $200,000 plus HST commission), the real estate salespeople will prepare an appraisal and run an open house and do some marketing to try to find you a buyer.
  • The usual Exclusive Listing Agreement talks ON AND ON about how the real estate agent gets paid:
    • They want their 10% commissions if the practice is sold during the term.
    • They want their 10% commissions if the practice is sold after the term if negotiations took place during the term.
    • They want their 10% commissions if the practice is sold after the term if the buyer was introduced/found during the term (whether or not the Broke-Er agent found the buyer or made such an introduction!).
    • They want their 10% commissions if you do a share sale or asset sale.
    • They want their 10% commissions if there’s a willing buyer who is ready and able to do a deal, and REGARDLESS of whether the deal actually happens (P.S. I’m not even sure how this one is legal since it looks like it’s an agreement to agree and the dentist is being forced into the big unknown of accepting an offer even if it is not a good offer or the seller changes their mind or doesn’t want to sell on the terms offered).
    • They want to take the deposit from the buyer (even though it should be going into the selling lawyer’s trust account).
    • They take 50% of any deposit that the buyer loses (P.S. this rarely happens because deals are “conditional”; and if a non-refundable deposit is given, it should go to the seller since we don’t consider that to be anyone else’s money).
  • Lastly, you STILL need a lawyer throughout the process to help you with your lease matters, employment matters, corporate matters, and do all the legal work for the actual purchase/sale transaction!

Exclusive Listing Agreements have been the standard model for DECADES. And we’ve witnessed more real estate agents try to get into the Broke-Er game over the past few years to try to grab money from dentists when they sell their practice.

BUT is there a newer, better, faster, more cost-effective option out there ???

ABSOLUTELY !!! And this is how the dirty little secret of Exclusive Listing Agreements get cleaned up!

Since 2014, Canada’s largest boutique dental-only law firm, DMC, has been helping dentists prepare their dental practices for sale, market their dental practices for sale, do the legal work required to sell dental practices and actually sell dental practices at HUGE cost-savings with dentists. We DO NOT charge commissions like the real estate salespeople do. We have fixed, flat-rate, pricing for everything related to a sale and which typically results in tens or hundreds of thousands of dollars of cost savings to the selling dentist.

We DO NOT require you to give us exclusivity when it comes to selling (if you find a buyer on your own, we’ll simply do the legal work!). If you don’t want to work with us anymore, just say so. What does it cost you? A nominal flat-rate amount to cover the out-of-pocket expenses we’ve incurred and the legal advice provided.

We DO work with an independent appraisal business (Dental Strategy) to get you a COMPREHENSIVE (not boilerplate) appraisal that can actually draw prospective buyers in with its analysis AND help you stave off price reductions during the due diligence phase.

We DO have access to almost 2,000 Ontario dentists who’ve signed confidentiality agreements with us to purchase practices.

We DO market your practice to thousands of more dentists and other dental professionals across Ontario through our Newsletter.

We DO run all-day open houses for your practice to buyers.

We DO get involved EARLY on to help prepare your practice for sale (clean up your lease, put team members on contract, make sure your corporation is ready to be sold so you can claim the capital gains exemption, etc.).
We DO also represent buyers on other transactions (where we are not already representing the selling dentist) so we know what they’re looking for or will make a big issue out so we can remedy those things with the seller’s practice before it becomes an issue in a transaction.

We DO draft and negotiate the legal paperwork (letters of intent, purchase and sale agreements, associate agreement, lease transfers, etc.) so that your interests and rights are represented properly (do you want a real estate agent doing this???!!!) and risks are mitigated.

We DO help our clients sell to dental service organizations when a DSO is the buyer (note: DSO’s tend NOT to buy from real estate agents.

Do you need a real estate agent as part of that equation? No. Have questions? Give us a shout. We’ll get back to you same day for a no-obligation free consult.

If you want to know what incentivizes us to help you achieve your goals on your sale (which could be the highest price or a very fast closing or finding a certain purchaser to sell to) then here they are:

  • First, we have an idea of what your practice should be selling for based on about 50 metrics (that’s a 30-minute complimentary phone call with myself or my law partner, David Mayzel). So it’s not like we don’t have a sense already of what the buyers are prepared to pay.
  • Second, what we’re really looking for is DENTISTS telling dentists about how great we are and how our model of doing everything in-house (lease, employment law matters, corporate/purification work, marketing, selling, associate agreements, advising throughout, etc.) is the best approach.
  • Third, we encourage our selling dentists that, if they’re happy after the sale and achieved their minimum price, then they can donate up to 15k worth of equipment or supplies for our dental charity outreach program. In 2019, for example, we were able to donate 30k worth of dental units, portable chairs, and cavitrons for our dental charity outreach program to Grenada. And later this year when our outreach program goes to Turks & Caicos, we’ll be able to donate thousands of dollars worth of digital x-ray sensors, high/low-speed handpieces, curing lights and more.

We’re lawyers who know dental offices and the dental industry. We get involved in everything from legal paperwork, to running open houses for a sale, to setting up and organizing and staffing temporary 20-op clinics in the Caribbean (as part of our dental outreach program). We also give you the real straight answers as we are not here to waste your time or ours. We know how to market your practice to find you the best possible buyer and deal terms while educating you throughout and mitigating your legal risks. We put dentists first. It’s not about tying selling dentists to us for 12 or 24 months to secure a commission. We don’t do that. It’s about us helping dentists achieve their objectives at various stages in their careers and then (hopefully) they come with us on one of our dental charity outreach programs and give back. A win-win for all. And then they can spread the good DMC gospel throughout the dental community.

The Content of this post is provided for informational purposes only. It is not intended to be legal, financial, tax, or other professional advice of any kind. You are advised to contact DMC (or other counsel) to seek specific legal advice concerning your individual situation.