Email Alerts of New Listings Provide a Good Reason for Listing Your Home on the MLS

Yes, it’s a seller’s market, and maybe you think you don’t need to hire an agent to put your home on the MLS, but the opposite is true. Take, for example, the listing which was featured in this space last week. For 7 days it was listed as “Coming Soon” on our MLS, REcolorado, during which time it was not visible to non-mem-bers of the MLS (i.e., buyers). But that listing was emailed to over 250 buyers who had email alerts set up by their agents. One of those buyers tagged the listing as a “favorite” and another six tagged it as a “possibility.”

Those numbers, however, only reflect buyers who had included “coming soon” among the criteria that would trigger an alert. After the listing changed from “coming soon” to “active” on the MLS, the number of buyers who were alerted jumped to 720 and two more buyers tagged it as a “favorite.”  When a buyer tags a listing as either a “favorite” or a “possibility,” the buyer’s agent gets an email letting him or her know which client liked the listing and may want to see it when it’s “active” and showings are allowed.

These numbers don’t include the buyers who set up their own alerts on Zillow or other consumer-facing sites, including Redfin. Also, those websites don’t display “coming soon” listings until they have been changed to “active.” Thus, buyers who had agents include “coming soon” as a criterion benefited from a 1-week earlier notice of that listing than did any of those buyers who were setting up alerts on their own.

For buyers wanting the earliest alerts of new listings matching their search criteria, please make this a reason to have an agent set up alerts for you instead of setting up alerts on your own.

Knowing the power of MLS alerts should cause any seller to have second thoughts about selling without an agent. It used to be that sellers could hire a “limited service” agent who would put their home on the MLS for a flat fee (say, $300) without performing any other service, but that is now illegal. The Colorado Real Estate Commission has ruled that there are certain minimum services which must be performed by all listing agents. Those services include exercising “reasonable skill and care,” receiving and presenting all offers, disclosing any known material facts about the buyer (such as their ability to close), referring their client to legal and other specialists on topics about which the agent is not qualified, accounting for the receipt of earnest money, and keeping the seller fully informed throughout the transaction. 

Failure to perform those minimum services could subject the agent to discipline up to and including loss of license, which has caused “limited service” listings to disappear. If an agent offers such service to you, you should report them to the Division of Real Estate.

By the way, the Colorado Real Estate Commission has also ruled that it is the duty of all licensees to report known wrong-doing by other licensees, which their competitors are happy to do. We can be disciplined for not performing that duty.

Studies have shown that homes which are listed “for sale by owner” (FSBO) sell for less than ones which are listed by an agent on the MLS, and you can see why, because the more exposure your home has to prospective buyers, the more showings and offers you are likely to receive. And that difference in bottom line proceeds can far exceed the commission you are likely to pay.

Consider this: whether or not you hire a listing agent, you’re still likely to pay the “co-op” commission to the buyer’s agent, which is typically 2.8%. The  average listing commission (which includes that co-op commission) is now around 5.5%, not the 6% everyone tells you. As a result, the savings you might experience from not hiring a listing agent could be about 2.7%, and that is likely less than the increased selling price you might get from listing your home on the MLS with a true “full-service” agent such as my broker associates and myself.

Note: Some brokerages mislead you by promoting a 1% listing commission, but when they get into your home to sign you up, they disclose that the 1% is in addition to the 2.8% that they recommend as the  co-op commission and is increased further if they don’t earn a co-op commission on the purchase of your replacement home. It is also increased if they double-end the sale of your home, meaning that they don’t have to pay that 2.8% co-op commission to the buyer’s agent.

Such deceptive advertising, to me, is reason enough not to hire such a brokerage, but it may be hard for some people to say “no” to an agent they invited into their home with contract in hand.

Unlike such a brokerage, Golden Real Estate tells you upfront that we reduce our listing commission when we double-end the transaction, and we discount it further when you allow us to earn a commission on the purchase of your replacement home.

That said, our final commission might be only 1% or so higher than what you might pay to a discount brokerage, and our version of “full service” is much more complete than theirs.  For starters, we produce narrated videos tours on every listing. Our video tours are not just slideshows with music or un-narrated interactive tours which can be dizzying and annoying. Our narrated tours resemble an actual showing, where the listing agent is walking you through the house, talking all the time, pointing out this or that feature which may not be obvious otherwise. Are those quartz countertops? Are there slide-outs in those base cabinets?  Is that a wood-burning or gas fireplace? We have sold listings to out-of-towners who only “toured” the home on video, not seeing it in person until they flew into town for the inspection. That’s the power of narrated video tours.

‘Selling Agent’ vs. ‘Seller’s Agent’ Confuses People

Among the real estate terminology that confuses home buyers and sellers is the term “selling agent.” 

The selling agent is, in fact, the agent representing the buyer in the purchase of a home, not to be confused (hopefully) with the seller’s agent, also referred to as the listing agent.

The reasoning behind calling a buyer’s agent the selling agent is that the buyer’s agent is the one who actually sells the home. The listing agent could, of course, sell his listing himself, but 90% of the time (actually closer to 95% of the time), the home is sold by another agent who shows the home to a buyer and then writes the contract to purchase it. In return for finding the buyer, the listing agent then shares his or her listing commission with the selling agent. It’s called the “co-op” commission, because the selling agent is cooperating with the listing agent to sell the listing.

I like to compare our industry to the automobile industry. Picture, for a moment, a sales person working for a Chevrolet dealership being able to bring a buyer to a Subaru dealership, get the keys to any of the cars on the lot, give multiple test drives and then get paid 40 to 50% of a Subaru sales person’s commission for selling one of that dealer’s cars. That’s how real estate works. The Mulitple Listing Service, or MLS, was created to facilitate such “cooperation and compensation” in the real estate industry. It benefits both buyer and seller as well as both real estate agents.

NAR Agrees to More Transparency re: Buyer Agent Commissions

Last week, the Department of Justice simultaneously sued and settled with the National Association of Realtors regarding how brokers representing buyers are compensated and the public disclosure of that information.

As you may know — because I have written about it many times — the seller typically pays the commission of both the listing agent and the agent representing the buyer. The standard listing agreement includes the total commission and specifies how much of that commission will be shared with a buyer’s agent.

In that listing agreement, the total commission typically ranges from 5 to 6 percent, but the amount of that commission that is offered to buyers’ agents is traditionally 2.8% in our market. Our office policy at Golden Real Estate, like that of many brokerages, requires our agents to offer no less than 2.8%, because it has been demonstrated that offering less than 2.8% can result in fewer showings our listings.

Currently, that “co-op” commission is not displayed on consumer-facing MLS websites, but the settlement requires that it be displayed starting in January. Also, agents will be forbidden to tell buyers that their services are “free” or at “no cost to the buyer,” on the premise that the cost of that commission is reflected in the purchase price paid by the buyer.

Under the settlement, brokers who display MLS listings on their websites may not filter out listings which offer less than a specified co-op commission. We have never done that on our website, www.GoldenRealEstate.com

Lastly, the settlement requires that lockbox access be provided to licensed agents who are not members of the same MLS, an issue I have never encountered.