Tag: FSBO

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.

Fewer Sellers Are Trying “For Sale By Owner” — Here Are Some Reasons Why

There will always be people who are comfortable with selling their home without the assistance of a real estate professional. In 2019, 8% of sellers chose the For Sale By Owner approach. That’s an increased from 2018’s record low of 7%.

Here are some of the things with which you need to be comfortable if you choose the FSBO approach to selling your home.

Commissions: You will save on commissions, but not as much as you probably think. Listing commissions are negotiable, and the average commission is below the 6% you may think it is, and the listing commission includes the “co-op” commission paid to the buyer’s agent. In our market, that co-op commission is typically 2.8%.

Since most buyers choose to be represented by a buyer’s broker, you can expect that you won’t be able to save more than about 3% on commissions. Then you need to calculate whether selling without professional representation of your own is worth that reduced savings.

Net proceeds: It’s possible that you won’t get as high a price for your home without the marketing advantage of being listed on the MLS, which could attract multiple offers and even a bidding war.

Putting aside that bottom-line calculation, here are some other elements to be considered by the unrepresented seller.

Showings: How will you handle showings, including screening those who will be walking through your home? This is handled nicely by ShowingTime, the service utilized by virtually all agents in the Denver market. They make sure that only licensed agents are approved for showings. All licensed agents have been fingerprinted and passed a background check. In two decades of listing homes, I’ve never had an incident of theft or other crime associated with an agent showing of my listings.

Your time: Another consideration is the convenience of showings. Yes, you could purchase a lockbox and allow agent showings when you aren’t home, but you don’t want to give the lockbox code to buyers who don’t have an agent. Someone has to let them in.

Feedback: Another service provided by the showing service (only available to agents) is obtaining feedback after each showing and forwarding it to both seller and agent.

Disclosures: There are strict rules regarding disclosures of “adverse material conditions,” which real estate agents know well. If your home was built before 1978, there’s a 5-figure fine associated with failure to disclose possible lead-based paint hazards in your house, even if the disclosure would say there are no such hazards.

Pricing: Even in a seller’s market, an overpriced home can sit on the market for a long time and end up selling for less than if it were priced correctly in the beginning. Priced correctly, your home may attract competing offers, and an experienced agent (like us at Golden Real Estate) knows how to play those buyers against each other to get you the highest possible price.

“But it’s a seller’s market”: Yes, it’s easier in our long-running seller’s market to sell a single-family home (condos are stalling because of Covid-19), but that makes it all the more important to get your home in front of the full market to stimulate competition, which only a listing agent with access to the MLS can do for you. It’s no surprise that the number of FSBOs has fallen, not risen, because of this dynamic. Your net proceeds, even with a higher commission expense, could be much higher.

Off-Market Transactions Hurt Sellers By Shutting Out Buyers Who Might Pay More

The sale of homes without listing them on the MLS frustrates would-be buyers who are waiting for just such a home. Those frustrated buyers might have paid more than the actual buyer, in which case it’s fair to say that both buyers and sellers have been harmed.

This is an update of a column with the same headline published exactly a year ago. On March 22, 2018, I wrote that in January and February of that year 4.4% of the sold listings were only entered on the MLS after closing. It’s even worse this January and February, when the percentage of Denver sales showing zero days on market rose to 6.3%. Another 2% sold in one day, which is still not enough time to expose a listing to all potential buyers.

I have determined that with proper exposure, 4 days is the “sweet spot” for listing a home and getting the highest possible price for it. That is office policy at Golden Real Estate, violated only when the seller insists on selling sooner for one reason or another, such as to a friend.

Analyzing the 101 Denver sales in January and February, the median sale was for full price, which makes sense. However, half the 86 Denver homes which sold after 4 days on the market garnered from 1% to as much as 10% above their listing price. That can amount to a lot of money “left on the table” by sellers who chose (or were convinced by their agent) to sell without exposing the home to more buyers via the MLS..  

It’s reasonable to ask how listing agents may have profited (at their seller’s expense) from keeping listings off the MLS. An analysis of the Denver listings that were entered as sold with zero days on market this January and February reveals that 20.8% of them were double-ended, meaning that the listing agent kept the entire commission instead of sharing it with a buyer’s agent. Not one of the homes that sold after 4 days on the MLS was double-ended. It seems obvious to me that many listing agents are convincing their clients to sell without putting their home on the MLS so they can increase the chance of doubling their commission. Putting their self-interest ahead of their clients’ is a serious violation of both ethics and law.

This is not to say that zero days on the market is never in the best interests of the seller. For example, the seller and buyer might know one another, or otherwise found each other, and simply asked an agent to handle the transaction without seeking other buyers.  Or perhaps it was a for-sale-by-owner property where an agent brought the buyer and entered the sale on the MLS after closing as a courtesy to other agents and to appraisers. Or a seller might ask to keep the home off the MLS because he/she does not like the idea of opening their home to lots of strangers.

One would hope, however (and sellers should expect), that when a broker double-ends a transaction, he or she would at least give the seller a break on the commission, rather than keeping the portion (typically 2.8%) that would have been paid to a buyer’s agent. This practice is referred to as a “variable commission” and is office policy at Golden Real Estate. Unfortunately, however, only two of the 21 listings that was double-ended and sold without being put on the MLS offered their sellers this discount. The other 19 enjoyed the windfall of keeping the full commission to themselves, without sharing that windfall with their sellers.

Some agents put listings on Zillow as “coming soon” while holding them off the MLS as a technique for attracting a buyer before other agents know about the listing. The Real Estate Commission addressed this practice in a 2014 position statement, stating that “if the property is being marketed as ‘coming soon’ in an effort for the listing broker to acquire a buyer and ‘double end’ the transaction, this would be a violation of the license law because the broker is not exercising reasonable skill and care.”  Further, the commission stated, “a broker who places the importance of his commission above his duties, responsibilities or obligations to the consumer who has engaged him is practicing business in a manner that endangers the interest of the public.” 

Sadly, that is still happening.