Tag: MLS

Let’s Hear It for the Multiple Listing Service: The Best Tool for Buyers & Sellers  

We hear a lot about “off-MLS” sales of homes, particularly by investors. Investors love to buy homes off the MLS, but they turn to the MLS to sell the homes they bought. Prospective sellers should read that sentence again, because it says everything you need to know about the value of the MLS: Buyers can pay less if the seller doesn’t put their home on the MLS; and sellers net more money by putting their home on the MLS.

Investors know they would pay “market value” for MLS listings, because that’s what the MLS is — it’s the market! Investors know they’ll be competing with other buyers if the home is on the MLS. That’s why they find the homes they buy by soliciting homeowners who do not have their home on the market.

They make an appealing pitch — no showings, no open houses, and a quick cash closing. Remember, investors are in business to make a profit, and the only way to make a profit is by paying you less than your home is worth by buying it off the MLS, and then selling it on the MLS.

Now, if money doesn’t matter that much to you — for example, you’re the personal representative of an estate, but you’re not a beneficiary — that’s probably an attractive pitch. After all, it’s not your money! But, if it’s your house and your money, just know that you’ll make more money from the sale of your house if you let a professional like one of the agents at Golden Real Estate expose your home to the full market — which is only accomplished by putting the home on the MLS.

I have written in the past about “iBuyers,” such as Open Door, which buy homes off the MLS, then flip them with minimal improvement by listing them on the MLS. You can find columns on that topic dated Jan. 2, 2020, and Aug. 22, 2019, at JimSmithColumns.com, where all these columns are archived. In those columns I point out that the iBuyer companies typically convince homeowners to meet with them by offering a high sight-unseen price, which is thousands above what they finally offer the seller. It’s a bait and switch approach, so beware!

The essence of the MLS is “cooperation and compensation.” Sellers hire a listing agent for a negotiable commission — currently averaging under 6 percent — which is large enough for the listing agent to compensate another MLS member for producing the buyer of that listing.

There’s an understandable misconception that the seller pays both the listing agent and the buyer’s agent and that somehow that’s unfair — that the buyer should pay his or her own agent.

But, although it may look as if the seller is paying both agents — because it is taken from the seller’s proceeds at closing — in fact, as I said above, the listing agent is paying the buyer’s agent out of his or her listing commission.

As shown in the graphic below, the MLS is at the heart of making the real estate market work efficiently to expose listings to the full universe of buyers. No other industry that I can think of works as well as the real estate industry, because no other industry has an MLS.

Last year, the National Association of Realtors introduced the Clear Cooperation Policy to make the MLS system work even better, telling participating Realtors, in effect, that if they want to be a member of the MLS, they must commit to giving fellow members a reasonable opportunity to find and sell their listings.

That policy has yet to achieve its goal because some MLS members find a way around it so they can sell their listings without sharing their commission with other MLS members. Golden Real Estate’s agents, however, are in full compliance.

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.

The MLS’s Campaign Against ‘Pocket Listings’ Is Serious, With $1,500 Penalties

Last November, the National Association of Realtors (NAR) board of directors voted into existence a “Clear Cooperation Policy” (see below). The rule required all MLSs in the country to implement the policy by May 1st of 2021. Although there were some technical delays, the rule is in full force now and our MLS, REcolorado, is enforcing it with substantial fines for violations. (I know because I’m on the Rules & Regulations Committee.) Many MLS members have already received fines starting at $1,500, with only one warning notice given.

The rule basically says that there can be no advertising of any kind for a listing without making the listing active on the MLS so that all members of the MLS have the opportunity to show and sell it.  If a “for sale” sign is put on a listing or there is a social media ad for it, or any other kind of public promotion of the listing, the agent must put it on the MLS within one business day. Currently that means that if the sign or advertising appears in the morning, it must be on the MLS by 6:30 pm the same day.  If it is promoted in the afternoon, it should be on the MLS the following morning.

A listing can be listed on the MLS as “Coming Soon,” but that means no showing by anyone including the listing agent. Once a showing takes place, it must be changed to “Active” immediately, making it available to other MLS members. Also, if it’s “Coming Soon” on the MLS, there must be a Coming Soon sign rider on the yard sign.

Most NAR rules only apply to NAR members (aka “Realtors”), but since NAR requires all MLSs to implement the rule, it does apply to the thousands of agents who do not belong to a Realtor brokerage. 

The policy was intended to reduce the number of “pocket listings.” A pocket listing is one which an agent withholds from the MLS (i.e., keeps in his pocket) in hopes of selling it himself or herself and thereby not sharing the commission with another agent.

With such stringent enforcement of the rule — other MLS violations carry penalties as small as $25 — you’d think there would be a widespread shift away from agents selling their listings before they are shared on the MLS. 

To see if that was the case, I did some analysis of my own, counting the number of closings entered on REcolorado showing zero days on the MLS. I fully expected to see a drop in the number of such closings.

The first day that a listing is on the MLS, it is shown as 0 days in the MLS. If it is changed to pending (or closed) the same day, one can assume that the listing was not active on the MLS long enough for other agents to set a showing and submit an offer.

Much to my surprise, the number of homes listed as closed with zero days on the MLS has only increased over the last 24 months, as shown by the chart below. In fact, the highest number of such closings has occurred since the rule went into effect.

So what gives? This harsh penalty does not appear to be having the desired effect, but maybe some more publicity about it will create more awareness and more compliance. Agents can be suspended from membership in the MLS after enough violations, basically putting them out of business.

After three violations within the same brokerage, the brokerage itself starts getting penalized, with the fine starting at $5,000, so that should certainly increase the in-house training about the rule. I have made sure that my own broker associates are aware of the rule.

Homeowners can, of course, make their own private deals with a buyer and then call upon an agent to handle the paperwork, which is fine, since there’s no advertising or promotion of the listing by the agent.

Also, there’s a “brokerage exclusion” which allows an agent in a large brokerage to tell other agents within that brokerage about the listing, but that cannot include posting it on social media where other buyers could learn about it. These two work-arounds could explain many of the homes contributing to the chart’s high numbers.

Why Is It Called ‘Clear Cooperation Policy’?

The real estate industry is unlike any other industry I know. Through our many Multi-List Services or MLSs, we members agree to “cooperation and compensation.” In other words, each member agrees to share his/her listings with every other member, allowing them to sell that listing to a buyer, and to be compensated by the listing agent by an amount displayed on the MLS.

I like to compare our industry to the new car business. Imagine if you went to a Chevy dealer and described the kind of car you wanted, and the salesman said, “I think the Ford Explorer would be perfect for you.” The salesman takes you to the Ford dealer, gets the keys, and then joins you on a test drive. If you like it, the salesman writes up the contract and presents it to a Ford salesman, who then gives the Chevy salesman half his commission (which the Chevy salesman then splits with his dealership).

That’s how it works in real estate. The commission earned by a buyer’s agent (who is the selling agent)  is called the co-op commission, short for cooperation.

The MLSs have rules requiring a member to put all their listings on the MLS, typically within 3 business days.  NAR’s “Clear Cooperation Policy” tightens that rule to say that any agent who promotes a listing to prospective buyers in any way (including with a sign in the yard or a social media post) must put the listing on the MLS within one business day.

The NAR policy — now an MLS rule — was instigated by members upset that other members were withholding their listings from the MLS until they were sold, further frustrating both the agents and their buyers looking for homes to buy at a time of especially low inventory.

Brokerages Should Allow Agents to Enter or Change Their Listings on the MLS

At Golden Real Estate, each agent (under my supervision) enters and updates their own listings on the MLS. I believe that helps to promote accuracy.

But many brokerages block their agents from accessing their own listings, sometimes resulting in incomplete or inaccurate data. One would hope that agents in those brokerages check to see how their listings were entered and tell their admins when mistakes have been made or data omitted, but there’s no way to know that.

Did you know that in addition to the “public remarks” for listings, there is a place to enter a description of every room in the house?

Very few listings — under 50% by my count — include a description of any rooms, and some listings don’t even list rooms other than bedrooms and bathrooms.

Dimensions can be entered for each room, too (rounded to the nearest foot), but I find very few listings with that information either. Our office policy is to enter room dimensions and descriptions for every room in every listing.

Brokerages which require all agent listings to be entered by their unlicensed administrative staff are less likely to have these non-mandatory fields entered. If they would make each agent responsible for such data entry and then monitor their work as we do, I believe that buyers would have much more useful and accurate information for each listing. Other non-mandatory fields in the MLS include the following:

> Is the property owner-occupied, tenant-occupied, or vacant?

> What is the zoning?

> What direction does the home face?

> How close are bus stops and light rail stations?

> Is it in an incorporated or unincorporated area?

> What are the dimensions and features of the garage/carport/RV parking?

> What appliances are in the house?

> What kinds of flooring is there?

> Does the home have any fireplaces, and where are they?

> If there’s an HOA, what are the fees and what do those fees cover?

Our office policy is not only to complete every field on our company’s MLS listings, but to share our MLS data entry in draft form with the seller before making the listing live on the MLS, which also helps to assure accuracy and completeness of our listings.

‘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’s ‘Clear Cooperation’ Policy Is a First Step at Eliminating Pocket Listings

A “pocket listing” is a property which the listing agent does not put on the MLS, hoping to sell it himself or get it sold by other agents in his office. It’s not typically in the best interest of the seller, since the property is withheld from the full universe of potential buyers.

The organizing principle of the Multi-List System, or MLS, is “cooperation and compensation.” Every real estate agent working in the public arena needs to belong to the local MLS, because it’s only through the MLS that the agent can show and sell that MLS’s listings and be guaranteed the “co-op” commission displayed on the MLS.

A listing agent, naturally, would prefer not to give a big slice of the listing commission to the “cooperat-ing” broker who brings the buyer. He or she would much rather sell the listing, keeping the entire commission for him or herself. Meanwhile, other agents (and their buyers) are upset when they don’t have the opportunity to show a new listing and submit an offer, especially when there are so few listings on the market, as is currently the case.

The National Association of Realtors (NAR) took up the issue of pocket listings last year when it adopted a policy called Clear Cooperation. Essentially the policy says that if an MLS member advertises or promotes a listing in any way — including putting a “coming soon” sign in the yard or mentioning it on social media — that listing must be entered on the MLS within 24 hours. It can be listed as “coming soon” on the MLS, during which time it can’t be shown, including by the listing agent. Once it is shown, it must immediately be changed to “active,” allowing all MLS members to show and sell it.

Unfortunately for sellers, who are the big losers with pocket listings, this policy will never be completely effective. That is evident from the fact that over 7% of listings, by my count, are entered on the MLS only after they are sold. Unless a home remains active on the MLS for 3 or 4 days, it’s unlikely that all potential buyers will have had a chance to compete for it.

You may recall the featured listing in last week’s column. It was listed at $375,000, a price consistent with comparable sales, and we received a full-price offer on the first day. Our policy, however, is to get our sellers to wait four days before going under contract. We had 30 showings and received six offers by day four. By being transparent about the offers received, we were able to bid up the property by  more than $55,000 by day four. We did get an offer $35,000 over listing price on day two, but we waited. Our seller benefited from waiting 2 more days.

Sadly, most listing agents haven’t adopted this practice. They sell their listings too quickly, potentially costing their sellers thousands but also frustrating would-be buyers who might pay more. 

I have calculated that in addition to the 7% of listings being sold with zero days on the MLS, 15% are sold after only 1 or 2 days on the MLS.

One technique for minimizing showings by other agents has been to make a listing “active” but block showings with the showing service. Because the listing is “active,” the listing agent can show the property him or herself without technically violating the clear cooperation policy.

Another technique is the “office exclusive” option.  A listing can be marketed within a brokerage without putting it on the MLS. But once any kind of public marketing takes place, the listing must immediately be put on the MLS as either “coming soon” or “active.”

If You Don’t Put Your Home on the MLS, You May Not Get What Your Home Is Worth

A reader wrote me last week complaining that some homes in her subdivision are being sold privately for less than they should, without putting them on the MLS. It bothered her because doing so creates lower comps that could affect what she is able to get for her own home when she sells.

Just as important, there are buyers who would like to move into her neighborhood who are frustrated when a home is sold before they can submit their own offer for it. And, of course, sellers are not getting the highest possible price for their home, as I’ll explain below.

Among the culprits are fix-and-flippers and “iBuyers” such as Open Door and Zillow Offers, who convince sellers to take a cash offer, claiming to save them the cost and inconvenience of listing their home on the MLS. More about them below, as well. (See my Jan. 2, 2019 and my Aug. 22, 2019 columns about iBuyers.)

If anyone offers to buy your home for cash without listing it, there’s one thing you can be certain of: they’re going to pay you a price that leaves lots of room for profit. That is money that could be yours if only you exposed your home to the full market by putting it on the MLS.

The worst thing you can do in a “sellers market,” which is what we have now, is to sell your home off the MLS. The next worse thing you can do is, after putting your home on the MLS, to sell it to a buyer who quickly offers you full price. If someone offers you full price on day one, you can be sure that there are other buyers who’d be happy to pay even more. Four days should do it.

But there is something worse than both those scenarios, and that is to put your home on the market at a price which does not attract any offers. I tell my sellers that they can overprice their home, but they can’t underprice it, because a low price can trigger a bidding war. An experienced Realtor like myself can help you set the perfect listing price. Just remember not to accept the first offer — unless that offer comes long after you put your home on the market, because you overpriced it.

What I see all too often is sellers putting their home on the market at a wished-for price, then lowering the price reluctantly over several weeks, and ending up getting only one offer, not multiple offers, at a price that’s lower than what they might have gotten if they had priced the home right initially.

It’s tempting, I know, to accept an unsolicited offer to sell a home without paying 6% commission, but I can’t even remember the last time I charged 6% commission. Remember, 2.8% of any listing commission goes to the buyer’s agent. Typically, sellers who try to sell “by owner” end up paying that 2.8%, so they only save the difference between 2.8% and the full listing commission, which is 5.6% on average. At least that is what I charge, and I reduce it if I sell the home myself, and I reduce it further when I earn a commission on the purchase of the seller’s replacement home.

If you factor in the totally free moving which I provide (locally, of course) when you sell and buy with me, it’s hard to justify not putting your home on the MLS with Golden Real Estate, thereby exposing it to all those bidders in this still-hot seller’s market.

Our Denver MLS, REcolorado, is now enforcing a new rule called “Clear Cooperation,” which was voted into being by the National Association of Realtors last November. It requires MLS members to put their listings on the MLS within 24 hours of promoting their listings in any way.

The rule is very simple: If a listing agent promotes his or her listing in any way — with a yard sign, tweet, Facebook post, or newspaper article, etc. — the listing must be on the MLS, either as “Coming Soon” or “Active.”  If it’s “Coming Soon,” the sign must say so, and it can’t be shown, even by the listing agent himself. Once shown, it must be changed immediately to Active status, making it available for showings by all members of the MLS. Prior to Sept. 1st, REcolorado only issued warnings, but fines are now being levied for violations.

So, yes, there can be off-MLS sales, but not involving an MLS member unless there was no marketing at all, not even emails to his/her clients. With “pocket listings” now banned, the focus now turns to the iBuyers, companies like Open Door, Zillow Offers and others which directly solicit homeowners to purchase their homes, charging a 7% “service fee,” with the intention of flipping the home for a profit.

Only time will tell whether this new rule, with fines being levied, will make a big difference, but it surely will make some difference.

What Is a ‘Variable Commission’ and Why Should Home Sellers Demand It?

This week’s column is intended to help those who might benefit from a better understanding of how real estate brokers are paid.  If you’re already well versed in this, please bear with me while I share some information with those who aren’t as well informed.

Before I explain what a variable commission is, let me explain who pays — and who receives — the commissions in the typical real estate transaction.

Normally, sellers pay the full commission to the listing agent, who then compensates the agent representing the buyer. How commissions are paid and shared is the primary purpose of the Multi-List Service, or “MLS” — to provide a system of  “cooperation and compensation.” If you’re a member of an MLS (a must if you want to do more than just word-of-mouth real estate), you commit to putting all your listings on it so that other MLS members can show and sell them. MLS listings disclose how much the “cooperating” broker will be compensated by the listing agent for procuring the buyer. 

Real estate firms may not dictate, share or discuss the commission rates that their agents charge sellers. To do so would constitute price fixing, a federal offense under the Sherman Anti-Trust Act of 1890. Brokerages may, however, dictate the amount each agent offers to other agents who sell their listings. At Golden Real Estate, we, like most brokerages, require that our broker associates offer a minimum 2.8%  “co-op” commission.  Offering less could result, I’ve found, in fewer showings by other MLS members.

There’s some history behind that 2.8% co-op commission.  Before the Justice Department forbade  the real estate industry from engaging in the fixing of real estate commissions, the Denver Board of Realtors fixed the rate at 7% and pegged the co-op commission at 40% of that, which is 2.8%. Listing commissions began falling due to competition once Realtors could no longer tell sellers there was a “standard” commission, but the  co-op commission remained at 2.8% to assure their listings got shown by agents.  As a result, it’s not uncommon now for listing agents to receive less at closing than buyers’ agents, even though they absorb all the costs of listing a home — signs, advertising, photos, video tours, showing service, staging consultations, etc.

Perhaps you’ve seen ads offering a “1% listing commission.” Such ads conceal (except in their fine print) the fact that an additional 2.8% is added to compensate the buyer’s agent.  As noted above, the listing commission includes what the listing agent will pay the buyer’s agent, so promoting a “1% listing commission” is, quite simply, misleading or deceptive advertising.

That said, let me now explain what a “variable commission” is and why sellers should demand it.

A variable commission is one which is reduced when the listing agent does not have to compensate a buyer’s agent — in other words when the listing agent sells a listing to his own buyer or to an unrepresented buyer, such as an open house visitor. Listing agents like to “double-end” a listing, because doing so can double what they earn on a given transaction.

Sellers certainly want their listing agent to be motivated to sell their own listings, but when that happens,  should the agent share his good fortune with the seller?  That’s the purpose of the variable commission.

Typically, I list a home for 5.6%, committing half of that (2.8%) to paying a co-op commission, but I reduce my commission to 4.6% when I sell the home myself. That way, I still earn more, but my seller pays less.  I want it to be a win/win.

MLS rules requires that each listing disclose the existence of a variable commission, so that brokers representing buyers know what they are up against in the event their buyer must compete with another buyer who doesn’t have his own agent.

Before submitting an offer, buyers’ agents typically ask the listing agent if there are other offers in hand. If the MLS indicates that there is a variable commission, the buyer’s agent will want to know whether any of the offers are from unrepresented buyers and, if so, the amount of the variable commission differential.  If the differential (as with my listings) is 1%, then the buyer’s agent knows that his client’s offer has to be 1% higher than an unrepresented buyer’s offer in order to be of equal monetary value to the seller.

Likewise, when meeting with unrepresented buyers, the listing agent can advise them that the variable commission makes their offer worth 1% more if they don’t engage an agent to represent them.

At Golden Real Estate, we have other rewards we can offer the unrepresented buyer, including “totally free moving” — free use of our moving trucks, free moving labor, gas and packing materials — if they choose to work with us instead of hiring a buyer’s agent.

As a matter of principle, I believe that a variable commission should be part of every listing agreement. However, my own research of sold listing on the MLS found that less than 20% of them indicated a variable commission.  In other words, more than 80% of sellers signed a listing agreement that allows their agent to keep 100% of their commission if they double-end the sale.

My research has also shown that roughly 7% of all real estate sales are double-ended. Thus about 7% of that 80% missed out on a multi-thousand-dollar discount in their real estate commission that they might have enjoyed by listing with, say, a Golden Real Estate agent.

Many homes are sold before they are made active on the MLS. Some, but not all, are put on the MLS after closing, showing zero days on market. I mentioned above that 7% of MLS sales overall are double-ended, but that percentage jumps to roughly 31% for MLS sales with zero days on market. Of those, 70% did not indicate a variable commission.  Many of those sellers, one can surmise, not only did not get as high a price for their home as they might have if it had been put on the MLS as an active listing, but also lost out on a discounted commission.

It should be noted that while the MLS considers a variable commission worthy of having its own data field, the standard listing contract lacks any place to specify a variable commission. If the contract had a section to enter that information, more sellers might ask about it before signing. Instead, unless your agent offers it proactively, as we do, you may not think to ask about including it as an additional provision.

New Report Reveals the True Cost of Selling Your Home to an ‘iBuyer’

Perhaps you’ve heard about the new concept in home selling called iBuyers. Open Door, Zillow Offers and OfferPad are offering this way of selling your home. Basically, these firms use their own cash to buy your home and then re-sell it for a profit.

If you’re a seller who needs to sell quickly and you’re not worried about getting top dollar (or paying less in fees), the iBuyer model is an option that may not otherwise be available to you. You avoid the uncertainty of not knowing how long your home will sit on the market — or whether it will sell at all.

A company called Collateral Analytics has published a study of 4,000 iBuyer transactions in Phoenix which outlines the costs to sellers and the earnings vs. risks for these iBuyer companies. The report’s title is “iBuyers: A new choice for home sellers, but at what cost?”  It was released two weeks ago. To read the full report, click on this link.

   The last paragraph in the report is a good summary of their findings: “These preliminary empirical results suggest that sellers are paying not just the difference in fees of 2% to 5% more than with traditional agencies, and a generous repair allowance, but another 3% to 5% or more to compensate the iBuyer for liquidity risks and carrying costs. In all, the typical cost to a seller appears to be in the range of 13% to 15% depending on the iBuyer vendor. For some sellers, needing to move or requiring quick extraction of equity, this is certainly worthwhile, but what percentage of the market will want this service remains to be seen.”

In May I got a call from a couple which was under contract with OpenDoor for $548,500, but with a 7% “service charge” and $38,563 for “repairs found in assessment.” This way of doing business annoyed them enough that they terminated with OpenDoor and listed with me at $498,000, selling for $507,000, which netted them more.

Above is one of 3 charts in  the report. The analysis is from Phoenix, where OpenDoor began buying homes in 2016, because they didn’t come to Denver until 2018.

I’ve written in the past about companies which will buy your home “as is” for cash without putting it on the MLS. Then they flip the property to a new buyer for a profit — profit that you gave up  by doing business with them. The same is also true with iBuyers.

Bottom line: Unless money is no object for you, you’ll do better listing your home with a full-service traditional brokerage like Golden Real Estate. Call any of us at the phone numbers below!

Here Are Some Questions Sellers Should Ask When Hiring a Listing Agent

Do you know what to look for in a listing agent, and the questions to ask during a listing presentation?

You’ll probably want to know their level of experience, competence and success in selling similar properties, hopefully within your city or neighborhood.

Like you, I monitor the real estate activity where I live, and I’m astonished how many homes are listed by agents I’ve never heard of. As I write this on Monday, there are 50 active or pending listings in my area, represented by 40 different agents!  No agent has more than three listings. And despite practicing real estate here for 17 years, I only recognize the names of 11 of them.

This is typical of every city. Where did the sellers find all those different agents to list their homes? Many, I suspect are friends and family — every agent’s biggest “competitor.” In some cases, the seller had just bought their replacement home elsewhere and was convinced by that listing agent to list their current home — not the best decision if that agent is unfamiliar with your neighborhood, lives far away, and is unable to show the home on short notice, answer questions from buyers, or keep your brochure box well stocked.

Or perhaps the agent sent a letter or taped a note to your door claiming to have a buyer for your home. That earned him or her an interview, in which the agent said that his buyer found another home but convinced you to list with them.

Let’s say, however, that you want to interview  listing agents and make a rational hiring decision.

First, choose the agents to interview based on their location and experience in your neighborhood or city. Second, study their active/sold listings to see (1) their geographic distribution and (2) how well they are presented on the MLS. 

For this you can use a shortcut I created,  FindDenverRealtors.com, which takes you to the page on Denver’s MLS for searching agents by name. In my case, you’d see a profile and my active, pending and sold listings. Search for the agent(s) you’re considering. Read their profile, if they created one. Look at their current and sold listings. Click on one or more of them to see how they described the home on the MLS. Did they list all the rooms, not just bedrooms and bathrooms, providing dimensions and descriptions, or just enter the mandatory fields? Keep in mind that, the best indicator of how they will serve you is how they have served previous sellers.

Looking at those listings will answer the most important questions which you’d ask in person, but you won’t have to take their word — the truth is there in front of you. You’ll learn, for example, whether they did point-and-shoot pictures or had a professional photographer shoot HDR (magazine quality) photos, and whether they created a narrated video tour or just a slide show with music.

Having chosen who to interview that way, ask these questions of those you invite into your home for an interview:

What commission percentage do you charge? Keep in mind, there is no standard commission. It’s totally negotiable, and the industry average is in the mid-5’s, not 6%.

See whether the agent volunteers that they reduce their commission when they don’t have to pay 2.8% to a buyer’s agent. If you have to ask them, consider it a red flag. They hoped you wouldn’t.

Ask the agent whether he or she will discount their commission if you hire them to represent you in the purchase of your replacement home.

Hopefully the candidate will have researched the market and make a sound recommendation of listing price. Beware of agents who inflate their suggested listing price so you will list with them.

When setting the appointment, ask the agent to bring a spreadsheet of their sold listings with dates, days on market, listing price and sold price.

Lastly, how will they promote your listing?  Measure their promises against what we do, published at www.HowWeMarketListings.info.