Spring is here! Flowers bloom, temperatures rise, and sellers make big mistakes. Like not putting their home on Multiple Listing when it’s time to sell. It’s a disturbing trend in the Bay Area where according to the San Francisco Chronicle, about 50 percent of closed sales never hit the market.
Agents run display ads in the newspapers: “Call now, before this home goes on Multiple Listing.” Yard signs are planted at homes whose newspaper ad might pop up when a buyer does an advanced Google search of that exact address.
Let’s examine this from both the seller’s and the agent’s points of view and note the agent’s distinct advantage.
• Avoid hordes of lookers coming through the house
• Sell quickly because in a heated market, guaranteed, you’ll get an offer immediately
• Ummmm, that’s about it
• Potentially “earn” twice the commission when a buyer gets in touch directly
• Don’t have to field dozens of agent calls and emails
• Save toner and paper by not printing out all those pesky multiple offers
For the life of me, I don’t understand how an agent does his/her fiduciary duty by not MAKING a seller put the home on Multiple Listing. OK, we can’t do that.
A recent matched pairs analysis (appraiser talk for extrapolating data from the sales of two homes as identical as possible) illustrates the
insanity shortsightedness of not exposing a home for sale on the MLS:
House A—a three-bedroom, two-bath, 50-year-old, 1500 square foot ranch style home in Concord, California (my bailiwick), occupied by Mr. Jones, an elderly wheelchair bound gentleman who needed to move to assisted living. Extreme “deferred maintenance” was a polite way to describe the home’s condition. It did not go on Multiple Listing.
House B – Down the street, same floorplan, same everything, marketed as a contractor special. It did go on Multiple Listing.
Mr. Jones’ home sold for $385,000 to the first person who looked at it, probably someone known to Mr. Jones’ agent. End of story. That was easy!
House B drew eight offers and sold for $440,000 because there is high demand for flippers.
Mr. Jones did not put his home on MLS because he didn’t want to be disturbed by showings. Apparently, his agent didn’t try to convince him otherwise. Because had she tried, she might have told him she could the following:
• take photos of the property
• put them on MLS
• have buyers/agents submit offers subject to seeing the interior
• schedule ONE viewing for everyone who submitted an offer by a certain date
And his home could possibly have sold way over asking price.
But no. He got one offer and stopped.
Now, let’s consider the commission. The typical commission today is 5 percent (2.5 percent to each side). Say Mr. Jones’ agent double-ended (represented both buyer and seller) the sale and only charged 3 percent. Her commission on $385,000 would be $11,550, and the net to Mr. Jones would be $373,450. But House B brought 5 percent commission, or $22,000, and the net was $418,000.
I doubt that if the dots had been connected for Mr. Jones he would have chosen to forfeit $44,550 to avoid putting his home on MLS. Especially since there was an easy way around showing it.
Why did Mr. Jones’ agent price his home so low? Because she based it on the most current data she had—asking prices of homes that were currently in escrow—homes whose actual sale price is not revealed until they close (another pitfall of not exposing it to the MLS). But House B was exposed to the market and got multiple offers, which pushed it up to a price similar to those that would eventually close…when it was too late for Mr. Jones.
So, readers with friends and family, if you see someone you love about to make the biggest financial mistake of his/her life, share this post. The inheritance you save may be your own.
If this is confusing, or you’d like to discuss, feel free to comment below or email me at firstname.lastname@example.org and put “Blog” in the subject line. I welcome your comments. I tweet at @CathyTurneyLafs.
Cathy Turney has been a California licensed real estate broker (#01056789) since 1988, a state-certified appraiser (#AR008672), and wrote the American Business Association Stevie Award-winning book Laugh Your Way to Real Estate Sales Success.