Marc Davison suggested here that we re-brand the word ‘realtor’:
http://www.inman.com/2017/02/14/the-case-for-killing-the-term-realtor/
He was met with the usual drivel from agents, some of whom mentioned the big difference between a real estate licensee and a Realtor is that we subscribe to a strict Code of Ethics.
But if we’re going to re-brand the name Realtor, then let’s stop the charade about ethics. Realtors have stood by idly while their fellow agents have fleeced the banking industry with fraudulent short sales. We intentionally deceive consumers by re-inputting our listings to make them appear like hot new offerings. We make off-market deals and boast about them in the MLS that they were ‘sold before processing’, when every realtor has signed an agreement to share their listings with each other.
None of that is ethical, and if you participate – or stand by and watch others participate and do nothing about it – then you’re not an ethical agent.
Let’s put an end to it.
Either be ethical, or let’s stop saying we’re ethical, when we’re not.
Because the industry is so fragmented and independent, we’re not going to get a million agents to be ethical when you can double your commission by telling sweet little lies.
But we could educate sellers on the truth, and save our jobs.
The auction format would help to drain the murky cesspool of home selling. Buyers and sellers would enjoy full transparency, and everyone would have a shot at paying what they think a property is worth.
Auctions would invigorate the marketplace!
But sellers are leery of the idea, and they don’t want to give it away.
Here’s my idea:
The MLS is a dinosaur, and has been complicit in the fraud. Instead, let’s take this idea straight to Zillow – they already have different categories of listings on their website: Pre-foreclosures, Coming Soons, Make Me Move, etc.
Let’s add a new category: Market-Rate Sellers.
First, we properly educate a seller by having them read and understand the definition of a property’s value. We give them this disclosure:
A property’s value is defined by how much a ready, willing, and able buyer will pay for it. After proper marketing, I am willing to sell my property for what the market will bear. Signed, Seller.
Why don’t we already have this piece of education? Because sellers think they determine the value, and agents do nothing to convince them otherwise. Instead, we encourage the idea just to get the listing. Is that ethical?
If a seller is stuck on his price, then they go into the Make Me Move category. No problem, I take listings like that – and I might get lucky some day.
But for the sellers who want to control the entire process and move promptly, we will have a solid game plan to get them top dollar now:
The Slow-Motion Auction:
- Tune-up house.
- Open house for 5-10 days.
- Buyers engage in open bidding at the house on X date.
Sellers and buyers deserve to have this full transparency, and the ethics it would impose on agents will save our jobs.
Here’s another alternative I’ve been thinking about for a while and it works with the current MLS.
– Call the listing an “Auction” on the MLS
– In the listing state what day the auction will begin and when the auction will end (generally 2-3 weeks)
– Define a base price for the auction to start at
Here’s the trick…
– Each offer is added to the MLS listing and displayed for other potential buyers to see
– Offers are binding and can’t be retracted without losing a 20k deposit that goes to the seller
On the last day of the auction the highest bidder wins. If the don’t follow through the seller gets to keep the 20k deposit.
What all his does is change the MLS into a form of EBay but with realtor agents on both sides of the sale. For a little added zest the MLS could take a cut of the deal.
Some of the newbie high-tech real estate services have suggested similar transparency, and it would be great for buyers.
But sellers aren’t going to like the exposure if they are getting low offers – or no offers at all.
The Matterport 3D tour is going to suffer the same fate. Sellers and listing agents want to hide defects, not expose them.
I don’t understand what you’re hiding. Either you get offers at or above the price defined as the “floor” to start bidding from or you don’t. How is this any different from an “OPT” that sits and doesn’t sell? Buyers get the same understanding either way that the property is priced too high. With the auction format you have a point where the seller is backed into a corner showing that their price was/is too high. They can then simply relist at a lower auction starting point.
Home sellers have egos, and they don’t subscribe to our interpretation of the facts.
When they aren’t selling, they just think they will get lucky next week or next month, not that the price is wrong.
When we’ve been in a rapidly-appreciating market, they sell in spite of their beliefs. But when it cools off, listing agents should properly educate their sellers about pricing. But they just wait instead.
If you asked most sellers about their opening bid, they would tell you, “Oh, I’d never sell for that”, so there would need to be some mechanism in the auction process that made sellers feel comfortable yet provided transparency to the buyers. I think we need ‘no reserve’ to really capture the buyers’ attention, so they know they can buy a house on auction day. The seller would have to be comfortable with selling for the opening bid.
Once we had a track record of sales being bid up from the attractive opening bids, sellers might trust the process more. But it would be choppy in the early going – they will want the opening bid to start too high, and we will have a few duds for auctions.
“No reserve” will never fly. But you can easily get around it by providing a base price for starting the auction from that is 100-200k below market.
The one problem with unmanaged auctions like what I proposed is that buyers will want to try and “snipe” the auction at the last minute. This is also easily addressed by adding a rule that involved bidders can bid one more time 24 hours after the highest bid was received by the seller.
Another big problem with auctions is that they don’t accommodate provisions that may need to be considered between different buyers. It’s all about who’s got the $$$. Often the one in a million buyers that are willing to pay a crazy price don’t have immediate access to cash.
Even with all the negatives regarding selling homes via auction I’m behind you 100% in trying it. I’ve never seen a situation in business where transparency didn’t create a fair and equitable end result.
Some auction facilities have been caught using paid bidders to ensure they get somewhere in the vicinity of market price, or ideally pumping the price up beyond what legit bidders would have bid, it the illegitimate bidder hadn’t been there to manipulate the process. How would the real estate industry eliminate this scam?
It only has to be discovered and publicized a very few times before potential buyers would reject the idea from the get-go, and not participate in the future owing only to the perception that they could get hosed at worst, or waste a lot of time and energy at best.
Would an analogy be that traditional selling is like playing Poker, and the auction process more like a crowded game of Blackjack? Both require skill, but one is faster, and less complicated, yet carries a note of time pressure that some might never take a shine to, since a game with time pressure requires a particular mindset that’s foreign and/or scary to some, not just to the players, but also the broker? Most brokers I’ve known couldn’t begin to deal competently in an auction process. They wouldn’t have the mental or emotional ability to function under the pressure. How to regulate and qualify brokers who can deal?
Even with all the negatives regarding selling homes via auction I’m behind you 100% in trying it. I’ve never seen a situation in business where transparency didn’t create a fair and equitable end result.
Five to ten years from now, the auction format would be humming along, and providing a fair and equitable end result. But sellers and agents would have to give up the unfair full control of the process now, and let buyers have more power.
I just had it happen last week where I sniffed out a listing agent who had his own buyer. I asked about it, and he went all vague on me but I got him to commit to playing it straight and do what’s right for his seller and let us submit our highest-and-best offer.
Of course, he calls back a few hours later to tell me he screwed me and my buyers out of the deal because he had the seller sign his offer. My buyers would have paid well over the list price, which the seller deserved to entertain. But instead the listing agent breached his fiduciary duty to his own client and instead lined his greedy pockets with the double commission.
All buyers deserve to have their best offer entertained, and frankly, I deserve the right to earn a commission. But first and foremost is his duty to his seller, who also got screwed.
How would the real estate industry eliminate this scam?
Part of this process is to ensure we have a job. If every buyer had to be represented by a legit agent, and had to prove their prequalification and put up a deposit in order to bid, it could smoke out the shills. But yes, a shill could undermine the progress – if discovered.
There would be agents who are auction specialists – an inexperienced agent could hire their service.
Regarding agents not being able to handle an “auction MLS” type solution… All you have to do is make buyer/bidder info required fields that need to be completed before a bid is excepted. Also the MLS would need to do all the auction processes on their site keeping realtors completely out of the actual auction process.
I can’t imagine any MLS being able to be this nimble. It would be an outsider who invades the space with the perfect auction-website solution.
Maybe sellers could live with the number of bids being public – and they would probably enjoy seeing them go above expectations. Let’s have the seller log in a dollar amount where they allow the bid amounts above that to be exposed to public.
Doing the auction live and in person adds an extra thrill to it, and evokes the animal spirits when you can see the opposition eye-to-eye. Winning becomes everything. The ebay format only gives you one last shot, and you’re just guessing if your bid will be enough. A live auction would keep going as long as people are bidding – nobody ever gets cheated out of buying, which the sellers would dig!
Why not have the home inspection reports available to those who make the deposit? Would give the seller feedback on why the offers are so low. More transparency can never hurt. Appraisers wouldn’t like it, but…..