Coming
Soon. For Sale by Owner. Make Me Move.
These are
all potential “off-MLS” sales, meaning these are properties that never hit the
Multiple Listing Service and, thus, are never seen by thousands of real estate brokers with active
buyers looking to purchase a home.
When a
market heats up, like this one has, you always see a rise in this type of
activity. But because of technology, we
have never had the quantity of offline sales, nor the quantity of buyers
looking to go offline to purchase a home.
Frankly, I
don’t care if you go offline, online, or over the line. I just want you to know what you’re getting
into.
The MLS has
been around for decades, first in printed form, then in online form, and now
fully digitized, with updates pounding our phones with emails, texts and
instant alerts in real time. It’s been
the primary way homes have been sold for 60 years.
As a real
estate professional with 20 years of experience, I can summarize what the MLS
stands for in two words: fair trade.
It’s fair
trade because it sets ground rules. It
provides full exposure and equal access.
And the agents who belong to the MLS agree to certain rules and
regulations that promote ethics and integrity.
When you go “off-MLS”,
these ground rules quickly disappear.
For example,
agents who submit properties to the MLS agree to abide by mediation or arbitration
(as opposed to a formal court proceeding) in case of a dispute. No MLS, no mediation or arbitration, which
means if there is a problem there is no set protocol short of going to court (which
is the most expensive option) when it comes to seeking resolution.
For the
majority of licensed agents who are also Realtors, there is an enforceable code
of ethics that requires full disclosure of material facts about the property,
no undisclosed or “secret” compensation, and disclosure of any potential
conflicts of interest. Go “off-MLS” and this code of ethics disappears. It suddenly becomes a "one and done" world, with significantly higher potential for fraud or non-disclosure of pertinent information.
And for
agents, going “off-MLS” is huge because when you leave the MLS system, there is
no guarantee of compensation. What is
the commission if you bring a buyer to a Make Me Move seller? Zero, unless you can get the seller to toss
something in (but the vast majority of Make Me Move sellers are going this
route because they have no intention of paying a commission in the first place).
This means many agents flat out won’t engage
with these types of sellers, because there is no guarantee of
compensation. That means not only is the
seller unrepresented by a licensed agent, the buyer often ends up without
representation, either. That greatly
increases the chances of a dispute, which greatly increases the chances of
litigation. So much for saving money.
Finally, no issue in Denver real estate has become a bigger flashpoint during 2014 than the “Coming
Soon” sign. You see these signs all over town, with
agents or individual sellers marketing properties via a “Coming Soon” sign instead
of through the MLS.
Why is this
an issue?
Sometimes,
the “Coming Soon” sign is a legitimate marketing tool. But in this market, it has become the
epicenter of “off-MLS” sales.
How does it
work? An agent will list a home for a 6%
commission. However, as part of the
listing agreement, the agent tells the seller that if he is allowed to “pre-market”
the home for two weeks, and he is able to find a buyer, he will lower the total
commission to 5% (representing both sides as a transaction broker, which means
limited representation for both buyer and seller, which the buyer and seller may or may not even understand).
The agent
posts the “Coming Soon” sign, buyers line up to see the property, and the agent
collects a commission on both sides of the deal.
Is this
illegal? No, if it is expressly agreed
to by the seller in the listing agreement.
But is it
best for all parties? We know it’s best
for the agent, because he just increased his commission by 60% or more.
But for the
seller, is it better to have one agent bringing buyers, or is it better to
allow true market exposure by promoting the property to more than 14,000
dues-paying members of the Denver MLS? What gives you the better chance for a highest and best final offer?
For the
buyer, is it better to be represented by someone whose interests are aligned
with the seller (or by collecting an oversized commission), or by having your
own competent and experienced representation? Again, I would argue
that good representation is worth its weight in gold (see my Zillow Reviews), but because our industry
has failed so badly in articulating its value proposition to consumers, buyers
are often inclined to go it alone and hope that things work out.
When a market
is overheated and full of emotion, as this one is, decision making skills often
break down. There is an emotionalism to
this market that is causing buyers to lunge at properties, and there is a
profit opportunity for some listing agents that is too enticing to pass
up, ethics be damned.
It’s gone
Wild West out there, and professional ethics are dying a slow and bloody
death.
