The MLS and Creative Sales

Posted on August 2, 2006 by seattleeric

It’s amazing the stories I hear about the self-policing that occurs on the MLS (some of it seems more like snitching, in my opinion). One of the big no-no’s is listing any reference to an open house in a listing’s marketing remarks. The reason for this rule seems clear enough; with so many of the big guys subscribing to feeds of all the listings, the MLS doesn’t want to bite the hand that feeds it. The Windermeres and John L Scott’s don’t want prospective clients to go to open houses on their own, they want their agents to represent these prospects.

On the more creative side, an agent I know had her hand slapped after she tried to emulate an auction situation, using her MLS listing to attract buyers. She is also an investor, having bought the home in question on a lease-option. The previous owner did a beautiful rehab job, but ran out of money and needed out fast. She stepped in, leasing the place (the lease payment covering holding costs for the owner), with a year option to buy for what was owed by the seller. She also took a chance and put another $15K into the home to finish it out (a risk since she didn’t own the home). With her large equity position given the market value of the home, she decided to test the waters, and create a situation that would attract more offers.

First, she offered a buyer’s agent commission of 4%. Then, in her creativity, she made her first mistake. In the agent-only remarks, she explained that the 4% would be added to the highest bid price. This was also clearly stated in the auction rules posted at the property during the open houses, available to all potential buyers. Her thinking was to put walk-in buyers on the same footing as buyers with agents (there were two open houses over the course of a weekend, then bids were accepted – no time for lockbox enabled agent visits), thereby creating an apples-to-apples comparison when reviewing competing offers. In other words, the final bid price would be the net (of commission) price. If a buyer with an agent offered the highest bid at (for example) $100,000, then price would be grossed up to $104,000, with the investor/agent/seller paying out the $4000 commission to the agent at closing. If a walk-in buyer offered the highest bid, then no commission is necessary (since she is the owner of the house, there’s no need to pay herself a commission…she’s getting all the profits anyhow). I can understand why she got in trouble for this. The MLS is for agents, not joe consumer. Agents would naturally prefer that the buyer’s agent commission is included in the final cost of the property. With this gross-up method, savvy buyers (even dumb buyers) would realize that they would have saved $4000 had they gone directly to the open house without an agent.

The other creative step she took was to include the word ‘auction’ in the agent remarks. She listed the home at her acquisition cost, knowing that it’s true market value would grab the attention of agents. Her objective was not to deceive, thus the reference to an auction (all bids would be reviewed at the end of the second open house).

However, on both counts, other agents snitched her out. I think each of her creative marketing ideas went against the traditional thinking of the industry.

In trying to offer a grossed up commission (and super-sized at that!), she was bringing the bright light of transparency to the transaction. Though her intent was not to ‘out’ agents who don’t discuss compensation with their clients, this is clearly the first thing many agents thought about. The agents would publicly claim that ‘it isn’t fair’ to raise the price 4% after a final bid has been made. On the contrary, as long as the this is known from the beginning, there should be no problem. If buyer’s agents openly discussed compensation with their clients, then clients would have a better chance of understanding that grossing up the offer to capture commission is not a big deal.

As for trying to market an auction, I think agents didn’t understand what the investor/agent/seller was trying to accomplish, or they were thinking of a Sotheby’s style of auction, which would be uncomfortable for agents and buyers alike. In either case, it was just strange enough to be deemed out of place on the MLS.

I’m guessing that some agents reading this are thinking, “yeah, this seller/agent should burn in hell for what she tried”. However, being an investor myself, I applaud her creative approach to trying to maximize the price she can fetch for her property, and for trying to structure the commission so that agent represented buyers and walk-ins are treated equally.

Sold Data

Posted on May 16, 2006 by Dustin Luther

Interestingly, the NWMLS is now allowing agents to list sold data on real estate websites.

Along these lines, Shelley Rossi, the Director of Public Relations for John L. Scott, emailed to let me know that John L. Scott added a comparable market analysis tool to their home search Robbie discussed last week…

There are two ways to access comparable sold property information on JohnLScott.com. The first is by address, which can be refined by entering property characteristics, such as square footage, bedrooms, bathrooms, etc., and the system will identify the ten closest “sold homes

The Lame List Part II – MLS Rules

Posted on April 13, 2006 by Robbie

[photopress:LAME.jpg,full,alignright]Recently, Dustin, Anna, myself, and the fine folks at LTD Real Estate, had the pleasure of dealing with the NWMLS.

The gist of the discussion was our inabilty to host a NWMLS search tool due to NWMLS belief that Rain City Guide is alledgedly not an agent site. They are of the belief because multiple agents from multiple brokers participate on Rain City Guide. Because of this, having a “framed” IDX solution developed by me, using LTD’s feed on Rain City Guide would be considered a violation of NWMLS rule 189, because said rule states: “No member shall advertise, sell or otherwise provide to any other member’s subscriber or a non-member any product utilizing information or content derived, extracted or complied, in whole or in part, from or through NWMLS.”

Needless to say, this rule makes no sense, because any web site that offers any publicly accessable MLS search could be considered in violation of rule 189. At any rate, I’m sure Dustin will comment more on this in a future post.

Anyway, the more I learn about how the MLS operates, the more I want to start a “bottom feeder” site and screen scrape everything I need. Any way this experience has lead me to the following questions for the peanut gallery.

What MLS rules are you least fond of and why?
Granted, I’m an outsider loooking in, but it’s seems the current rules are very agent unfriendly and add uncessary cost & ineffeciency to the entire system.
Why are there 189 rules?
Well, that’s easy, because 188 weren’t enough! But the bigger question is how do these rules get written in the first place. I’m assuming MLS board members write them, but is there any kind of vote by the membership on these? I can’t imagine why any agent (or broker) would impose such crap on themselves.
Is the wave of MLS consolidations good or bad for the industry?
Slightly off topic, but I’m curious to find out how Joe Realtor and Jane Broker feel? I think fewer MLSes make things easier, but I’m so far undecided if things would be better or worse.

Anyway, after learning about their interpretation of Rule 189, our local MLS earned a spot on my Lame List.

Closing Today

Posted on March 6, 2006 by ARDELL

There are a thousand stories in the Naked City….this is just one of them.

I was working on my computer one day when I saw some emails coming from Realtor.com

I stopped what I was doing and opened the emails. The emails were from clients of mine whose son purchased a condo from me several months ago. The emails had no messages, just property. Vacant lots out on the coast in Washington that were really cheap $25,000 to $90,000.

I called the clients and arranged for an agent on the coast to take them out to look at those lots and others. They returned here having found a fabulous lot that backed to a canal, one house from the ocean, with an easement access to the ocean directly across the street. It already had septic, water and electric hooked up.

The owners were a couple who owned it for many years and enjoyed it and needed to sell it because the wife was dying of cancer. To make a long story short, the woman left her hospital bed and her husband drove her two hours and the listing agent drove two hours and they met at midnight under the bridge to sign the offer. The woman felt a huge weight lifitng knowing that her husband would have this money toward her hospital bills. She died before it closed with that peace of mind.

It is closing today and I received this message from the listing agent “Mr (XXX) says he hopes they find as much happiness there as he and his wife had throughout the years…”

[photopress:beach_1.jpg,thumb,alignright]

This area was never on the mls, and so not on the internet, until they joined NWMLS this summer. Had the area not joined the mls, my clients would never have seen the lots on Realtor.com and emailed me. A chain of events started and ends today when it closes.

We are in a business of people. Buyer people and Seller people. We do not sell property, we help people buy and sell property. The people are important. Let’s not forget that.

Zillow MLS membership – done

Posted on February 17, 2006 by Galen

Zillow gossip of the day (already reported by Dustin in the comments): Rumor has it that Zillow is now a member of the NWMLS and they’re aiming to get a license in every state.

You could spin this as the story of a company that promised an MLS-free “revolution” settling on improving the current system, but business-wise, I think it makes sense; going it alone is a much higher risk strategy that could lead to spectacular failure and would definitely be an uphill battle. This means they can have all the listings of brokerage sites, a way better interface, and sell leads and maybe make more of the process.

In my mind, consumer-centric web design is Zillow’s true innovation in the real estate industry. Even the biggest sites still view the internet as a way to snag customers into using their “real” business. No broker or agent site approximates the consumer-centric feel of Amazon.com circa 2000 or Google and Yahoo today, although I think the race is on to get there. I give Zillow a good shot as it looks like they’re first to market with a trully consumer-oriented, national real estate search site.

-Galen
ShackPrices.com

UPDATE: John Cook of the Seattle PI picked up this story and has some interesting quotes from Zillow vice president Jorrit Van der Meulen, NWMLS Chief Executive Jack Johnson and Redfin Chief Executive Glenn Kelman. Well worth a read.

Is it bad if everyone else does it too? What if you're one of the best?

Posted on January 12, 2006 by Galen

Realtors are the subject of another balanced-but-critical New York Times article today. This time it’s for a whole host of lobbying-related fair market-blocking activities.

Frankly, I don’t have a lot of sympathy for banks, but the strong-arm tactics of the National Association of Realtors described in the article make banks look like victims of injustice. The story meanders away from bank-blocking tactics to easier to explain subjects, like the federal suit brought against the National Association of Realtors for locking low-cost realtors out of many listings. It appears the government (a very pro-business administration, at that) wants to create a level playing field:

When the suit was filed, J. Bruce McDonald, a deputy assistant attorney general, said, “Our job is to ensure that one group of competitors doesn’t tell some of its members they can’t compete in a certain way and undercut the level playing field.”

The defense:

Ms. Janik warns that major changes to the multiple listing services could cause large nationwide brokerages to pull out of the system and establish their own private listings. That, she said, would be a far greater threat to small firms.

So what’s the story? As I understand it, the progressive (egads!) North West MLS does not allow brokers to selectively block listings from competitors sites, which is what the realtors say they have a right to do. And, as far as I can tell, Windermere and the other monsters still list their houses with the NWMLS. Why? Because listing on the MLS allows way more potential buyers to see their houses and, sorry FSBO lovers and separate MLS creators, having more potential buyers increases the speed and price at which your home sells. Also, it would be extraordinarily two-faced if they first said “don’t do For Sale By Owner (FSBO) because you won’t get the exposure that you would get with a full-service brokerage” and then said “list with us even though only we’re going to intentionally reduce the visibility of your property to only buyers who talk to our agents.”

If anything, the Justice Department’s suit should keep realtors in business longer. If the system is open just enough that innovators and alternative pricing models will use it, they keep people in the fold and maintain some pricing power. If the system is locked down, innovators will tend to create MLS replacements systems until one of them succeeds.

Realtors: a PR campaign is in order. Your organization is blocking open markets left and right in order to enforce a 5-6% commission structure. The reputation of the National Association of Realtors is headed toward car salesman and lobbyist territory and when other folks find themselves having monopoly-like pricing power, they spend some of that money on goodwill (see: Microsoft). When other organizations find themselves in this making lots of money, not very popular pickle (for good reasons or bad), they also advertise on NPR (see: ADM, Exxon, Walmart).

On a side note, why haven’t I heard of the sell-your-home-get-a-Toyota model?

“Because the industry functions as a cartel, it is able to overcharge consumers tens of billions of dollars a year,” said Stephen Brobeck, the federation’s executive director. “Consumers are increasingly wondering why they are often charged more to sell a home than to purchase a new car.”