2008 May 22nd

Should We Close the Door on Open Houses?

Open Houses Don’t Sell Condosbuildingsmall.jpg

There is a myth in the real estate business. It’s one that’s been around for a long time. It’s especially entrenched in urban areas like here in Hoboken. Sellers put their Hoboken condo on the market and think that their agent should hold an open house every weekend until the property sells. They believe that a buyer is going to walk through the door, fall in love with the property and pull out their checkbook. Selling a condo at an open house is a rare event. There are people who make a recreational activity out of visiting weekend open houses. It’s something for them to do after brunch – to check out their neighbors’ condos and pick up some decorating ideas and renovation tips. The vast majority of visitors to open houses are not in the market to buy a condo in Hoboken. So should agents be firm and tell the sellers to get real and stop holding them? Probably not.

Buyers Want to Window Shop

There is no doubt that today’s buyers start their search on the internet, especially young, smart, sophisticated Hoboken buyers. Nonetheless, pictures and even video only go so far. There is nothing like the real thing, baby. Being able to walk into a property at ones leisure is a nice opportunity for a buyer to window shop without feeling obligated to an agent, without having to make an appointment in advance and without the fear of pressure from a possibly pushy realtor. Going to open houses is a great way for a buyer early in the buying process to test the waters.

Sellers Want to Know

An open house lets your agent get an idea of what the browsing public thinks of your place. Now, most people have some social grace. They are not going to walk in and say “what an awful property”. If your agent is perceptive and can read body language and make people feel at ease they should be able to get a pretty good idea of what most people like and don’t like about the unit. A good agent will communicate that information back to the seller so changes can be made where possible. It also adds credibility to what the agent may have been trying to tell the seller from the start. If the fuschia curtains just don’t work in the living room it may help to convince a stubborn seller when the seller hears it more than once.

Even The Most Committed, Serious Buyers Want Some Freedom & Flexibility

Some buyers are actively engaged in the house hunt and have been working with an agent. In Hoboken most agents know each other and work together frequently. If a buyer wants to go out looking at properties and the buyer’s agent can’t accompany them it is common for the buyer to go to open houses on the weekend alone. When they are asked to ‘sign in’ they let the host know that they are already working with a certain realtor. That relationship is (and should be) honored by the hosting agent. This gives the buyer a way to go out looking at his convenience without having to have his agent there while still being loyal to his agent. If the buyer sees something he likes, he will typically go back with his agent to see it again. He then has the assistance of his agent should he decide to move forward. But a buyer, even if working with the best realtor in town, can just stroll into an open house on a whim.

Open Houses Can Even Be Good For the Agent

Hosting an open house gives the hosting agent the chance to meet people. Any agent who doesn’t want to meet people is in the wrong business and not likely to be a very good realtor. Sure, the visitors may be nosy neighbors (who later decide to sell), window shoppers (who may ultimately be buyers) or real buyers (often accompanied by their agents). Any of these situations can be capitalized upon by a good agent as a marketing opportunity and a way to make contacts for future business. In a small town like Hoboken, every interaction is chance for a star agent to shine.

We all Like Free Food

Across the river at the high end NYC condos, open houses have become quite elaborate, catered affairs with live music and passed hor d’oevres. While Hoboken open houses are not quite there yet, it’s not a bad idea. There are certainly some open houses at which the guests are offered coffee and cookies or some other goodies. Free bagels & lox on a Sunday morning – why not?

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  1. r

    Open houses eliminate the need for two Realtors to be involved in a transaction. When I bought my house, after seeing it through an open house, I used the Realtor that hosted the open house on the condition she only take 50 bps. more than she normally would have gotten for one side of the deal. The seller was able to come down $15k because he only had to pay the Realtor 3.5% verus 6%.

  2. Lori

    Well, that’s one way to look at it. The other is that the seller’s agent has a fiduciary duty to obtain the highest possible price for the seller. When a buyer deals directly with a seller’s agent, although technically it then makes the seller’s agent into a “dual agent” many people feel that an innate conflict of interest arises. How can an agent work for the seller and the buyer at the same time when their interests are naturally at odds with each other?

    While your seller claims to have “been able to come down 15K”, you really don’t know how much they might have ultimately accepted had you had your own agent negotiating for you, regardless of the shared 6% commission. One possible protection a buyer can secure in this situation is to hire a real estate lawyer to negotiate on the buyers behalf during the offer process.

    Also, the offer and acceptance is only the very first step of a deal. Who is representing you during the rest of the process? Perhaps your attorney but, believe me, I’ve seen many attorneys do a woefully inadequate job of due diligence. What is problems arise during the home inspection? Or with the condo docs? The realtors are the only ones in the transaction who do not get paid a penny unless the deal closes. They have an incentive to work out problems that may arise. The attorneys collect their $1,200 or so even if the deal dies.

    So working directly with a listing agent may or may not save you money – there is no real way to know. Many buyers, especially first time buyers, are wise to avoid that route.

  3. r

    What ever other services a Realtor might provide (negotiator, secretary, chauffeur), they are not getting a full 3% (or 2.5%) if they didn’t find me the property. There are just too many Realtors at this point in the cycle willing to take a smaller cut for not being entirely involved in the process.

    Additionally, when a property sits unsold for 15 months, and the Realtor has ruined many of her own Sundays sitting in an empty kitchen at an open house – you can rest assured she is working extra hard to lower the expectations of the seller rather than trying the convince the buyer to bump up their bid.

  4. Lori Turoff

    R,
    You’ve brought up some interesting points.

    There are some less than full service real estate companies that will list a property for a seller for a reduced fee. With these type of companies, the savings comes from their reduced marketing on behalf of the seller. They do little other than listing the property on the MLS. The reduced fee has nothing to do with the buy side – any buyer’s agent can show a reduced fee listing. Problem is, most agents are going to show 6% and 5% properties before they show the 2% property. That’s just human nature. Foxton’s was one example of a reduced fee brokerage. They went bankrupt.

    Any realtor sitting on an unsold property for 15 months doing open houses every Sunday must not be a very good realtor. For what ever lenght of time a listing is active (which averages 90 days in Hoboken right now, less in Manhattan), a good realtor will use that time for his or her advantage, as I explained above. 15 months? What’s wrong with the unit? What’s wrong with the realtor?

    You may have gotten a great deal. Your unit may have been sitting unsold for a long time. In your case, a realtor may not have added much value to the process. What often happens, however, is that a buyer is working with a realtor. A new listing comes on the market and it’s a great property. Who do you think learns about that listing first? The person looking on their own or the loyal customer who immediately gets a text from the realtor saying “we have to go see this one right away”? Sure, there is more inventory on the market than last year but the good properties still go fast, often before an open house is even held.

    -Lori

  5. Michael Bergin - Your Realtor in Alexandria, VA

    Lori,

    You make excellent points about why open houses are still a staple of the buy/sell cycle – especially in today’s market. And yes, working for both the buyer and the seller IS a conflict of interest.

    Michael

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