FAQ VIII: What Do You Mean the House is Already Under Contract?
Oh, if I had a hundred dollars for every time I’ve heard this question – from clients AND REALTORS!
Let me set the stage: You are a buyer. You have searches running at every web-site that lets you set up automatic notifications of new listing in a given price range and geographic region. You’ve had your agent scouring the neighborhood for any signs that someone is getting ready to move. You’ve even had your agent go door-to-door telling residents he has a buyer DYING to get into a house in this neighborhood and are you perhaps interested in selling – but nothing has panned out. Then, mid-morning you get the email notification straight from your favorite real estate web-site that the house you’ve been dreaming about has just come on the market! You text, email, and voice dial your agent to let him know THIS IS THE ONE! The agent calls to set up a showing and the receptionist informs him the house is already under contract. What-the..WHAT?
Two things have likely happened. First: the site where you saw the house isn’t updated regularly and the house has actually been on the market much longer than you might suspect. One of the biggest challenges with listing syndicators is getting them to pull down or in some way identify listings that are under contract or that have already sold. The second part of that wish is that the syndicators should update their data with as much frequency as the multiple listing services (MLS) provide. Our MLS, for example, updates listing data every 15 minutes but it may be 24 hours or more before the syndicators download updates – and even then, the updates may only be incremental in that they don’t update existing listing statuses, they simply download the data that has new listings. It may be once a week or once a month that changes to listing statuses are updated, if at all.
Second: This listing was being privately marketed as a “pocket listing” prior to being entered into the general market. A strategy in some brokerage offices is the idea of a Whisper Campaign. This is a marketing program formulated to put fresh new listings in front of a select group of brokers (usually from the same brokerage) to give them first shot at bringing a buyer to the listing. Sellers are enticed to agree to this “soft opening” with promises of getting the home sold faster and with less hassle than putting it on the broader, open market.
The way it works is the listing agent takes the listing agreement and inserts language that says “Seller instructs the listing firm to not publicly market the listing for XX number of days following the execution of this contract.” However, the listing firm may market this property internally during the same time period. My beef with this approach is that it creates a false expectation that the seller’s property is being exposed to a truly competitive environment. Without providing all the brokers in a given market equal access to a listing, the seller may miss out on competing offers that can often drive the purchase price over the list price. This is usually a good thing for the seller.
Why would a brokerage do this? The short answer is MONEY. If the brokerage has an agent on the list side and an agent on the buy side – that’s two commissions for the brokerage as opposed to having just the list side. The buy-side commission goes to a different agent outside the brokerage. If you’re a seller and a brokerage wants to limit the initial exposure of your home to the market – does that seem like it is in your BEST INTEREST? Again, this brings up the value of agency, advocacy, and different forms of representation. Take a look at my colleague Dick Greenberg’s post on this topic by clicking here.
The lesson here is that if you’re tracking new properties on any web-site, be sure to look for the kinds of updates the site is providing. Does it identify properties that are “Under Contract”? Does it identify properties that are “Sold”? Does it state how often the data is refreshed and updated? At the very least, have a broker in your area check on the properties you’re following as they will likely have the most current and accurate information on any property (publicly) available for sale.
