Return of frenzied real estate spin? Don’t be fooled again

Excerpt from broker facing MLS:

Named Exclusion

Concerned that the housing market this Spring could become irrational again, Boston.com’s real estate blogger raised questions today about the risks / rewards of waiving contingencies:

A buyer’s most foolish move

Yesterday, one of Real Estate Cafe’s DIY buyers received a conference call from a seller and their listing agent saying their offer was

the lowest of five competing buyers,

one had no financing contingency,

another had no inspection contingency.

However, the buyers were a “named exclusion;” which means they made an offer directly to the homeowner before they relisted in the MLS.  With that offer in hand, the homeowner wanted to see if they could net more profit by working with a well-known listing agent.  Fast forward three weeks from that date, and stir the frenzied FUD pot:

Fear, Uncertainty, and Doubt.

The buyers remained calm, raised their offer a bit, but did NOT remove any contingency clauses, and insisted on the right to get out of the transaction or renegotiate their price if the inspection revealed more than $10K in repair costs.

Guess who won?

Not a cash buyer, nor a fearful or poorly advised buyer playing Russian Roulette with contingency clauses.  Instead, a smart, PROACTIVE, DIY homebuyer who allowed the seller to NET more profit / retain more home equity by selling to them.  We don’t know if the listing agency will receive a partial fee for their role, but both the buyer and seller saved by outsmarting the traditional co-broke real estate commission buried in every MLS listing.

How common is that?  Named exclusions are probably pretty rare in Greater Boston because, unlike some parts of the country, FSBOs — for sale by owner listings — are less common than other cities, (eg. Madison, WI). Still, this isolated case study reflects two larger trends:

Megatrend #1. The MLS is playing a less important role in the housing market

Nationwide, guess what percent of homes are selling outside the MLS?  One study, which has generated considerable debate (including our own comments) suggests that the MLS played little or no role in nearly half of 2013 home sales

http://bit.ly/MLSnoMas

Megatrend #2.  New challenges the traditional two-sided real estate commission

The Consumer Federation of America first called for the traditional two-side real estate commission to be uncoupled more than 20 years ago, predicting billions in savings annually.  More recently, we were delighted to discover an academic paper and feature story in AOL Real Estate about the same:

Price Collusion and Adverse Intermediation

Significantly, one of the coauthors, Benjamin G. Edelman is an associate professor in the Negotiation, Organizations and Markets unit at Harvard Business School.

Real Estate Agents Who Rewrite the Rules on Commissions

CNN Poll Agents Over Paid (2005)

We’ll write more about these two trends and are eager to include them in a upcoming C2C / P2C Real Estate Conference.  In the meantime, we invite DIY homebuyers to contact us now for a complimentary consultation to learn more about alternative money-saving real estate brokerage models, including our PROACTIVE House Hunting strategies.

Posted in Bidding wars, Buyer agent, Commission Reform, Consumer protection, Defensive Homebuying, DIY Homebuyers, Proactive househunting, RECALL: Real Estate Consumer Alliance, Savings & Rebates, Unbundling the Commission

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