Open Letter: Are BLIND Bidding Wars part of unfair & deceptive business practices?

Sent this email two weeks ago, and still have not received a response even though a similar effort caused Barron’s to tone down their headline — removing the words “on Fire” from their original shown below:

https://twitter.com/RealEstateCafe/status/1302001043258118145?s=20

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Dear Elected Official,

First, sincerely appreciate the attention and dedication you’re investIng to protect residents from COVID-19.  Your care and dedication to public service is shining brightly.

Have any constituents expressed concerns about how the pandemic is impacting the real estate market?  The meme is that there is low inventory but the screenshots in the tweet below document otherwise:

https://twitter.com/realestatecafe/status/1298027772665827339?s=21

In addition to a five-fold increase in active listings, FAILED listings – Expired, Canceled & Temporarily Withdrawn listings have *** more than DOUBLED *** during the summer (June 1st til today, 8/21) rising from 47 in 2019 to 100 listings this year.  

That’s more than one per day. 

If more buyers knew that, think they’d be eager to rush a blind offer on a three-day listing — particularly during a pre-election pause?  At what point we call those kind of sales practices price gouging?

The Fall housing market starts after Labor Day, less than two weeks from now.  Despite the statistics above, some real estate brokerages will use hidden listings and high pressure sales techniques will try to create a false sense of urgency while hiding what’s really happening with inventory.  

What’s the best way to raise the visibility of these unfair and deceptive business practices; and if warranted, bring a Chapter 93A action against those who manipulate homebuyers in BLIND bidding wars — particularly during a pandemic?

https://twitter.com/realestatecafe/status/1298296419808415747?s=21

My hope is that some of those organizations that came together to protect tenants from eviction can join a call for an Emergency Real Estate Transparency Act to empower homebuyers to make informed decisions this Fall.

Fell free to share this open letter as my plan is to publish some version on the internet.  See related tweets already online:

https://bit.ly/RETransparency_LIVTwts

Related Articles

Summer slump of 2007: For every 2 sales, 3 listings failing in MA

Expired_shot2005_2
Two years ago, The Real Estate Cafe graphed summer sales versus expired listings in Massachusetts across a ten year period:  1996 to 2005.   It’s too early to update the graph but the current tally of 8,628 expired listings during the past seven weeks exceeds the 7,457 peak in 2005, the highest of any ten week summer period graphed above (click on image for larger view).  In addition to expired listings this year, there have been 4,455 canceled listings and another 2,455 withdrawn listings.  That’s a grand total of 15,538 unsuccessful listings, compared to 10,136 sales during the same period.

So, for every two sales over the past seven weeks (6/30/07-8/20/07), three listings failed.  That’s about 2,000 expired, canceled, or withdrawn listings per week.  Unless sellers hold their properties off the market, the unfolding credit crunch could create a higher rate of failure in the final weeks of 2007.

What does that mean for potential home buyers?  Two money-savings opportunities:

Expired & canceled listings:  If you have had no previous contact with the former listing agent or attended any of their open houses, buyers may save money — approximately 5% of the asking sales price — by contacting owners of expired and canceled listings directly.  If you’re interested in that do-it-yourself opportunity, The Real Estate Cafe would be glad to provide assistance "a la carte" on a fee-for-service or flat fee basis

Proactive house hunting:  There are thousands of homeowners getting ready to list their homes this Fall.  The Real Estate Cafe would be glad to tell you how some of our recent home buyers have saved money by identifying homes BEFORE they are listed with a traditional listing agency.

Draft

Oct. 2007: Foreclose petitions
topped 3,000 in Mass., 4,814 MLS listings sold during same period,
8,976 listings expired or were canceled!

Because October listing represent December closing, maybe more appropriate to compare sales in December 2007:  Sales below 4,000 (3,956) or down about 20% from October 2007.  Expired & canceled listings even higher:  10,982 across Massachusetts in December 2007.  Those listings are now available, at approximately 5% below their last asking price in the MLS.  Estimating that another 9,000 home owners have received foreclosure petitions since October 1, that puts further downward pressure on asking prices.  48,321 active listing and 38,000 in shadow inventory 67,585 MLS sales last year.

Defensive homebuying tip:  The falling number of active MLS listings unstate the potential inventory of homes for sale.  For each home sold in December, there were 2.7 expired and canceled listings.  If petitions to foreclose continued at October pace, there are up to another 9,000 distressed homeowners who may consider in an unsolicited offer to purchase their home:

Petitions to foreclose are the first step in the foreclosure process, and do not always end in actual foreclosure. Some homeowners eventually sell their homes or refinance.

“Petitions to foreclose spiked in August, and are back up near that level in October,” Warren said. “Auction announcements and foreclosure deeds are slightly lower than in previous months, which could mean more homeowners are finding solutions before they lose their homes, or that lenders are slowing down the process. It looks like we’ll see more of the same in 2008.”

CARPE DIEM: Expired & canceled listings create “commission-free holiday” for buyers & sellers

Maoffmarket_junejuly10yrs
Massachusetts home buyers, if you have been waiting for housing prices to slide into your acceptable range, this could be time to "carpe diem."  As shown in the graph above (click for larger image) of MLS activity during June & June over the past 15 years (1994 to 2008):

  • The number of off-market properties — expired, canceled & temporarily withdrawn listings — surged to a new record of 16,319 properties just after midnight.*
  • In contrast, sales have fallen from a peak of 19,180 in 2006 to 12,335 in 2008 (as of 12:30am, August 1). 
  • That means that sales are down by about a third, while off-market listings have nearly doubled since 2005 when we first wrote that expired listings were a leading indicator of the real estate bubble.
  • Over the past three years (2006-2008), more properties have been pulled off the MLS than sold during June & July.  For every three listings closed in the past two months, four were pulled off the MLS statewide in Massachusetts.

What do these raw numbers mean to buyers and sellers?  Think of expired and canceled listings as a two-sided window of opportunity, or the real estate equivalent of a "tax-free holiday."  Sellers can accept an offer about 5% less than their last asking price and still net the same profit because they are no longer obligated to pay a traditional real estate commission.

Will this "commission-free holiday" be enough to motivate buyers to make offers, or will motivated sellers in Greater Boston begin making offers to well-qualified buyers as is happening in other markets? 

The Real Estate Cafe is advertising buyers on Zillow to make it easier for motivated sellers, particularly those who have received pre-foreclosure notices, to find them. If none of our buyers wants to purchase your home, we offer seller services "a la carte" on a fee-for-service basis.  If you’d like to learn more about how to sell your home "for sale by owner," we’re organizing a FSBO support group and invite you to see our "FSBOs on Steroids" presentation.  If you’re not interested in selling on your own, we’d also be glad to do a Listing Agent Report Card to help you select a new listing agent and try to negotiate a reduced commission.  Email for more details.

* Technical note:  Includes all residential property classes in
MLSPin:  single family, multi-family, condominiums and land.
Temporarily withdrawn listings available for 2008 only.

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