This morning I went on a listing appointment and discovered the ultimate business plan. Actually, let me rephrase that, I discovered the ultimate "list for free" business plan. This particular Seller had been on the market for six months with another company, his listing agreement had just ran out and he had called me and asked me to come by today, since I have a house just like his, on the market, two doors down. As usual, I went over with my arsenal of listing materials, fully expecting to walk away with my sign in the ground, as I normally do.
Anyway, I had his old MLS printout and started going over it with him to try and figure out why he hadn't had any showings in six months. It looked like it was priced OK, albeit just a tad high. But not enough to keep it from at least getting showings. After price, the next thing I normally check, is the amount of the co-broke, that was fine as well. Very much in line with our market.
Now, I knew this particular company offered reduced commissions, so I wanted to talk commission pretty quickly, to make sure I wasn't wasting my time. So I asked him how much they were charging him. I was surprised to hear they were charging him exactly the same as the co-broke being offered! Now this caught me a little off guard, as I assumed the Realtor wanted to get paid, if another Realtor sold the property. But nope. The entire amount being charged was offered as the co-broke and there were no upfront fees or transaction charges. Basically, if another Realtor sold the property, the listing side got squat, goose egg, nada, nothing, not one cent.
I guess this explains why he hasn't had any showings. There is zero incentive for the listing broker to arrange showings and let other Realtors show the property. So their "list for free" business plan must go something like this:
Attract Sellers by advertising, "We list homes for free"
Get as many signs in the ground as you can.
Attract as many buyers as you can, off of these signs.
Sell them houses and mortgage services.
Now folks, I am a firm believer in free enterprise and truly feel there is a place for all business models in out industry. The problem is, that this Seller didn't have a clue, that his Realtor was doing nothing more than using his property as a billboard. His property was bait and nothing more. The listing is the bait and the Buyer is the catch. He certainly wouldn't want to sell this house because it has great signage and he has it locked in for six months.
I wonder if this Seller would have listed with him, if he knew, selling the house was not the Realtor's game plan? I wonder how many other properties this Realtor sold off of these sign calls? I wonder how much this "list for free" service really cost this Seller, in lost market time and carrying costs? With our property values declining, my conservative estimate is that this six months, has already cost the Seller $15,000 to $20,000 in real dollars, due to depreciation.
So what do think? Would you list a house for free?