The Flat Fee Listing Coach

The Flat Fee Listing Coach

My goal is to be a resource for consumers considering a flat fee listing, as well as a way to for sellers to learn how to best sell their home. I firmly believe that flat fee MLS listings are the future of real estate and look forward to discussing their development here. Thank you, Albert Hepp

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• Announcements [A] (26)
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Announcements [A]

• A great CNN Money Magazine article on how flat fee MLS sellers are fairing in the buyers market

  http://money.cnn.com/2007/10/18/real_estate/home_sale_broker.moneymag/index.htm

  Our company, actually the main website we advertise on http://FlatFeeMLSListing.com was featured in this excellent article for CNN Money recently. The article does a good job dispelling the misconception that flat fee MLS listing doesn’t work in a buyers market. It tells how the stories of sellers putting their home on the market, getting 60 showings and 10 offers after the first weekend (yes, many of our sellers experienced those numbers a few years ago) are quite rare now that most markets favor the buyer over the seller right now.

  One point I wished the article would have developed further, that we frequently hear from our sellers: My listing can have a better price, and therefore be more attractive to buyers, because I am saving so much on my listing commission. One very happy seller who had just gotten two offers within a week of listing was still in shock. He talked about that there were a dozen other similar homes for sale in his neighborhood, all with traditional agents and probably paying a traditional high commission. Many had been on the market over 6 months so he had prepared himself for 6 to 9 months on the market. Because he was only paying $499 for the listing broker, he was able to offer a slightly lower price and still come out way ahead.

  
• A new industry organization for flat fee brokers

  Over the past year or so I have been recruiting flat fee brokers from all over the United States (including one in Puerto Rico) in the hope of starting an industry organization just for flat fee brokers.

  I am proud to announce that my work has come to fruition and the American Real Estate Brokers Alliance has started. I already have more than ten brokers from Washington state in the West to Louisiana in the South to Massachusetts in the East to join and write checks. We even were mentioned in a recent article in the Wall Street Journal, which characterized us as a rival to the National Association of Realtor, which is a little bit of a stretch.

  I expect this organization to grow and be a great resource for flat fee brokers from every state to trade best practices for making our home sellers effective at selling in the MLS. Our website should be up and running soon, you can find it at www.AREBA.org

  We had our first well-attended meeting in Washington, DC, with a happy hour afterwards in the beautiful Union Station. What a place. I am excited to see what this group of real estate innovators will do.

  
• Back from FTC/DOJ event in Washington DC

  I had a whirlwind trip to Washington to attend an all day event best described by the hosts… “the Federal Trade Commission and the Department of Justice hosted a public workshop entitled “Competition Policy and the Real Estate Industry.” The workshop focused on issues related to the competitiveness of the residential real estate industry, and covered topics such as multiple listing services, online “virtual office Web sites,” discount and limited-service brokers, and minimum-service requirements.” Found at http://ftc.gov/opa/2005/09/comppolicyworkshop.shtm

  It was a fascinating presentation on the state of Flat Fee Listing in the entire nation. Flat Fee Listings are a trend that is really taking off. I enjoyed getting to meet many of the other pioneers and leaders in the Flat Fee Brokerage community, as well as Attorneys, media, consumer advocates, and FTC/DOJ employees tasked with protecting competition in the real estate industry. I was thoroughly impressed with the knowledge, motivation, and understanding these people have of our industry. Again, it makes me sleep better at night knowing that they are on the job and interested in Flat Fee MLS listings (do I say this too much? sorry if I keep making that point).

  I think this event laid the groundwork for better understanding of the industry, the flat fee listing evolution (or revolution) that is occurring , and important relationships were formed as a result. I like to see examples of good government like this. Stay tuned…

  
• BuySelf.com recognized for internet marketing excellence by leading real estate website

  Yesterday I was honored to accept an award on behalf of the entire BuySelf Realty team. It was the “Award of Excellence” for online marketing from the world leader in real estate marketing, Realtor.com. It was humbling to be among the handful selected for the great work our team does marketing our sellers properties on the internet.

  Since the beginning, BuySelf Realty has focused on being the best and strongest at marketing properties on the internet. Back in 1998 when I started flat fee listings, few of our competitors were on the web. We were the first that allowed someone to order a flat fee MLS listing, and then follow through and list their home all using our website, unassisted unless they wanted help. I remember my excitement, and how much the customers enjoyed this capability to do the work of listing a home at their convenience. And I still get a sense of satisfaction (and relief knowing I don’t have to have a team member available 24 hours per day) when I see customers who have successfully done the everything necessary to list their home in the MLS, with all the work done after 8pm.

  Don’t get me wrong, our customers have appreciated the strength of our internet marketing consistently from the beginning. But to finally have the king (or 800 pound gorilla) of real estate internet marketing formally recognize our excellence in this area is quite a treat for our team to celebrate. While I have known that we market our properties better than our competition, this further recognition from an impartial third party should make it even clearer to our customers. I don’t know of any other flat fee listing brokers that received this award.

  I have been meaning to figure out the photo part of this blog for a while, so I will try to post a photo from the award ceremony next week.

  Albert Hepp
  Flat Fee MLS Broker

  
• Consumer Federation of America supports flat fee listings

  I just got back from a trip to a conference at the Consumer Federation of America (CFA). I was invited to represent flat fee brokers in a CFA Real Estate working group. The CFA wants to support the growth of flat fee mls listings by advocating for fair competition and vigorous enforcement against any traditional broker that attempts to compete unfairly. Our working group will meet regularly, which means I will be spending more time traveling to Washington.

  It is an honor to represent the flat fee brokers to this important consumer advocacy group. I regularly talk to lots of flat fee brokers and hope to be a liaison to help problem solve and advocate for flat fee brokerage. The CFA has lots of questions about flat fee MLS listings, how they compare in various parts of the country.

  I am very glad that the Consumer Federation of America is involved and very supportive of innovation in real estate. I believe that flat fee listings in the MLS is one of the best (if not the best) innovations to ever come to the residential real estate services industry. Having all these well-connected and resourceful organizations like the CFA, the US Department of Justice, the US Federal Trade Commission, among others, will only help the success and growth of the flat fee mls listing model.

  
• Do buyer agents show non-MLS listed homes to their buyers?

  Sometimes a person who wants to sell their home but has not listed it in MLS asks me “Why should I list it in the MLS? I offer a comparable buyer agent commission to any agent that brings me a buyer.”

  The best way to answer that question is with a story. We list lots and lots of sellers who tried selling a home without the MLS, but were not successful. My favorite question to ask these people is “Before you listed with us, did any real estate agents show your home to buyers they were working with?”

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• Featured in lead article in recent Real Estate Intelligence Report issue

  I was surprised when recently a flat fee MLS broker from a neighboring state faxed me the latest issue of the Real Estate Intelligence Report, a prominent industry magazine for real estate industry executives. I read with surprise the front page article all about my leadership in the flat fee MLS broker industry, my picture (oh, not that picture, I have to take that one off my website–professionals shouldn’t be allowed to display photos from previous decades, but I digress…) and about how we have established a trade association for brokers who specialize in flat fee MLS listings.

  It was a very complimentary article, and I hope and expect it will further enable flat fee brokers to help each other get established. New flat fee listing brokers can learn so much from the pioneers who have now been practicing as a flat fee broker from the very beginning of the concept. I still learn so much about this business and how to do it well when I meet and talk to other flat fee brokers. I don’t know how the new brokers out there can do it alone, or at least how they can do it well starting from scratch. The other great part of our flat fee broker national organization (AREBA) is that many of us pioneers have significant real estate experience before we started our flat fee business, and that experience is crucial to the success of our sellers and quality of our service. I think of the relationships I had in the real estate community, the understanding of how agents act and react, and the involvement at the Realtor Association level, all of those experiences are directly tied to how well our sellers sell their home.

  
• Flat Fee Listing Broker reputation-why it is important

  I spend lots of my time being involved in local, state, and national Realtor Associations, whereas many flat fee brokers do not. The reason I serve on committees, travel to other cities (often Washington, DC), and spend other times working with Realtors is to strengthen my company’s reputation. My work and involvement with traditional Realtors quite frankly makes them more likely to sell my sellers homes. A buyer agent who sees a familiar name as the listing broker has a higher level of comfort at showing that listing, as well as putting in a purchase agreement. That helps my flat fee MLS listing sellers, plain and simple.

  There is a tremendous variety in the work I have done in Realtor committees, the only constant that it involves working with and building relationships with traditional Realtors. I remember making presentations to grade schoolers about Fair Housing laws in the early nineties, interviewing candidates for public office about their positions on real estate-related issues, and more recently giving feedback and helping establish MLS policies and procedures.

  I also work hard to establish our company’s reputation by how are sellers interact with buyer agents. We strive to have the most prepared, well-coached, and knowledgeable sellers about how a purchase transaction transpires so the buyer agent doesn’t have to worry that they will have extra work helping the seller through the transaction. That is why I relish the feedback we get from agents when they say “that transaction went really smooth.”

  Even within the flat fee broker national association, my work to help other flat fee brokers frequently ends up helping our flat fee sellers. Whether it is working on issues that other flat fee brokers encounter or sharing best practices for having our sellers sell quickly and effectively, my sellers see many benefits from this involvement.

  All of this time I spend is worthwhile, and has built BuySelf Realty’s strong reputation within the real estate community. What makes me proudest is that our sellers benefit from this investment of time, even though often the benefit is transparent to them. If you are looking for a flat fee broker in an area we don’t serve (although there are fewer and fewer areas like that), keep in mind how important broker reputation is to your sale. I would ask how involved the broker is in Realtor Associations, whether they are a member of the American Real Estate Brokers Alliance, which is the flat fee broker national association, and about the broker’s background in general.

  
• Flat Fee Listings growing in popularity with do it yourselfers

  The past few years our flat fee MLS listing business has seen a huge influx of sellers who first tried to sell their home without any professional help and without a Muliple Listing Service (MLS) listing. Most of these people had put a sign in their yard, and maybe put an ad in a newspaper and maybe a few other things to try to sell their home.

  Unrepresented sellers reach a point where they decide to have us list their property. That is when they contact us at BuySelf.com. Rather than just give up and pay the 6% commission, many of these sellers want to do a flat fee listing with us. Most of them have figured out that they need an MLS listing. These non MLS sellers have experienced first hand that 99% of buyers just don’t know their home exists or is for sale if it isn’t on the MLS.

  Many of these sellers have spent lots of money on newspaper advertising to no avail. Let me be clear: Newspaper advertising isn’t dying, it is dead. Actually, it has been dead for awhile now. Real estate classified ads don’t work because people don’t read the newspaper in numbers like they used to. Full disclosure: I am a big fan of newspapers, and read it every day. But not for real estate. Real estate advertising is what I call painful reading–you have to read through a bunch of content, 99% which is of no interest or relevance to you. Everyone by now has figured out that the internet is far easier, effective, and accessible–you simply put in your price range, number of bedrooms, neighborhoods, etc. and you will only see the relevant listings.

  Now many of us, and many real estate agents are creatures of habit. We keep doing what we have always done, without thinking about whether it is worth doing. I recently read that 79% of real estate agents still spend more money on print advertising than on the web. The only explanation for such a waste of money is habit, or worse yet failing to educate a home seller that advertising dollars spent online are far more effective.

  Another gripe we frequently hear from sellers who tried to sell without the MLS is all the calls they get. No, these aren’t calls from buyers, the calls are from agents who want to sign the seller to the traditional 6% listing contract. The worse stories are about the agents that say they have a buyer that wants to view the property, but the seller never sees the buyer, but they do end up having the agent over and having to listen to a high pressure sales pitch to list with that agent. I wonder if sellers ever actually fall for the never-appearing buyer trick or if the agents realize it is a waste of everyone’s time.

  The last of the common complaints we hear from sellers who tried to sell without the MLS is about people who aren’t buyers, they just like to look at homes. Many a rookie real estate agent have wasted hours and hours of time with people who have a hobby–they like to look at homes. They aren’t qualified for a mortgage, they aren’t planning to buy, but they would love to tour your home. This is why real estate agents quickly learn that a buyer must be qualified for a mortgage before they see homes. People like this belong at home tours, not taking up agent and motivated home sellers’ time. This is another benefit of being in the MLS and working with BuySelf.com, we show our sellers how to effortlessly not spend any time on these people, so their time and resources are focused on buyers motivated to buy their home.

  The part of this equation I want to work on and improve is the sellers who don’t understand the MLS. If consumers in general better understood the MLS and how it is a necessity, home sellers wouldn’t waste their valuable time attempting to sell without it. I haven’t seen any good educational tools out there that explain the MLS in consumer-oriented language and without industry jargon. It doesn’t need to be a secret.

  Albert Hepp
  Flat Fee MLS Broker

  
• Interview with Money Magazine reporter

  A few weeks ago a reporter with Money Magazine flew into to town and wanted to interview me about a number of real estate topics, including flat fee MLS listings and closing costs. I was happy to help out in any way. I liked the way the reporter focused on finding tips that their readers can use to save money on their closing costs, which isn’t easy.

  I hope that I will be mentioned in the article he publishes, if he does I will let you know…

  
• Interviewed by 60 Minutes for an upcoming story on the real estate industry

  I was interviewed by the 60 Minutes CBS News program, which is not something that happens every day. It was an off camera interview, they were asking me questions about my business and the current state of the real estate industry. At first I was hoping I might get an on camera interview and maybe even appear in the piece, but that appears highly unlikely. I have to face the fact that I am just not flashy enough, not animated (except in my own subtle kind of way) to make a compelling story. They did ask what they would be able to film if they came to my office but by the end of the interview I think the staff interviewer had concluded I didn’t have a face or voice that would make for good television.

  I still spend lots of time with the reporter talking about how flat fee MLS listings and the consumer response are revolutionizing the real estate industry. If I can’t be on camera I hope that some of the ideas and experiences I contributed will shape the story. I eagerly anticipate seeing the story, the reporter thought it would show in 4-6 weeks. I don’t know what they are going to focus on, but it is one of my favorite TV programs so I expect they will make it interesting.

  
• Interviewed by Canadian Competition Bureau

  When I became a Flat Fee MLS Broker one thing I thought I would never do is be interviewed by a team of attorneys from the Competition Bureau of Canada. The Competition Bureau is the Canadian equivalent of our Federal Trade Commission and Department of Justice. It was kind of flattering because they weren’t in town for anything else but to interview me (granted it may be a few degrees warmer here than in Ottawa, but not worth a trip of that magnitude).

  They wanted to ask me about the mechanics of the flat fee business and why I thought it does not exist in Canada. I don’t know much about the similarities and differences between the US and Canadian real estate markets, competition, and regulations, so they really focused on the factors that have made flat fee MLS listings rapidly grow here: consumers like saving money when saving their property, they like the greater control over their home sale transaction, and the ability to ask unlimited questions of a real estate professional.

  The Attorneys said they were preparing an in-depth analysis of the industry and innovation. They also asked me a number of questions about my role as President of the Flat Fee MLS Broker National Association (called AREBA). Soon, they were on their way, back to Canada I assumed until I talked to another leading flat fee broker in Texas they were also going to visit and interview. I certainly hope my input was worth the huge time and expense they put into visiting me.

  
• Last minute showings and inconvenient showing times-The educated and effective home seller series

  We just had a seller who was having trouble getting showings on their listing, and therefore their home was taking longer to sell then they expected. I had a chance to talk to them, and looked at their listing and saw the common listing comments “hardwood floors, across the street from a park, remodeled bathroom…” and then I saw it: “No showings without 24 hour notice and no showings between Noon to 3pm”

  I was surprised. I asked the seller why that was in there, and they said that they have a 6 month old baby and they don’t want her naps disturbed. They also said that their house was messier and more cluttered than usual because of all the baby gear so it took some time to get the home ready for showings. Being a fairly new parent myself, I tried my best to empathize with the situation. “Mrs. Seller, that is great that you want to make sure your home is in tip, top condition for every showing, but you have to remember the old basketball adage: you miss 100% of the shots you don’t take.” To convert to real estate, every showing you refuse means you refuse a potential buyer for your property: “You miss 100% of the offers from buyers you refuse their showing request.”

  In discussing what had occurred, the seller had also flatly refused some showing requests because they were in the early afternoon nap time. “Did those agents reschedule the showing for another time?” I asked even though I knew the answer. The answer was no, they didn’t reschedule. Like so many properties, there were many other properties in that area and price range that were available. That buyer agent had just scheduled the other properties for their buyer to look at.

  I strongly suggested that they remove those showing restrictions from their listing. “But what about the nap schedule and getting the house ready?” she asked. I said that they may get a showing request that falls during those hours but it was probably worth either taking the baby to a friends/grandparents for a visit those days. “When you put showing restrictions on a listing, you are sending a clear message to buyer agents: this showing will be a hassle to schedule. Therefore, they look for other listings to show instead of your home.” If your schedule gets interrupted a bunch of days in a row then consider that a good problem to have. Every one of those showings that takes place means you are that much closer to an accepted purchase agreement and no more showings.

  The preparation and showing time commitments exist no matter if you are paying an expensive fee to a traditional agent, selling completely on your own, or using BuySelf.com flat fee MLS listing service. There is no denying it is work (except for those rare people that are instinctively neat, tidy, and away from their home for most/all of the time).

  This seller was also concerned about last minute showings “What if they call and say they would like to do a showing in 15 minutes?” I said to take those 15 minutes to pack up and do the best you can to get the house ready in that time. If it isn’t perfect, it is better to have a showing where the home is a little messy than to not have a showing. Even better, short notice showings are rare because it usually means one of two things: (1) the buyer is a relocation buyer in town who has to buy a home quickly in a few days, and/or (2) a buyer was being shown other homes in the area and said “I like that one, can we see it right now?” Both of these are great situations involving a highly motivated buyer.

  It is important to not feel put off by a short notice showing, and to be very friendly and professional with the request. Buyer agents don’t plan to or enjoy making a last minute request, they try to avoid it as much as possible. But if they have a buyer ready to go and buy, they will ask, which is good for everyone in spite of the inconvenience. Most showing requests will give you 6 to 48 hours notice.

  So just remember, don’t try to force showings into your own schedule. That is a sure way to spend more time on the market and reduct the chances of showing success. And no matter what you do, don’t tell or suggest that agents come to the open house you have scheduled. The process of selling real estate effectively just doesn’t allow for a seller to set a time some Saturday or Sunday and expect a whole herd of motivated and pre-approved buyers to come through. This is an area where traditional agents usually do a good job, if they need to they will hammer the seller to accept showings whenever they are requested.

  
• Many Traditional Agents use Flat Fee Brokers to sell their own properties

  Since the very beginning of being a flat fee broker, I have been surprised at how many traditional real estate agents use our flat fee listing service to sell their own properties. Yes, I think a flat fee MLS listing is an outstanding and incredible value, but I never really figured that agents who as their job ask people to pay 5%, 6% or more would not make sure they themselves paid that price when they sold their own properties. If for no other reason than to set an example and be able to tell their sellers “I believe so much in the value of the 6% I charge that I pay it myself when I sell my own property.”

  Although it still surprises me a little every time a licensed real estate agents asks us to list their own property, it shouldn’t because it is common–I would estimate a handful of agents do so every month. And then some others don’t tell us they were agents until closing or after they have sold.

  The biggest takeaway to this fact is the endorsement of the value of our services that these agents actions provide. Yes, I say actions because I assume most of them do not then go out on their listing presentations and tell Mr. and Mrs. Seller that they used BuySelf Realty for a $499 flat fee listing when they sold their property. These agents are full time professionals, who sell property for a living, for other people and presumably know the process inside and out. But for their own situation, they choose a flat fee MLS listing instead of the full priced, one size fits all that most traditional agents provide.

  I also think it is significant that these professionals choose BuySelf Realty over other flat fee brokers. Many times there may be others who will put a listing in the MLS for a little cheaper than our service, but these professionals do their research and choose the leading and most established flat fee MLS Broker. They make the rationale choice to go with experience, reputation, and quality instead of risking a listing with someone new to the flat fee listing business (or new to real estate as a whole) who is learning the ropes.

  Early on, when an agent would list us, it made me nervous. I wondered, were they trying to catch us doing something wrong? I wasn’t worried about getting caught doing something wrong, but I always so curious I made sure I talked to the agents. Turns out most of the agents I talked to owned a property in an area where their company wasn’t a member of the MLS, and they felt like all they needed was to get the property on the MLS. This was exactly what most of the non-licensed sellers thought, also. A few of the agents that listed with us were actually members of the MLS, but the cost we charged them was lower than their own company would charge them to sell their own property.

  Perhaps I still am more sensitive than I should be, having some old scars from doing flat fee listings in the 1990s when many agents didn’t know what flat fee MLS listings were until I explained it to them. To be fair, even in the very beginnings of flat fee MLS listings most agents were professional and understanding when they learned about it. But that tiny handful that reacted negatively and treated me like I was turning their stable real estate world upside down, I always wonder if that agent I am talking to will be like they are. Granted, we are more than a decade into the existence of flat fee MLS listings, and any agent not familiar with flat fee brokers must be both a part time agent and have their head in the sand. I can’t remember the last time I had an agent react unprofessionally, but it has to be a few years ago or more.

  The other part of agents listing their own properties with us that shouldn’t surprise me is that it parallels the popularity with other real estate professionals–attorneys, loan officers, appraisers, and commercial Realtors. We have lots of these professions of people who work with real estate transactions (and agents) on a daily basis that choose our service. At first, having the attorneys made me kind of defensive because they wanted to go over our listing agreement sentence by sentence and ask questions. But then I realized and came to appreciate how having hundreds of attorneys review our listing agreement, it would not only make our listing agreement excellent legally, but also it had the potential to make it communicate our service as clearly as possible (or in other areas where MLS rules in effect mandate that we use the MLS listing agreement clarity probably wasn’t going to be possible). In any event it helped me to explain our listing agreement to experts and novices alike.

  
• MLS Executives want to better understand Flat Fee MLS Brokers

  Recently I was at a national meeting in Washington, DC of the Executives of Multiple Listing Services. There were hundreds of people at this meeting, and the topic ended up being flat fee MLS listings. I guess it should be no surprise that these MLS leaders, who ranged from the smallest one county MLSs to the largest MLSs in the country (that cover whole states and can have well over 30,000 members) had lots of questions about how flat fee listings work, and the role of flat fee brokers in the MLS.

  First of all, I should give some background: There are an estimated 900 different MLS systems within the United States. Most of them are created, owned, and operated by their local Association of Realtors. In the past decade, most of the larger MLSs have become their own organizations that are either wholly-owned subsidiaries of the Realtor Association or have a handful of Realtor Associations as their shareholders. A few of them have large traditional brokers who also have ownership of the MLS. The MLSs usually have a certain territory where they have all or nearly all the listings for that area. In some cases, there is overlap or competition between two different MLSs but luckily that is fairly unusual–overlap or competition makes it is challenging for real estate broker (especially flat fee brokers) because it usually requires membership (read: lots of expenses) in two or more MLSs to list sellers in that area.

  The lead attorney and General Counsel of the National Association of Realtors (NAR) spoke about the importance of the MLSs providing a fair competitive playing field. She also stressed the clear and present danger of any MLS that has rules that disadvantage one kind of listing or broker over another, and talked about how active the US Federal Trade Commission (FTC) and US Department of Justice (DOJ) have been in investigating any rules that disadvantage flat fee MLS.

  Overall, I was happy to hear what was presented. MLSs now clearly know that they need make sure their members compete fairly or they will face significant punishment. I was also pleased at the tone of the questions. MLS Executives want to better understand flat fee MLS brokers so they better manage their MLSs for the betterment of all brokers, whether they are traditional or flat fee brokers (and everything in between).

  In the big picture it makes sense that these MLS Executives have questions: the type and role of the broker hasn’t really changed since the very beginning of the Multiple Listing Service. So we are talking about a 50-60 year period of time where the role of the broker and how they interact didn’t really change. And in the last decade flat fee brokers have brought innovation that changed that relationship. Change isn’t easy for anyone, especially if you have to change something you have been doing the same way for decades and decades. It reminded me of the time I saw my first real estate broker, who I worked for way back in the late 1980s. I had just started working as a flat fee broker and was explaining to him how it works and he was shocked–he could hardly believe it. In fairness, this was the very beginnings of flat fee brokerage (probably 1998 or so) and it would change the way this broker had interacted with listing agents for 30 some years. It wasn’t revolutionary change or turning his world upside down, but it was change to something that had not changed.

  I’m glad the real estate industry has been through the changes that have occurred over the last decade. It is a very rare and uninvolved agent that is not familiar with flat fee MLS listings here in 2006. I no longer regularly have conversations with brokers and agents explaining that I give them my permission to talk directly to the seller. They understand it, which makes things smoother for me and my flat fee sellers.

  
• Multiple Offers, and when a second buyer brings an offer in the middle of negotiations with the first buyer

  It may surprise people to learn that we still get lots of questions about multiple offer situations. While the market has definitely slowed down in the past year or so, listings where two (or more) buyers competing to buy the property still happen. As my friend Pat Crosby, a 35+ year real estate veteran frequently said “a well-priced home that is well presented and in great area can sell quickly in any market conditions…” And yes, flat fee MLS listings are just as likely to see multiple offers as other listings.

  While I haven’t had the absolutely off the hook months of 2002 where I remember within one month I had 1 listing that received 11 offers in the first three days, followed by another listing that had 9 offers in the first four days. I remember explaining to those sellers that traffic control at offer presentations was a very rare problem to have, and certainly one of those problems that is nice to have. Yes, both of those properties sold for significantly more than their listing price. I have to wonder if we will ever see conditions like that again in my lifetime.

  So the main concept I preach for multiple offers is fairness. Sellers often want to know what the applicable rules or laws are for multiple offers, and there really aren’t any that apply directly. Of course, sellers can’t discriminate in accepting offers based on protected classes, and need to follow fair housing laws. That doesn’t give a seller much guidance. I believe the guidance for how to act in a multiple offer situation is ethics and common courtesy.

  Fairness, ethics, and common courtesy sound good, but how should a seller apply those concepts to their specific situation? Let’s get specific:

  Offer Situation #1: Multiple Buyer Offers from the beginning.
  This situation presents itself when before an offer is presented the flat fee seller gets the call from more than one buyer or agent who says they would like to present an offer on the property. Right away, when the seller gets the second such call, let both agents/buyers know that you have two parties planning to present offers. If time is short, I recommend offering them additional time if they wish to revise their offer now that they know they will be bidding against another buyer. This helps the seller because buyers will generally increase their offer amount–their mindset changes from “how low can I get this home for” to “what is the most I will be willing to pay for the home/at what price will I later wish I would have offered more for” if they lose the home to the other buyer.

  To be fair to the first buyer/agent who told you they have an offer, the seller should call that buyer/agent right away to let them know there is another offer. Again, offer to give them a little more time to revise their offer (usually 3 to 24 hours depending on the situation).

  Some sellers have a temptation in situations like this to try to turn the offers into an open auction to the highest bidder. I generally don’t recommend that course of action because it tends to make all the buyers feel like they are being taken advantage of–that the seller is trying to emotionally and financially manipulate the buyers to get the last nickel out of them. Even the winning bidder in such a situation often has a bad taste in their mouth (not to mention more likely buyers remorse compounded by a fear that they paid way too much) and there is very little goodwill left in the transaction.

  My opinion is the better, and more courteous way is to make sure each bidder knows to put in their best offer, and that the seller will choose what they feel is the best match for their needs. Telling bidders of your plans is reassuring to buyers in what is usually an emotional roller coaster of bidding for a home they really want. And my opinion isn’t based on the principal of just being nice. In my experience it is critically important to get the best buyer through a bidding process that the buyer doesn’t see as patently unfair or a deck stacked against them. In that way, the transaction still has goodwill between buyer and seller to get them through any unexpected issues that arise in the future. I have seen more than one seller who could have tried to squeeze the last nickel out of a multiple buyer but didn’t, and that later that fact saved the transaction when the air conditioner stopped working the day before closing. Instead of having a resentful buyer who felt manipulated by the bidding process who suddenly sees the tables turned where the seller is at their mercy to accept a proposal suitable to the buyer, the buyer approaches the situation with balance and goodwill towards the seller.

  Special important guidance for flat fee MLS listing sellers
  Flat Fee MLS Listing Sellers may have other information important to share with a buyers agent. Since flat fee sellers will pay zero buyer agent commission if they accept an offer from a buyer with no agent involved, they need to let a buyer agent know this fact if they have an unrepresented buyer bidding against a represented buyer. Of course, the represented buyer’s offer will require the seller will pay a buyer agent commission. Disclosing this information will generally help the seller, as it makes the represented buyer understand they may need to bid more to have a more attractive bid.

  This disclosure is not necessary when all the buyers are either represented (where a commission would be paid), or all the buyers are unrepresented. This disclosure is also generally not necessary for sellers who are not flat fee listed, because the typical full priced traditional listing agreement doesn’t give the seller any commission savings if the buyer is unrepresented–the listing broker simply gets both the buyer and listing portion of the commission.

  Offer Situation #2: A second buyer arrives while seller and the first buyer are negotiating an offer.
  This offer situation is usually more challenging then a simple multiple offer because of timing involved. The most common situation is that the first buyer makes an offer which the seller wants to counter offer, or maybe has already counter offered the offer. Then the second buyer appears ready to put in an offer, usually with the knowledge that they are bidding against the first buyer.

  The seller may have a counter offer extended to the buyer. If this is the case timing can be particularly difficult, especially if the seller would like to withdraw the counter offer to see if buyer #2 has offered a better deal. If this is the situation, I generally recommend immediately communicating to the buyer/agent #1 that you withdraw the counter offer because another buyer has made/will be making an offer in writing (via fax and/or email), then following up with a phone call to the buyer/agent. I recommend making this communication in writing as a way of documenting the time your withdrawal was communicated.

  An important exception: A few times since I started in real estate in 1989 the second buyer has appeared with a better offer, but the buyer and seller have verbally agreed to terms and are in the process of getting everyone’s signature. This is a completely different situation, and I strongly believe that the seller must follow through in finalizing and signing off on the verbally agreed to terms. I believe not doing so would be unethical and unfair, as well as potentially creating a big mess with lots of upset people.

  At this point, assuming buyer #1 has confirmed that they understand the counter offer has been withdrawn, you can proceed with the basic process outlined in Offer Situation #1 above: Make sure both parties know they are bidding against another party, encourage their best offer, etc.

  Multiple Offer Emotions
  I think the National Association of Realtors says it best on the emotions: “Finally, buyers and sellers need to appreciate that in multiple offer situations only one offer will result in a sale, and the other buyers will often be disappointed their offers were not accepted. While little can be done to assuage that disappointment, fair and honest treatment throughout the offer and negotiation process, coupled with prompt, ongoing and open communication, can enhance the chances that all buyers – successful or not – will feel they were treated fairly and honestly. ” Well said.

  The importance of timing in multiple offer situations.
  A few times in my career I have also had a seller that wants to “sit on” one or more offers in hopes of getting even more offers. This is rarely a good strategy, as buyers understandably feel like they are being manipulated if a seller sits on their offer for days in an attempt to get more or a better offer. I believe a buyer/agent making an offer should always be told within an hour or two, when they can expect a response from the seller. Of course, the expected response time may change if another buyer wants to make an offer, but that also will be promptly communicated. If the seller doesn’t remember the emotions usually involved in making an offer on a house, it is almost always an emotional and stressful time for the buyer, even without the fear that they are being manipulated or not treated fairly.

  If another offer may be reasonably expected, I generally suggest that the first offer be reviewed. If the seller thinks they can do better, they can do either or both (1) counter offer with terms that they would find acceptable, or (2) tell the buyer they are not ready to accept the offer at this time, but may consider it in a few more days. That treats the buyer fairly, as they know what is going on and have the option to increase their offer, withdraw it, or wait for a few more days to start negotiations. This is also a good strategy if the first offer comes really quickly and there are other showings scheduled for the next couple of days that could also bring offers.

  Disclosure: If you need legal advice or representation, see an Attorney. This blog is not representation or legal advice, it is sharing of one broker’s experiences and opinions.

  
• Real Estate Terminology-the terms that sometimes confuse people...

  I (and my team) spend lots of time helping sellers every day. So I am very familiar with explaining some of the terminology that often confuses buyers, sellers, and more often then you would think agents. I’m sure most flat fee MLS listing Brokers are. If you have terms you have found confusing please email them to me as I am sure I am just scratching the surface here.

  None of the terms or concepts they represent are critical for a flat fee seller to understand. 99% of the time we are asked what they mean by our extra-conscientious sellers who really want to learn the ins and outs of the real estate world. For those sellers:

  1. Selling agent.
  This is my least favorite term still in use. It is an old, completely outdated term for the agent helping the buyer. The old rationale was that this was the agent that brought the buyer to the transaction and sold them the home. Not to be confused with the seller’s agent, who represents the seller and is also known as the listing agent.

  2. Facilitator, Non-Agent, also know as a Transaction Broker.
  For flat fee listing sellers, there are two relationships that a buyer can have with an agent. One is a buyer agent, where a buyer agent represents and advocates on behalf of the buyer. The other is where the agent facilitates the transaction but does not advocate for one party over another, generally called a facilitator. In our experience as a flat fee MLS broker, nearly all buyers and agents select the buyer agent option. A third possibility still exists but has become unheard of in almost all areas, the seller subagent, where the agent (who you have probably never met) who is helping the buyer but represents the seller. Seller subagency rightfully became extinct in the early 1990s. There is also a fourth and fifth possibility that wouldn’t apply to flat fee listings in my experience called dual agency and designated agency, where one company attempts to represent both the buyer and seller. I am not a fan of dual agency. These options depend on state law and are not available in all states.

  A flat fee seller is free to choose if you want your listing to offer a commission to only buyer agents. I suggest that flat fee sellers be open to as many buyers as possible–because it maximizes the exposure of your property. Therefore, I suggest that the commission offer be made to buyer agents and facilitators. Most sellers agree that they want the buyer who will pay their price, regardless of what arrangement that buyer has with the agent helping them to buy. There is never a situation a double commission or where a commission would be paid to both a buyer facilitator and buyer agent. Only one commission will be paid to either a buyer agent or facilitator, even if the seller offers both options in the MLS.

  3. Assessments.
  There are two kinds that come into play in real estate transactions: Property tax assessments, which are attached to the property much like property taxes themselves by a local unit of government. The classic example is that the city rebuilds the road in front of the property, and assesses all the property owners along the road for the project cost. Not to be confused with Association Assessments, where a property is a part of a private/community property association that has decided to assess all the member properties a fee to pay for some operating cost or improvement to the association property(ies). One similarity is that both kinds of assessments must be disclosed to the buyer, and often are required to be paid off by the seller before/at closing.

  4. Mortgage Insurance.
  This is insurance required by a mortgage lender when a buyer is not putting a minimum of 5 to 20% down on the property. Do not confuse this insurance with a type of life insurance that pays off the mortgage if a person dies, which I have never seen involved in a real estate transaction. Mortgage insurance is paid by the buyer, either an upfront premium or as a part of their monthly payment.

  5. Hazard Insurance, Home Owners Insurance, or Fire Insurance
  This is basic property and casualty homeowners insurance to provide coverage for damage to the home or buildings on the property. The hazard insurance is required by the mortgage lender to protect their mortgage investment from catastrophe–the mortgage lender knows the property owner probably wouldn’t keep making mortgage payments on a home destroyed by a fire. Generally, the annual premium is collected by the mortgage company and they pay the insurance company. At closing, the mortgage company generally requires the buyer to bring proof of that the policy is in place and paid in full as a condition of closing.

  6. Flood Insurance
  Since Hazard Insurance doesn’t cover damage from flooding, the mortgage lender requires the buyer to pay for flood insurance if the property is located in a flood plain or area where flooding is considered possible. When it applies, the mortgage lender will require the seller to bring proof that the policy is in place and paid in full as a condition of closing.

  7. Title Insurance
  Establishing ownership of real estate is easy for 99.9% of properties but there is the rare property that has a “cloud” on the title. In case of such event, the mortgage company requires the buyer to purchase a policy to cover the lender’s interest in the property. Unlike the other types of insurance, title insurance generally requires one upfront premium to cover the property as long as the ownership interest lasts. The lender title insurance cost should be included in as a closing cost typically paid by the buyer on the buyers good faith estimate (GFE) of they receive from their mortgage lender.

  Let me know if there are other terms you would like to have explained…

  Albert Hepp
  Flat Fee MLS Listing Broker

  
• Realtor Associations educate and enforce fair competition

  Recently our company joined another MLS and I was required to attend an MLS Orientation. Being in a class filled with brand new Realtors brought back memories of my start in real estate back in 1989 and also made me feel like a grizzled veteran. I struggled to resist the temptation to tell stories of how it was back when I started in real estate and the challenges to get established in the business.

  The highlight of the day long orientation for me was a National Association of Realtors produced video on unfair competition. The video portrayed different scenes with a new agent doing his/her best to get listings and buyers and showed examples of agent statements that violate anti-trust laws. It shows the agent trying to get a listing, the seller telling him that they are considering using a discounter company, and the listing agent not knowing how to respond. He gets flustered and blurts out “but no one will show the listings of that broker” even though he knows that is not true. He tells the experience to an experienced agent back at the office and she explains how he just violated anti-trust laws. Later it shows an investigation by an unnamed government agency that looks at all the transactions and communications of everyone in the new agent’s office.

  The video makes the anti-trust laws really clear. It vividly presents the cost, time, embarrassment, and potential criminal punishment for violating anti-trust laws in a way that is impossible to understand. The video was well-written and entertaining enough to hold everyones’ attention.

  I was glad to see that in addition to State and Federal governments, Realtor Associations are also educating agents about how important fair competition is. Not only that, the Realtor Code of Ethics is yet another rule that requires fair competition. Good to know.

  
• Receiving a purchase agreement offer

  One common question that comes up with our home sellers is “How do I make a counter proposal to an offer I have received?” First, it is helpful to review the basics of offer and acceptance in real estate:

  When a buyer presents a purchase agreement form fully completed and signed by the buyer, it is referred to as an offer. Purchase agreements are also known as purchase contract, sale agreements, purchase and sale agreements and probably some other terms depending on where you live. They generally consist of a multi-page document plus addenda (a fancy word for an additional form that describes other parts of the offer, most common being an inspection addendum).

  Responding to a purchase offer
  When the buyer (or buyer agent) delivers the offer to the seller, the seller has three options on how to respond to the offer:
  1. The seller can accept the offer if 100% of the terms described are acceptable to the seller. Generally, the seller just needs to sign the offer in the signature lines marked “seller” for this to happen.
  2. The seller can reject the offer, which generally means the seller isn’t interested in further negotiations with the buyer. More realistically, or in practice, it really means the seller would love to negotiate a higher price, but the buyer’s starting price was so low they don’t think it is worth their time to make a counter offer. In some areas it is common to reject the offer in writing, in other areas, a call to the buyer or buyer agent telling them their offer is rejected suffices.
  3. The seller can create a counteroffer, which technically means the seller has rejected the initial offer and made a different offer to the buyer. The counter offer can be verbal or in writing, depending on the situation and the preferences of the parties involved. A counter offer could be as simple a statement as “we will accept your offer if you change the closing date from the 15th to the 14th” to the other extreme of listing 20 or more items that need to change in order for the agreement to be acceptable to the seller.

  Counter Offers, also known as counters, counteroffer, counter proposal.
  Another common question I get is “how should I counter this offer?” If you wish to counter offer, my experience and opinion is to generally suggest counter offering verbally instead of in writing for two reasons:
  1. Speed. Calling the agent enables the buyers to quickly receive the information, without the agent needing to go to their office to pickup a fax. Remember, a buyer certainly may respond to your counteroffer with a counteroffer of their own, and getting all the parties signatures and then getting to a fax machine, then the recipient may need to travel to their fax machine or computer, all these things slow down the negotiation. In my experience, slowing down the negotiations generally makes an agreement less likely, although there are many exceptions to that statement.
  2. Avoiding an open ended commitment. Even with a counter offer termination date and time specified, the situation can often change quickly. A second buyer can materialize without warning, and if you have issued a written counter offer you often must wait to get confirmation that the counter offer has not been accepted, putting the seller in limbo for a period of time. Keep in mind if a second buyer does come forward there is generally an ethical obligation to make sure that the first buyer knows that a second buyer is making an offer. We also strongly suggest giving the first buyer 3-24 hours to revise their offer now that they know it is a competitive offer situation, as it gives buyer #1 and buyer #2 the same information while formulating their bid (it is also generally improves both the offers).
  
  Once buyer and seller come to a verbal agreement, then it is critical that the verbal agreement be written up and signed by all parties as soon as possible. Either the buyer agent can write up the agreed upon changes, get their buyers signature, and forward to the seller, or the seller can initiate the process.

  Important: If you wish to have advice or representation, please see an attorney. Consult an expert on the specifics or your situation, customs in your market, and the regulations for your are.

  
• Starting the flat fee listing blog

  I am excited to start a log of what is going on in the flat fee MLS industry. I firmly believe that flat fee listings are the future of real estate and look forward to discussing their development here. My goal is that this blog with be a resource for consumers considering a flat fee listing, as well as a way to for sellers to learn how to best sell their home.

  For those of you who don’t know me, my name is Albert Hepp. I have been a Flat Fee Broker since 1998-1999, and I sold my first house in 1989 back in the day of the one page purchase agreement. I started full time in real estate and obtained by first Broker’s license in 1992. I am one of the few brokers who actually has a bachelors degree in Real Estate/Urban Analysis, which I obtained from the Ohio State University. Over those years I have obtained my brokers license in five different states and also helped many other Flat Fee Brokers market their services on the internet.

  The flat fee listing business has been fun for me and it is a great match for my personality. I enjoy the entrepreneurial element to the business, I like the technology (websites and web marketing) part of the business, I enjoy the legal aspects of the business, I enjoy how our business empowers and educates consumers in a way that saves them lots of money, and I also enjoy coaching consumers through their transaction. Yes, I like my job.

  In the interest of full disclosure, for some posts I am collecting many of the writings I have done on these topics and “back posting” them to the time they occurred to better establish background and history…

  

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