Posted by: Daryl & Wendy Ashby | July 30, 2011

Makes Sense to Me

The controversy over private selling and brokerage selling is a hot topic. Articles such as this stimulate hoards of comments– both positive and negative– about which method is better and why. Rants about reduced commissions vs. value-added services abound. In the end, of course, no one wins and the controversy continues. 

Time and again it has been suggested that someone tally the statistics of both methods and settle, once and for all, which system works.

So a Realtor from back east did just that, and here are his findings:

“I sell a lot of student residences. These are homes that investors purchase close to a University or College that are filled with students attending the school. It is fairly simple to compare apples to apples with student housing because most investors are looking at numbers more than the property itself. If the ROI is satisfactory and the house is not falling apart, there is likely to be several people interested in purchasing it, regardless of its condition.

And comparing apples to apples is vital when doing a case study. The two houses used to compare private selling and brokered selling have to be almost identical in order for results to be accurate. With the NLS (point2) system, I was in control of both properties. The private seller couldn’t overprice or over-explain the property because he needed me to put it on the system. Likewise, the brokered listing was performed as regulated and that Seller also needed me to put it on the MLS system.

At the beginning of June/11, I listed both houses for the same price on the NLS system. The brokered home was sent directly from the MLS—once it had been entered correctly by me and all paperwork was completed, etc., etc. The private home was entered directly by me, using similar descriptions, similar call-to-actions, etc., on the NLS system. The same number of pictures were uploaded, featuring similar rooms and the quality was identical (I took them all). As I was performing it as a private sale, however, all contact info led to the Seller.

Now, I love the NLS system. I have been using it for over 6 years. It allows me to display several hundred listings on my own website in a manner that assures a consumer utilizing my site that they are seeing a large database of available homes—not just from my brokerage but from everyone. This alone has enabled my website to rank very high in search engine results, which in turn, generates leads.

But it’s still not as effective as the MLS. Why? Because the MLS is the chosen system used by ALL brokerages. It is administrated by the local boards, promoted by CREA, and all of organized real estate revolves around it. Every listed home is on it…and everyone knows that.

So, at the end of June, after having both homes listed on the NLS for 30 days, which one had the most viewings? Which one sold?

Before we give you the conclusion, let’s discuss why this case study is relevant:

1)    The NLS is larger than any other private selling website in the country.  If a private seller chooses to print up a sign stating “For Sale by Owner” and noting where the home can be seen on the NLS website, it is enjoying the identical exposure any private selling company could provide. Their own phone number is advertised, not the agent’s.
2)    Requests to view the private home and the brokered home are received in an identical manner through the website. This means that the Seller’s personality (good or bad) is not reflected initially. Both requests are handled professionally by the NLS member. Since the private seller cannot use the services of the agent, they must be the ones to “show” the home and that is the first time the two methods vary.
3)    Requests to view the private home by phone are made directly to the Seller, whereas the brokered home uses the brokerage number.
4)    If the private Seller performs an open house, he/she does it their way, using the local classifieds, signage, etc. The brokered home uses organized real estate systems, the special real estate section of the newspaper, and signage.
5)    Recently, private sellers have been able to “get onto the MLS” for a flat fee via partnerships between private selling brands and receptive brokerages. Those of us in organized real estate have no doubt this method will have limited success as it bastardizes the system, trying to make it do something it wasn’t meant to do. Further changes (possibly regulations) are required to get this manipulation of the system to ever have any kind of success. And there will be major resistance throughout the process.
6)    As long as no other advertising or promotion is performed for the test period, both homes are receiving identical exposure. The only difference is the method.

Of interest to note also is that I did not charge the private seller anything for this service as this was a test that I initiated. In real life, however, the private Seller would have spent anywhere from $200-$1500 in order to “test the market” with any other private selling brand. The brokered listing, of course, pays nothing till the home sells. If the home doesn’t sell, the whole “test” is free to the Seller.

Results:
The private sale home received thirteen requests for showings, 9 via the NLS/my website, 4 via signage. Ten were achieved (three were lost because the Seller wasn’t available for showings) No offers were received and the Seller removed the listing at the end of the month stating that he had “tested the market” and it wasn’t ready for his home yet.

The brokered home had 43 showings, 12 via the NLS/my website, 20 via the MLS, and 1 via signage. Apx.1/3rd were shown by myself, the remainder shown by other agents from various brokerages. We had 3 offers during that time, the first two too low for my client to consider.  The last one was still low but both ‘represented’ sides were encouraged to negotiate to a point where it became a win/win. The home sold in the last week of June and closes mid-August. The home sold for $8,000 below list price. Statistics for MLS listings show that homes like this one had been selling for $5-10,000 below list over the past 6 months and this was considered normal.”

Let me know if you think the test was conclusive.

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