REAL ESTATE TOPICS:  OPEN HOUSE

There is a little secret in the real estate business:  “open houses do not sell houses – open houses help real estate agents find buyers.”  About 7% of buyers find the real estate agent they end up using at an open house – that’s the third most common way.  Personal referral accounts for 40% of buyers, and previous experience with the agent; 13%.

Sellers naturally want their real estate agent to do everything in their power to get their house sold – that’s why they hired them and why they are paying them so much money.  Understood!  And, good real estate agents want to do everything they can that will help get the house sold – that’s the only way they are going to get paid.  Great!  Sounds like a match made in heaven.   The problem comes in deciding what is going to be done that will be effective in getting the house sold.

There is the listing in MLS; there are the signs, flyers, newspaper ads, office tours; buyer incentives; agent bonuses; internet presence and many, many, many other advertising methods, marketing techniques, and influencing factors.  And of course, there is the open house.  But, what works?

In August 2006, the National Association of REALTORS^® mailed an eight-page questionnaire to 129,500 consumers who bought a home between July 2005 and June 2006.  The survey yielded 7,548 usable responses with a response rate, after adjusting for undeliverable addresses, of 6.3 percent.  One of the questions on the survey was:  Where did you find the home you purchased?  The results:

            REALTOR^®                                36%

            Internet                                      24%

            Yard Sign                                  15%

            Builder                                        8%

            Friend / neighbor / relative             8%

            Newspaper                                  5%

            Knew seller                                 3%

            Home book or magazine               1%

Open house didn’t make the list.  Well, actually, there was another category of response not listed above:  Other sources……<1%. Does this mean that you shouldn’t do open houses?  Absolutely not.  Suppose your home is one that is going to be purchased by one of the people who are part of the fraction of a percent that didn’t make the survey. You don’t want to miss them.  It can happen – just not very often.  So, absolutely, try a few open houses – you may get lucky.

The point is – for home sellers – there is no justification for you being mad at, or disappointed with, your real estate agent if they don’t seem interested in holding open houses all of the time at your property.  If they are not looking for buyer clients to work with, their time would probably be better spent taking a nap so that they were nice and rested when they receive that phone call from another agent with an offer on your property.  Or from that person who has been surfing the internet or who drives by and calls from the front yard sign.  Those are the things that produce results.

This writer has no first-, or second-hand information or experience regarding anyone ever selling a house as a result of an open house.  On the other hand I know of tons of buyers that have been found by lots of agents by sitting open houses.  And, quite a few listings that have resulted from doing open houses.  Maybe “open house” should be called “open agent”.  Really! They do provide the framework in which to showcase the agent.  Open houses serve two purposes for legitimate home buyers (as opposed to the “lookie lous”, “nosey neighbors”, and the “decorating idea seekers”).  They can sample the inventory that is on the market at their own pace and without the pressure of having a real estate agent driving them around.  And, if they don’t already have a real estate agent (or are unhappy with the one they have) they have an opportunity to meet and interview many different agents.  And of course, most people that are doing this think they are being very clever about their “hidden agenda” and they don’t realize that many agents know exactly what is going on.

So why aren’t all real estate agents holding open house somewhere all the time?  Simply put, many agents absolutely hate to do it – they’d rather have a root canal at the dentist office.  The results that do come from working open houses usually come pretty slowly – over a long period of time.  However, some agents – myself included – don’t mind so much.  Yes, they can bore the tears out of you when there is no traffic.  And yes, dealing with some of the people that come through an open house can be a test of patience.  But, if you plan accordingly – bring a book, a laptop, paperwork to do, it can be a productive use of several hours even if nobody shows up.

The closest I have ever witnessed an open house coming to actually help sell the house that was being held open, was some time back.  A top listing agent in my office asked if I’d be interested in doing open house at one of her listings.  Of course top agents never sit open house (they don’t need to) but her client – the homeowner, was just frantic to have open house held to get her house sold.  All of the top agent’s assistants were otherwise busy (of course they were), so I agreed and we scheduled open house for the coming Saturday afternoon.  Well, during the week, an agent from another brokerage happened to show the house and those buyers made an offer on the property.  A counter was made and there was still some negotiating to be done.  At some point during this process, the prospective buyers learned that there was an open house scheduled for the next day – Saturday, and they were persuaded to accept the sellers’ counteroffer on the condition that the open house would be cancelled.  So, the threat of an open house – that (in their minds) might find a competing buyer - was used as a bargaining chip.  Other than this experience, I have never heard of a house selling as a direct result of an open house being held.  I am sure it must happen, but it has to be a very low percentage of time.

For the real estate agent that chooses to do open houses, there is a lot to take into consideration.  Much has been written about how to hold a successful open house including: advice about advertising and promoting them, what cookie recipe to use for the treats, what safety concerns there may be, and on and on about every aspect of open house.

Agents need to know what to do and say under many different circumstances that present themselves during open house.  What do you say to people when they come in?  What about if they are accompanied by their own agent?  How do you deal with other real estate agents just visiting on their own to preview the property?  Other agents should always be made to sign the key-safe log sheet, by the way.

Agents must make decisions about doors and windows, lights and curtains, air conditioning and heat settings.   They should know little tricks like putting a drop of vanilla on light bulbs to send a favorable odor into the air.  They should decide whether the radio or TV should be on and playing softly to give the house a “homey” feel?

What is to be done about the homeowners pets during open house?

How do you deal with the nosey neighbors or the Lookie Lous?

How do you answer all the questions that people invariably ask?:

Why are they moving?  Why did they move?

Do you think they’d take less than they are asking?

How much do you think they’d take?

            How long has this place been on the market?

            Have they moved out yet?

            Don’t these people ever clean their house?

            What is that smell?

All of these questions and more get asked at open houses – and every one of them is fraught with the danger of breaching the fiduciary duty to the seller by answering them.  This is far more significant than the dirt and sand that is being tracked through the house.

Also, agents must remember to ask if the open house guests are represented by a real estate agent already.  Advanced professional trainings frequently address the sticky “agency” issues that may arise during an open house; the “psychology” at work and the “dynamics” of the whole thing; and, on and on and on.  Don’t get me wrong, I’m only poking a little fun.  All of these “issues” are very real and it is very important to fully understand the complexities and subtleties of house buying behavior.

As with anything in life – there can be advantages and disadvantages, benefits and risks, rewards and dangers associated with open houses.  One of the very real possibilities while working an open house is for the real estate agent to find themselves in grave danger.  Too many times there have been cases where the agent is sitting in the open house waiting on visitors to come in the front door, only to have a criminal show up with the intent of inflicting physical harm, or robbing them or the client’s belongings, or all three.  It has happened many times.  Real estate agents should take advantage of the education that is available to them on this topic and keep safety in mind at all times.  This is just one of the reasons for my strong preference for only doing open house at vacant properties – at least the client isn’t going to get robbed.

During one of my many lulls in this business, I decided to find a decent house (listed by some other agent in my office – since I didn’t have any listings), in a decent location, that was vacant, and plan to do open houses as often as I could stand it.  Over the course of almost two months, I must have held open house at least 25 times – virtually every weekend, and every different weekday - and just whenever I could – mornings afternoons, evenings.  I never sold that house, and nobody else did – the listing expired and the property went off the market for a long time.  However, I did meet and obtain several buyer clients to work with that culminated in nice transactions.  That was precisely the result I was looking for.

Much more surprising though was that I ultimately picked up three listings on houses in the same subdivision - although, that didn’t happen until about a year or so later.  Out of the clear blue sky, I received a phone call one day from a woman calling from Illinois who said she had been referred to me by some gentleman she named who said he knew me and that I was a great agent.  Well, I had no idea who this gentleman she named was, but she insisted that he knew me and that he insisted that I was the only agent that she should consider using in Tucson.  And, by the way, this lady was a licensed real estate agent in Illinois.  So, I said:  OK.  Who am I to argue with genius?  Anyhow, I listed the property and it sold for top dollar in one day.  Maybe this guy that I didn’t know was right.  As it turned out, he was one of the neighbors of that property that I had sat open all of the time more than a year prior.  He was retired – and bored, and would often come over during the open house and “visit” with me.  Frankly, I sometimes got tired of his visits and constant chatter – after all, I had some really good books to read.  In any event, he must have been impressed with something about me.

Well, another one of the neighbors in that subdivision saw me setting up that new listing and stopped by to inquire about it.  He too reminded me that we had met over a year ago when I did all those open houses down the street.  Three days later he called me and said he wanted me to list his house.  And, believe it or not, honest to God; this guy was an actively licensed agent with the same company I was licensed with.  He was moving to Flagstaff and didn’t want any other agent in his branch office to list the property.  Within a month, he moved and I listed his home, and I was sitting open house one weekend only to have yet another subdivision resident walk in and ask me to list their home too.  They had seen all of this transpire over the last year and a half, and figured I must know what I am doing.

Some people do pay attention.  Let’s say there is a subdivision that routinely has about a half dozen houses for sale at any given time.  And, of course, all of the residents are very much aware of that – seeing the For Sale signs in the front yards.  They also see which properties are being held open – and what that agent’s name is.  And if they see that repeatedly, time and time again – over a long period of time – what will they think?  Maybe they will think that this agent works a little harder than the rest of them.  “Wow, that agent is really trying”.

So, the point is that holding open house can be very productive in many ways and it usually doesn’t hurt a thing – it just rarely ends up selling the house being held open.

Factually, in that survey conducted in 2005 by the National Association of REALTORS^® of 100,000 people, 7% of buyers found their real estate agent because of an open house.  Interestingly, 4% of home sellers selected their real estate agent from an open house they attended.  The only influences that outranked open houses  for each group’s selection of their agent were as follows:

            Buyers                                                              Sellers

Referred by family/friend             44%                  Referred by family/friend             43%

Worked with before                    11%                  Worked with before                    28%

Yard sign w/ brochure box            7%                 Personal contact by agent            5%

Oh yeah, by the way there is another little secret in the real estate business.   There are really only two things that truly sell houses:  Price & Location – and not necessarily in that order.  Think about it.  Suppose a property is in very poor condition – if it is priced right, it will still sell.  If it is in a good location, it will just sell quicker.   All of the other things; signs, MLS listing, flyers, newspaper ads, internet exposure, office tours, open houses, and real estate agents are simply ways of getting buyers and houses connected.  None of those things sell the house – only price and location do.  If the price and location do not appeal to the buyer, it really does not matter how great any of those other things are or how many open houses are held.

Please note that this article was written by him to reflect the author’s opinion of good practice at the time of its’ writing for the general benefit of those considering sale or purchase of residential real estate, it is not intended as definitive legal advice and you should not act upon it as such without seeking independent legal counsel.  Frequent changes in the law and standards of practice may cause this information to become outdated and no longer applicable or even incorrect.