Brian Brady wrote an interesting post on Bloodhound Blog yesterday about the real estate industry. I think it is worth bringing to your attention AND I would like to hear what you all think of it.
Brian wrote:
Prominently display the terms and dates of the rejected offers, verified by participating market professionals, in the MLS system, and you solve the demand side of the equation because you identify the “size of the market”. Share that information with the banks and they’ll start trusting you. Show it to the prospective buyers and they’ll throw their arms around you in joy. The sellers will “get real” about the market, also.
So a chart might look something like this for ALL Salem Oregon sellers.
| Price/Date | Offers | Concession | Terms | Response |
| $200,000/10/1/2009 | 1 | 3% in closing costs/FHA financing | Contingent on sale of home |
Seller rejected |
| $197,000 10/15/2009 | 1 | $5,000 in closing costs/ 10% down conventional financing | 6 month closing date | Seller rejected |
| $185,000 10/30/2009 | 1 | cash | typical contingencies |
Accepted |
This information would be in the MLS for all to see. Sellers think about that. So let’s say in this above example that the
offer for $185,000 fell through. In the meantime, the buyer who was willing to pay $200,000 now sells their home and comes back to reoffer on your home. They are comfortable offering $200,000 because their parents live down the street and they want to be able to be close to them. BUT…they see that the seller was willing to come down to $185,000 on the MLS. Why would they offer more now? The seller might be willing to take $15,000 less for a cash buyer, but not for an FHA buyer.
As a home seller, this would really harm you. Is the house worth what the cash buyer was willing to pay, or is it worth what the 3.5% down FHA buyer was willing to pay? Only a buyer and seller can decide that because price is not the only consideration in a contract. I have seen many a seller take LESS money in order to work with a stronger buyer. There is a reason why the phrase “cash is king” exists. Cash buyers are stronger buyers because there is no lender to deal with. A seller may be willing to come down in price for that particular buyer, but not for buyers that have to finance. If a lender suddenly requires this information in order to lend on the property, they may decide that the house is worth less because of a previous lower offer. I’m not sure that we want lenders in the middle of negotiations.
Salem Oregon Buyers…as Brian stated above would throw their arms up in joy! Who wouldn’t want to know what a seller accepted or rejected before? Makes negotiations a lot easier.
Brian seems to think this is the way things are headed because lenders don’t trust appraisals. This would give them some data to see what buyers are willing to pay for a property…a “true” living breathing document about the real estate market for a particular property. Now Oregon has confidentiality laws in real estate. This information can’t be disclosed by an agent unless a seller says it’s okay. BUT if the lender made getting that information a requirement, then essentially a seller would be giving up their legal rights to confidentiality.
So readers…what do you think? If you were forced to disclose previous offers in order to help the buyer obtain a loan, would you do it?
I don’t think I could have asked for a more fair summary, Melina. I’ll witthold comments until after the weekend (unless asked a direct question), so that your readers might weigh in with an opinion.
PS: Love the chart.
Brian it’s an interesting idea with so many dynamics. We’ll see what my readers come up with!
I don’t think the confidentiality laws necessarily apply if we look at this as the price of entry to MLS. In other words, if a seller hires an agent who discloses that, as the price of MLS listing, all offers to you and the result of those offers will be listed on the MLS, then the seller is waiving the confidentiality going in.
And it would create a reason for the MLS to exist, which it’s presently losing. I’ve been struck by the number of homes that are being listed with agents (not FSBOs in other words) but that are not bothering with the MLS. They show up as for sale on Zillow but don’t show up in the MLS.
I think if I were running MLS and I wanted to have a job in the future, I’d jump at this suggestion. It basically turns selling into more of an auction where the buyers are able to see the results of other bids. That’s good for buyers and, in the end, what’s good for buyers is good for sellers.
Recent Buyer, I agree that the seller would be waiving their rights to confidentiality, but I think there is a line where it might be more of a “forced” choice rather than a real choice. If lenders make it a requirement in order for a buyer to get a loan the seller HAS to disclose that information, then it really isn’t a choice.
I also agree that it would be great for buyers, there is no question about that…
The real estate process from listing to offer can be a long one. Does it make more sense to have an “open bidding system” like this, but only open bidding once a month. Kind of like ebay does with a 7 day auction period or something? Does it make sense to allow sellers to explain why they turned down an offer? There are so many dynamics in negotiation that I could see that a seller wouldn’t want to seem unreasonable. Some offers just stink from the get go and while the price might be good, the terms are so horrendous that countering really isn’t worth it. Does saying the offer is rejected make it seem like the seller is unreasonable? Would a buyer look at the bidding history and make assumptions about that?
I think it’s important whatever we move to, to make it as impartial as possible. There is no doubt that the current system favors sellers. I don’t want to swing to the other extreme.