The Risk of Limited Exposure - OFF MLS SALES

by Osman Parvez

If you've been paying attention to Boulder real estate, you've seen the "Coming Soon" signs. What's it all about?

Here's how it works. The listing agent and seller agree to a reduced commission if the listing agent procures an unrepresented buyer. In this way, the commission earned by the listing agent is higher than it would be if the buyer was represented. This is a powerful incentive for the listing agent to work hard to find an unrepresented buyer. 

The seller pays less, so it's a win-win, right? Not necessarily. 

Here are the risks. 

The Risk of Limited Exposure Listings

Seller Risk: A listing that is not on the MLS, or available on the MLS for only a short period of time, is not receiving full market exposure. The biggest risk is that you're leaving serious money on the table.  

There could be a buyer out there willing to pay more, close faster, or remove contingencies. No doubt, unwitting sellers are leaving money on the table. 

Off MLS transactions can also make a buyer feel that something is fishy. They're more likely to flake on the deal mid-stream, wasting the seller's valuable marketing time and potentially tainting the listing for future buyers. 

Buyer Risk: Are you really getting a sweet deal or are you overpaying? Have you done your due diligence? Who is guiding you? Who represents your interests? 

Even if the listing agent downgrades their legal status to "Transaction Broker," never forget that they have a pre-existing relationship with the seller. It's extremely difficult for them to be neutral. 

In the old days, Realtors "found the house." Today, everyone has access to listings online and Realtor's jobs have moved upstream. Driving buyers around and opening doors adds no value. A good Buyer's Agent will guide you through property selection, negotiation, and due diligence. We're here to help you make prudent real estate decisions, avoid common mistakes, and advocate for your interests. Agents can't do that if they represent the seller too.  

Buyer's Remorse

Zillow recently conducted a study of regretful buyers. Here's what they found: 

62% wish their homes were bigger or laid out differently. They wish they had bigger kitchens, more storage space or just more space in general.

40% of first-time buyers believe they paid too much or should have put more money down. That's nearly half!

38% were surprised by maintenance costs.

20% wish they had negotiated more on price. That's 1 in 5. 

The Regulator's Position

The Colorado Real Estate Commission is concerned over "Coming Soon" listings being marketed privately (not on the MLS).     

Commission Position #44Motivation for limiting exposure of the property should be carefully considered. Is the property being marketed as “coming soon” because the seller is preparing it for sale or lease? This would be a legitimate use of that particular marketing method. However, if the property is being marketed as “coming soon” in an effort for the listing broker to acquire a buyer and “double end” the transaction, this would be a violation of the license law because the broker is not exercising reasonable skill and care. If the broker is a single agent for the seller or landlord, the broker may be viewed by the Commission as also failing to promote the interests of the seller or landlord with the utmost good faith, loyalty and fidelity. Finally, a broker who places the importance of his commission above his duties, responsibilities or obligations to the consumer who has engaged him is practicing business in a manner that endangers the interest of the public.

Best Practices 

It is possible to do a "coming soon" listing right. Make a smarter real estate decision. Join us on January 22 for the Boulder Real Estate Meetup. Our topic: Best Practices for Bidding Wars. RSVP by clicking HERE

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As always, your referrals are deeply appreciated.  

The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

Please Note

This document contains forward-looking statements. You are strongly cautioned that investment results are subject to business, economic and other uncertainties. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time. Always consult your financial advisor before making an investment decision.