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Broker Gets MLS Grief For Listing $1 House For Sale

Published by Joseph Ferrara December 5th, 2006 in Branding/ Marketing, Brokers & Professionals, Open Mike and Residential Real Estate.

open-mike1.jpg This Open Mike post submitted by Evan Kane.

Seems Evan got grief from his MLS (MLSNI) for this listing. According to the MLS rules, every listing must have a listing price number to prevent “Best Offer” in the list price field. So Evan decided to put a listing price of $1 (it is a number) and explain in the listing comments that it really wasn’t a $1 but the seller wanted buyers to make an offer. (I wonder if Evan went to law school). He contacted Sellsius for help. We don’t know whether we’re helping him but we let him have the floor to make his case. Evan would like to know what you think.

1-house.jpg

Evan issued this Press Release to further promote the listing.

It is not often that you see a house in the affluent Chicago suburb of Highland Park listed for sale at $1, but that is what Evan Kane the Broker/Owner of Endeavor Realty has done to help his clients sell their home in an increasingly tough real estate market.

Most Real Estate Brokers do not think to use the science of social psychology to help sellers. The real estate market has become increasingly tough causing brokers and real estate agents to have to think of other ways to attract buyers. Endeavor Realty has come up with a different strategy to serve the best interest of its clients.

Citing a recent study by Gillian Ku of the London Business School, Adam D. Galinsky, and J. Keith Murnighan of Northwestern University Kane says, “although this is not an auction, the principles are very similar and the evidence is clear that starting low can lead to more traffic and a higher sale price.”

Not only is approaching a slow market with creative ideas and new strategies increasing traffic and sales for the clients of Endeavor Realty, but it is also attracting other traditional real estate agents that have not thought of going beyond their guiding principles to try something different.

Evan went on to explain the reaction.

Deciding to implement this strategy has caused a few adverse reactions. “They don’t like it. I am using the system in a way they didn’t contemplate” says Kane of the reaction of more traditional agents. “I have to deal with a few angry phone calls, but it’s in the best interest of my client, so I do it.”

We tell them the truth, the seller would like the buyer to make the first offer. We don’t practice dual agency so if the buyer is not represented we offer them the data we used to help the seller determine the most likely sale price (minus the final result of course) or offer to assign an agent to represent their best interest and help them with an offer or suggest they seek the guidance of an agent from another company.

Although this strategy has a marketing benefit, the primary purpose is to strengthen the sellers negotiating position. It is a basic tenant in negotiating to try and get the other side to make the first offer, that is what we are attempting to do.

Some times agents will try and accomplish this same strategy by listing a property at a price they know to be far lower than the most likely sale price but high enough that a consumer would assume that the list price is in fact a price that the owner of the property would agree to sell. The hope being that the artificially low list price will generate multiple offers and thus drive up the sale price.

We see two faults to the latter method:

1. We believe this is deceptive to the consumer because unlike our listing where it is made clear that the owner is not going to sell the property at the list price no such indication is made in the latter method.

2. The owners position is at risk of being substantially weekend if the property fails to bring multiple offers.

We asked Evan who has complained. He said,

The only people that seem to be upset and/or confused are real estate agents, the MLSNI and the North Shore Association of Realtors.

In fact, the only negative response we have personally received from other agents ( I am sure many have complained to the MLS and the Association) have been in regards to the owners decision to offer a lower than “standard” co-brokerage commission (but that is a story in itself.)

What I personally find most interesting is how Realtors fail to appreciate how this type of listing works in their favor in terms of acquiring business. Unlike a conventional listing, a consumer without a real estate agent is at a clear information disadvantage in comparison to a consumer using a buyers agent.

I would even go as far to say that the one flaw in using this “Best Offer” strategy is that it requires a knowledgeable and professional real estate agent representing the buyer to be successful. A typical consumer just doesn’t have the information or expertise to make an offer without the help of an agent.

Imagine if “Best Offer” listings became commonplace. I think agents could find the value proposition to the service they offer that seems to be harder and harder for most of them to find. The “Best Offer” practice could be the “magic bullet” that makes real estate agents relevant in the internet age. The flaw? It would require buyers’ agents to do a lot more work than driving people around and filling in contracts.

Sellsius° Comment: This raises an interesting question. If a seller/client wanted to list the home for “Best Offer”, would the Code of Ethics require you to follow the client’s instructions or would the local MLS rule requiring only numbers be placed in the listing field supercede the Code? Somebody call Russ Cofano. What’s your reaction to Best Offer listings and Evan Kane’s marketing point of view?

Do you have something on your mind but don’t have a blog? No problem. Take the Mike at Sellsius Blog and we’ll publish it. Just email us at elatedclients(at)sellsiusrealestate.com. Ranters and Ravers welcome.

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  • The $1 thing doesn't bother me. A good agent should know a ballpark figure by the block the property is on and property information alone.

    However, agents would totally miss the property due to the price point searches. Am I missing something here? If I look for a $400K+ property on the MLS, I won't see this. Which is not good. I would want the lazy agents to find me too. Of course, I hit the craigslist etc..., but the search time is greatly increased.

    I think the MLS and any complaining agents need to lighten up. He followed the rules, there is nothing misleading or unethical, and it's up to the client and agent how this home will marketed. May or may not work.
  • I love games. Guess a number in my head between $1 and $1,000,000.

    I don't think the seller is benefited by a $1 listing. It's going to draw out all the investors who will low ball the offer. It likely won't get a look from serious buyers who would likely never get a chance to see it. Can you imagine the difficulty in narrowing down a search for a client when no prices are shown? Your clients would always be looking at things they clearly couldn't afford but what are you going to say?..."You can't afford that?
    A best offer listing of this type just says that you have no idea what it's worth. I can't imagine the seller getting the best price in this manner. It gets attention but I don't think it's the kind of attention that will bring a good price.

    A "magic bullet" to save the industry? Homes would continue to sell for what they're worth and all it would accomplish is waste everyone's time.

    Showing the list price of a home creates a context of what may be considered an acceptable offer. Without the context, high offers would lead to deals falling thru when the buyer finds out its not worth it. Unacceptable offers and low erratic sale prices would become the norm.

    I prefer the current reality where statistics and analysis of the competition can predict the range a home will sell in. No need to reinvent the wheel. Lets just figure out how to roll the wheel down the road.
  • Cal
    "Although this strategy has a marketing benefit, the primary purpose is to strengthen the sellers negotiating position. It is a basic tenant in negotiating to try and get the other side to make the first offer, that is what we are attempting to do. "


    Err, Don't the buyers always make the first offer in real estate?
  • We have $1.00 listingss on the market all the time. Not a problem, cosnumers call and ask about it and I explain the auction process.
  • We don't have them here in Michigan.

    I would say use EBay for this, and not the MLS. I don't have a problem at all with the concept, but, as Eric said, prospective buyers are not going to find the listing, because they (and their agents) are searching within a particular price range.

    This client would be better served by range pricing, in my opinion.
  • M.A.
    This property has been on the market for 196 days, with an asking price of $570K previously, before it was listed by the current broker. The current coop compensation is 1.5%!!!
    If the sellers would like to see more "buyer activity" I suggest they start realizing that in the current buyers market we're in, offering a higher commission rate (than presumably 3% to their agent) would go much farther than authorizing their broker to play games with a $1 asking price in the MLS.
  • Whether the "Best Offer" marketing strategy is a good one is open to debate and Eric raises a good point that in searches for 400K+, the searcher would miss this property. And Maureen suggests that this strategy may work better in other venues like eBay. Cal's point is also relevant.

    But what about the local MLS rule prohibiting OBO pricing? Is there a rationale behind it? Does the Code play in at all?
  • I've not thought this through which probably means I ought to keep my mouth shut until I have ... but I won't.

    I believe OBO pricing would be a nightmare - not for the public but for those of us who pay to access that data. I'm treading on thin ice in as much I'm on record on saying the MLS is a sellers' tool and the buyers are just reading the data; having said that, the data has no value to a buyers agent when key components are missing.

    I easily can see scenarios where buyers are looking at multiple properties they can't possible afford, but they don't know that they can't afford them because no price is posted.

    Range pricing might help but I fully understand Evan's concerns. I have all the respect in the world for some of the leading proponents of the range pricing idea, but I personally have an issue with listing a home at a price the seller is unwilling to accept.

    Evan's solution is far from ideal but at least it's up front - if the public sees the comments, that is.
  • Eric: We did explain to our client about the potential for buyers or agents using a bottom price limit in their search might miss the listing. In this particular suburb of Chicago it is my experience that most buyers and agents don’t use a bottom limit at the price range we expect this property to sell in.

    Spencer: The most likely buyer of this house is an investor, or a consumer looking for sweat equity. Creating a context or “anchor” can be problematic in terms of getting the best price; another study worth reading on the topic is in the Journal of Consumer Research, “Anchoring Effects on Consumers’ Willingness-to-Pay and Willingness-to-Accept”. As far statistics and analysis, we have a very good idea of the most likely sale price of the property as we employ a multiple linear regression technique that has proven to be highly accurate. I would not worry about erratic sale prices, an efficient market like real estate will always bear out the “true” market value, we are just trying to marginally increase our clients sale price.

    Cal: The buyers do almost always make the first offer in real estate, but who says they have to?

    Maureen: Range pricing is another strategy but our MLS doesn’t allow that either. Additionally, I don’t think range pricing counters anchoring as effectively. We are using other venues, but in my experience there is no better way to reach home buyers than through an MLS that has a fair VOW/IDX policy (at least for now).

    M.A. Offering agent bonuses and higher co-op commissions shows NO statistical effect on sale price and in our own study showed a 32% increase in market time. I would have liked to have had a “clean” listing but, we work with what we have. According to our client the number of showings and offers has increased dramatically since we took over the listing.

    I am perplexed why no one is willing to take on the question of the MLS hindering our ability to follow the code of ethics and follow the legal wishes of our client. Do we have no philosophers in the group?
  • Never keep your mouth shut JD. We enjoy whatever comes out :)
  • Evan,

    I appreciate the direct response. Interesting take on the local customs as well. I really liked this subject. We are always trying hard to figure out real ways to sell... sometimes we miss some real obvious ideas!

    Also, regardless of what we try... most clients know some old school marketing plan that will magically sell their home and have trouble trusting our judgement. This career is a puzzle, a riddle, a blast!
  • M.A.
    The MLS was not inherently designed to be a communication platform between listing agents and consumers, rather a medium to be used by listing agents to present offers of cooperation to buyers agents. The fact that many years ago NAR via its state and local associations decided to open up this database to consumers by way of realtor.com opened up a whole new can of worms which has been a subject of heated debates since the late 90's (and which I'm not going to go into, because its irreversible now, anyway). But the fact is that MLSNI (and in all likelihood other MLS's around the country, as well) are not set up for auction-type offerings to consumers. That's NOT what the MLS was created for, regardless of what the Code of Ethics mandates. As one of the previous posters said, it is probably much more prudent to use ebay or some other auction site for this offering, than the MLS.
  • Agree M.A., absolutely. The worms are now wriggling all over. But should the $1 or Best Offer listing be prohibited as a result? Should Evan Kane be subject to sanction, figurative wrist slapping or standing in the corner by MLSNI for his transgression? It's listing J-walking isn't it?
  • M.A.
    @sellsius
    No, I don't see why Evan Kane should be sanctioned. He owes his clients (the sellers) the duty of "obedience". If his clients directed him to offer their property for sale at $1 with the disclaimer that this should be interpreted as an auction price (for which a minimum reserve has to be met) AND at the same time were adamant about the listing to be included in the MLS, then Mr. Kane did the right thing. Whether or not the latter conforms to MLSNI rules is something I'm not sure about, but if I were to encounter a similar situation, I certainly would have consulted with MLSNI prior to inputting the listing. FWIW though, the worst case scenario would be that Mr. Kane would have to remove the listing from MLS, or alter the price. Not a big deal, imho. The PR effect has certainly been achieved, and the sellers couldn't possibly ask for better exposure. From a buyers agents perspective though, I'd say this listing is not worth my time.
  • I wouldn't take a listing like this.

    For starters, the listing agent has a responsibility to properly assist the seller with pricing. As in not too high - not too low. Pretty tough to do that with a $1 list price.

    Next, where is the upper limit to this scenario? In a normal listing agreement, I will have a list price that earns me a commission - regardless if a transaction takes place. All that is necessary is a willing, able purchaser at the list price... and I have earned a commission. How do you secure THAT in this $1 listing scenario?

    I also agree that the list price would leave out all the buyers that are searching within their price range (of which this listing will not come up on the radar) so I find that flaw pretty major.

    A buyer's agent should not have to do a Market Analysis on every property they wish to show. Only on properties of which they are going to prepare an offer. It's the listing agent's job to do the Market Analysis to set a reasonable and acceptable offer price.

    But that's just me. Others are more than welcome to disagree. :)
  • Usually gimmicks don't benefit the seller. This is not the first time an agent has tried to be clever to attract more showings. Giving away free trips and bonuses and value range pricing and such. Maybe these are effective, but I would just as soon offer the property at a fair price, with a fair buyer agent commission and let it sell by it's own merits.

    Question is, what type of buyers are going to bid on the gimmick?
  • Evan, thanks for the reference on pricing. It's a great study. Have you considered though by attempting to not set a price, you are creating an 'anchor'? People go to auctions because they feel they can get great deals so the perception of value is already lower than that of what the public may be willing to pay. In the end though, if a seller wants the house to sell, this is a great way to get it done. I just don't think this method gets the best price. I wouldn't recommend it to my clients.

    Also, I am concerned that if everyone started doing best offer pricing, the collosal waste of time that would ensue. Not to mention the affore mentioned not getting the best price possible for clients. Could start giving people one more reason not to use us.
    Does anyone think that the Code of Ethics may have this covered under Standard of Practice 12-8. "The obligation to present a true picture in representations to the public includes information presented, provided, or displayed on REALTORS®’ websites." This would at least give the local MLS the right to decide how they want to approach this.
  • Sounds like it's more of a lack in the MLS than anything. $1 listing is basically an auction, so an "auction" option and a planned date would possibly be the best solution. That way buyers could still get in to view the property before hand and all the offers would have a known deadline.

    I doubt $1 listing is being missed. After all we're all talking about it, so I bet it's big news where it actually is.

    The dude needs to get his sign out of the photo on the MLS though. Thats a major no-no around here.

    Only trying to sell for two weeks before trying this is interesting though. Need more info like whats the commission, the co-broke, what else he does to justify his commission.
  • My problem with this listing (and auctions) is will $1 purchase that property? If I sent you an offer for $2 (hey, that's 200% above list!) would it even be considered?

    Of course not, so I feel that while you may be fulfilling your fiduciary duty to the seller, you are walking a fine line on other issues (treating the buyer honestly being the first that comes to mind.)

    You say that showings and offers are up? Are any of them "legit"?

    Personally, I think any type of "reserve" listing should be put at that price -- auctions shouldn't be listed at $1 unless that is where the bidding will start.

    Also, check out a post by Broker Bryant over at ActiveRain, it brings up a very intersting discussion that not allowing Range Pricing is a violation of Sherman's Anti-Trust Act.
  • As a potential buyer, for me it cheapens the experience of house buying. Buying a home requires negotiating strategies but for some reason this seems condescending to me. I would only expect to see such on ebay. Who would want to be in a bidding war with 1,000 or more people bidding anywhere from 2.00 and up?
    The 1.00 strategy drives the point; but at whose expense, and what does it say about the real estate industry?

    It's like going to buy a vehicle and being told their are a few new 2007 Cadillacs today for one dollar. If they are one dollar,tell me why are they on the floor? you mean one of your own salespeople didn't want it?
  • First: I really appreciate the thoughtful and professional dialog from all of you (I wish I could get the same kind of dialog from the MLSNI and NSBAR). I also would like to thank sellsius for making this forum available to me.

    Now, back to the meet of the matter:

    This listing is NOT AN AUCTION (the public sale of something to the highest bidder) any more than any other listing is. There is no mention of auction, reserve bid, close of bids, highest bidder, etc. We are negotiating written offers to purchase juts like any other listing with the exception that the buyer is making the first suggestion of market value.

    I have NEVER seen a written definition or rule pertaining to any MLS or governing body that defines List Price as the price a seller will/must sell at if offered. We use $1 as a list price because the MLSNI will not allow “Best Offer” or similar wording in the list price field, which would be my preference.

    I would like to respond to the notion that without a list price that estimates market value, a consumer would have absolutely no idea of what the property might be worth with a question. Who among us has never had a client tell us without prompting that the property wasn’t worth what the sellers where asking? The notion that today’s consumer is so naive that they can’t “range price” without the help of a real estate agent is absurd.

    M.A.: I think it is ignis fatuus to believe that a MLS with a VOW or IDX policy is not a consumer marketing channel, no matter what the original intent of that MLS was. Through the MLSNI we market directly to consumers, if buyers’ agents don’t find our listings worth their time that is their prerogative.

    Doug Quance: I believe our responsibility to the seller is to assist to determine the most likely sale price of the property. We have done that privately with our client. Our listing agreement is not like yours, we only charge our clients if the transaction closes.

    Greg Tracy: We believe this to be a negotiating strategy, not a gimmick.

    Spencer Barron: Glad you liked the study! Keep in mind that what we are doing is not an auction. We feel that allowing the buyer look at past sales data and make their own determination of the most likely sale price can lead to anchoring at a price that is higher than they normally would. This will ultimately strengthen our negotiating possision and allows us to obtain better terms for our client. In regards to the Standard of Practice 12-8, all of the objective information in our listing is factual and we are clear that we do not believe the most likely sale price to be $1.

    Athol Kay: This is not an auction, there is no deadline. The sign stays, it’s subliminal advertising. ;)

    Toby & Sadie: I don’t know how we could be clearer that $1 will not purchase the property. We treat every buyer honestly in telling them that we are simply asking them to make the first offer. All of our offers have been within what a reasonable person might believe to be market value, just not what our client was looking for.

    Sandra: I am truly sorry that you feel we are being condescending. Multiple offers happen all of the time in real estate and buyers never like them. All of our offers have been within what a reasonable person might believe to be market value. We are not selling a new house so I think a better car analogy would be looking in the paper for a used car and finding an ad for a 1986 Cadillac asking for BO (Best Offer).
  • Evan ,

    Thanks for responding. The issue seems to be that you can't use the term "best offer" so you felt locked in to using one dollar. And there maybe several avenues to mobilize other realtors around that issue.

    Of course we all know one dollar will draw eyeballs. So this is a public relations strategy as well.


    But it seems the seller must have some minimum in mind (other than one dollar) to negotiate from.

    As an aside: just imagine if every single listing used "one dollar" so they could get the eyeballs. It would dilute the power of the one dollar strategy.

    It's a "clever" move! It's a strategic public relations strategy!

    But it still doesn't feel right. We can agree to disagree.
  • I was not aware that MLSNI has an anti-range pricing policy and if they do I believe it to be a violation of the Sherman Antitrust Act and a blatant refusal to allow the same thing Evan is doing - following the client's wishes and direction which is what the COE requires as well. While I hear Evan's response on missing bracketed searches (between $X and $Y where $X is > $1), I think that's the biggest problem - why not go on the low end of the desired sale price scale and make the same disclaimer in the notes about B.O. pricing? That might get a better search relevance, especially from agent-driven searches on the MLS. That is more effectively a range pricing strategy, done a different way.

    If it's B.O., what's the time frame the offers come in over before the seller HAS to accept the highest in place offer (legally) and how does this (vs. traditional range pricing) not create a problem that I can just show up with a contingency-free contract at $1 and the seller doesn't HAVE to sell to me (which is what a full-price offer requires essentially)???
  • I'm going to side with Sandra on this one, we are going to have to agree to disagree.

    This is a nice "publicity" stunt and its worked for you - kudos.

    However, I won't be using it.
  • Evan:

    There you go again - thinking outside of the box!

    Once again our local MLS and Boards are proving that they have forgotten that they exist to help us serve our clients; not to police us and our clients to make sure that we "behave" the way that old school real estate agents believe we should.

    Your client has the right to market the property in any way he chooses and effective marketing is all about standing out in a crowd.

    Good job and good luck with the listing!
  • These are really great posts. I appreciate your sharing this stuff with us and providing an open forum for comments. Very Web 2.0 !
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