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Its' free, it's free, I tell you!!

This morning I went on a listing appointment and discovered the ultimate business plan. Actually, let me rephrase that, I discovered the ultimate "list for free" business plan. This particular Seller had been on the market for six months with another company, his listing agreement had just ran out and he had called me and asked me to come by today, since I have a house just like his, on the market, two doors down. As usual, I went over with my arsenal of listing materials, fully expecting to walk away with my sign in the ground, as I normally do.

Anyway, I had his old MLS printout and started going over it with him to try and figure out why he hadn't had any showings in six months. It looked like it was priced OK, albeit just a tad high. But not enough to keep it from at least getting showings. After price, the next thing I normally check, is the amount of the co-broke, that was fine as well. Very much in line with our market.

Now, I knew this particular company offered reduced commissions, so I wanted to talk commission pretty quickly, to make sure I wasn't wasting my time. So I asked him how much they were charging him. I was surprised to hear they were charging him exactly the same as the co-broke being offered! Now this caught me a little off guard, as I assumed the Realtor wanted to get paid, if another Realtor sold the property. But nope. The entire amount being charged was offered as the co-broke and there were no upfront fees or transaction charges. Basically, if another Realtor sold the property, the listing side got squat, goose egg, nada, nothing, not one cent.

I guess this explains why he hasn't had any showings. There is zero incentive for the listing broker to arrange showings and let other Realtors show the property. So their "list for free" business plan must go something like this:

Attract Sellers by advertising, "We list homes for free"
Get as many signs in the ground as you can.
Attract as many buyers as you can, off of these signs.
Sell them houses and mortgage services.

Now folks, I am a firm believer in free enterprise and truly feel there is a place for all business models in out industry. The problem is, that this Seller didn't have a clue, that his Realtor was doing nothing more than using his property as a billboard. His property was bait and nothing more. The listing is the bait and the Buyer is the catch. He certainly wouldn't want to sell this house because it has great signage and he has it locked in for six months.

I wonder if this Seller would have listed with him, if he knew, selling the house was not the Realtor's game plan? I wonder how many other properties this Realtor sold off of these sign calls? I wonder how much this "list for free" service really cost this Seller, in lost market time and carrying costs? With our property values declining, my conservative estimate is that this six months, has already cost the Seller $15,000 to $20,000 in real dollars, due to depreciation.

So what do think? Would you list a house for free?

Posted by Bryant Tutas Broker/REALTOR(R) Tutas Towne Realty, Inc on 01/06/2007 03:33 PM

Comments (76)

list for free, opinion

76 Comments on Its' free, it's free, I tell you!!

JAN

2007

Reserved Parking For #1 "The Lovely Wife"...TLW...ROAR!

Hubba! Bubba! Wink. Wink. Awesome Post Darlin' so "much more YOU" :)

Okay. I have serious thoughts on this one. Imagine that. :)

I was really surprised to find all this out today. I thought that having been in this business for so long I heard just about everything. I guess I was wrong about that. :)

So, what we have here is a house being used as a billboard and a Seller with no clue that his house is not really up for sale. Not to mention that the For Sale sign in his yard is just a rusted lure.

Well that just sucks. I want to say very bad things but I know there's no point in that. I am still trying to digest all this. Maybe after I have given it some thought I will have more to say about this. Yah. Odds are pretty good that I am not done. :)

TLW "The Lovely Wife"...I Will Be Back After I Give This More Thought. ROAR!

BB: Seems to my way of thinking the selling agent was just a tad ethically-challenged. So what this fellow would do basically is "bait & switch" perhaps telling Mrs. Sign-call Buyer that he knew of a better house for her elsewhere???

Jay

No, B. I would not list a property for free. I have given discounts for bulk if all of the properties are listed at once and if they were a little higher in value. I have also been told to "do this one for xx and if it goes well I will give you more". They want the bulk price on their test drive. Nope. None fore me thanks.

TLW, I like the "rusted lure" very good:)

Jay, I would think so. The seller was clueless.

Rich, I too get that all the time. "If you sell this I have another one for you" attached to the discount request. Not me. I will however give them a break on the next one just not the first one.

I hate it when the intuitive real estate brokers expose the cloak of the mortgage company acting as a discount real estate broker. Drats! Foiled again!

It really doesn't take a rocket scientist, though...does it BB? For a textbook example, check out ipayone.com

Wow, Sounds something like the if you buy your house with me and you do not like it I will sell it for free with in the first year,

Brian, I know you hate being exposed:) I actually have no problem with this biz plan assuming the seller is informed. How about, "I'll pay you $100 per month and enter your property into the MLS if you let me place signs in your yard."

Daniel, This particular company advertises "never pay a Real Estate commission again". But again, it's all about the lack of disclosure.

WHAT?!? I guess this proves the "You Get What You Pay For" idea... That is awful. I hope that you are able to help them. It is a shame that they lost so much time and money with Rip Off Real Estate...

His property was bait and nothing more.

Excellent! Does "fiduciary" ever mean anything to some people?

I would encourage that seller to think seriously about filing a complaint to the real estate commission and an ethics complaint to the REALTOR Board as well. That has to be stopped!

BTW did you get the listing?

Pathetic-

The amount of garbage that people fall for is getting bigger and bigger every day.

BTW, no, I would never list a home for free.

I agree with the disclosure if it says this:

We are a licensed real estate company who knows absolutely nothing about real estate brokerage other than the minimum information to pass a state-sponsored test. We are a mortgage company, using this incentive as an opportunity to compete for your loan business.

And guess which disclosure I'd like to see real estate companies who attempt mortgage lending use?

(I'm dripping with sarcasm here)

It would be interesting to call on one of the "listings" that are active and see what the agents response would be if there were an "interested" buyer. ?!

Definitely some good dialogue here for talking with sellers about the 'list for free' deals, and a spin they most likely haven't considered. I like Brian's disclosure suggestion. =)

Mariana, I did not take the listing. The Seller refinanced during the listing period and now is very very tight on the property. In my opinion he is upside down on the mortgage. But since he doesn't really need to sell I suggested he wait until after the summer to see if things change for the better with the market. He owes $255,00. The exact same model that I have listed 2 doors down is priced at $249,000. His house does have a lot of upgrades and my listing is priced to move. His house comps out at about $275,000 but it would be real difficult to get in this current market.

Mike, In Florida we are presumed to be Transaction Brokers. NO FIDUCIARY. We can choose to work as an agent but few companies do, including myself.

Monika, How do you prove it? He signed a listing agreement and the Realtor has no fiduciary responsibility. It's a perfect example of shopping rates instead of experience. Sellers are blinded by the thought of a low commission.

Marc, You got that right. Dangle the carrot and they will chase after it.

Brian, I like your disclosure. How about "List with me for free, you won't have a cost but you will certainly pay the price" :)

I know most people "Want" to be sold but we as Realtors have to educate the public on the fact that you get what you pay for. We are in business after all and the incentive to earn money must be a part of the equation. Great story Bryant.

Lisa

Bryant, first I have to agree with everyone else that this is sleazy. Second it is unclear to me whether or not you told the Seller what this Realtor was doing? And third did you get the listing or not?

Lisa, thanks for reading. Yep educating is what it's all about.

George, I did not discuss this with the Seller. Even though what the Realtor did is wrong, I never talk negative about another Realtor or company, to a consumer, ever. When I meet with Sellers I'm there to discuss the way forward. I have always built my business on my own merits. In my comment above this I explain my reason for not taking the listing. Good to see you BTW.

This guy didn't even enter the property into the local MLS????? I don't think i'd want to trust my livelihood to only folks doing driveby's on signs.

Would I sell a house for free? Depends, I guess. I have clients who have purchased spec homes that have paid me significantly more than 3%. In such instances, I have sold their previous homes for VERY LITTLE.

But for absolutely free? Maybe just for my parents :)

Bryant, they can list them for free. They will make it up with volume. (old salesmans joke)

Ahhh..I forgot you guys have no fiduciary...strange concept to me but it apparently works.

Thanks Bryant, I went back and read it and it makes sense.

"Ahhh..I forgot you guys have no fiduciary...strange concept to me but it apparently works."
Me, too, Monika.

Actually I had a feller from Maryland suggest that I do exactly this. Buy 15-20 signs and "List for Free" to get my signs out.

Seemed a little shaky to me, to use someone's house strictly for "bait."

That is horrible. I can't believe someone would do that. It's people like this that hurt eveyone else's repututation. There has to be some way of keeping people like that out of the business. I can't imagine how frustrated the seller must have been. What did he say when you told him what you thought was going on?

Bryant - good for you for not talking bad about another agent. This information is helpful for us to know, but it's not really our place to tell a seller that he or she made some bad decisions.

I had a deal where the other agent charged her seller nothing except the coop fee (I'm guessing they were friends or family) and then screwed up in writing the counterproposal. The day before closing we got a frantic call from the listing agent saying that the seller shouldn't be paying the buyer's closing costs, but when I pointed out that she didn't specify that in her counter, it really began to cause problems. Because she hadn't even charged them a commission, she couldn't even offer it as a way to offset her mistake. She wound up having to get another agent in her office (we never heard from the managing broker, but that's another story) to help contribute money to help make things right.

As mentioned above, her sellers really got what they paid for!

"List with me for free, you won't have a cost but you will certainly pay the price" :)

That's even better.

I'm off to watch football.

With no fiduciary duties, it is sad to see how an agent would take advantage of it and act in his/her best interests instead of the seller's. And at was cost!!

Bryant, You said you had a similar home just two doors away. How many showings did that home have in six months? Is it maybe just very slow?

Bryant, I think these sellers are starting to learn now that if it sounds too good to be true, it probably is too good to be true. By the way, when would these LA ever get paid and by whom? Was there a catch somewhere?

I think not. I'm in the business to make money, it's not a hobbie. I would probably give my parents a break on my side of the commission.

I would respond but I fear TLW

:grin:

BB, In most case We do list for free !

No charge for listing the house! If you think about it, we do not get paid until it is sold.

www.HomeRome.com

Baltimore, Md

LOL@ Renee. Chicken. LOL.

Come on I will behave. GRIN.

Get your beautiful brian back here. :)

TLW...ROAR!

List for FREE - No way. But I guess the seller got what he paid for: paid nothing got nothing

There are ALL kinds of business models. This one may not be the "norm" today, but who knows what tomorrow will bring?

You should have asked the seller would he give the buyers the house for FREE..Hmmm, I wonder what his answer would have been?

Phyllis Pafumi

j/k I wanted you to chuckle!

As Realtors, we do have a code of ethics and a fiduciary to our clients but come on, this seller must have been in a coma. Any seller that has a competing house 2 doors down has to have some sense of "the market". I'm not excusing the agent (shameless) but the seller has to question the lack of showings (especially when buyers are coming and going from Bryant's listing).

JAN

2007

A couple of years back we asked one of the 'free listing' agents how they could possibly get their listings sold with no money for marketing. Their candid response was "Actually we hope the home doesn't sell ... so we can keep getting buyer calls off the sign." What a twisted, unethical business model.

I'd prefer some schmuck list it for free or list it overpriced so when the welcome has worn thin I can truly help the seller get an offer for their home with great representation. It makes it so much easier if some cheap/free/ or discount broker lists it first. Sad but true!

The only company I have seen list for free is one who says "buy through us and we will list your house for free". I did get a very good deal there for my buyer client, as the listing company was more concerned with the home this seller was purchasing.

"With our property values declining, my conservative estimate is that this six months, has already cost the Seller $15,000 to $20,000 in real dollars, due to depreciation."

I often wonder when a seller is going to sue one of these agents for the damages incurred???

Bryant,

Thanks for the post. Good job. Never bad mouth the competition (in this case, I don't think this company is!). Move forward on the merits of your marketing plan. Here in New Jersey, the discount brokerages have informed prospective sellers to expect others to bad mouth them. Instead of discrediting the discount brokerage, they wind up discrediting themselves as professionals. Market service, service and more service. That's what people are buying!

I have a nasty habit of liking to eat! My children have a nasty habit of wanting to eat...so the idea of listing for free would not make me or my boss very happy. Interesting tactic though and I appreciate your point about the carrying costs-most owners do NOT weigh in that factor until it is too late!

This post made me think of a case I saw in my marketplace. A house was listed by I would say, the top agent in the area who offer a 3% co-broke still this house did not sell, now the seller listed the property with a 1% discounter and is expecting to get a lot of showings. Of cours I would not say anything bad about the discounter, but I feel sorry for the owner.

I think we probably are going to keep seeing this happen. Our job is definitely to EDUCATE the sellers in the options and risks of the choices they are faced with.

Mollie Wasserman does a great job of explaining it all in her book, Ripping the Roof Off Real Estate

Bryant.... this is very interesting and sad. I thought I had read about this once before, possibly from something that you wrote once before. But overall, it goes back to letting the client think that they are getting a good service, because they are offering a cheap or free service. Again.... people need to be more aware of this.

BB,

Burn the other sign...

Oh! Yes!

SUNDAY IS A GOOD DAY FOR GOD TO SAY....NO.

Wink. Wink. SVW.

Interesting I had the APPLE on this one. Want a bite? Grining very wide. :)

TLW...ROAR!

OK way to many comments for me to respond to them all. But I really appreciate you reading and voicing your opinions.

First I want to point out that I have no problem with this type of biz model as long as it has been DISCLOSED to the consumer. Disclosure is the name of the game. But unfortunately in this case it was not.

As in most alternative or less than "average" commission models, the profit is made on the buyer side. The idea is to attract buyers by having a lot of inventory and signs in the ground. As long as they are still attempting to sell their listings this is a model that can and has worked. Just because it's different doesn't make it wrong. BUT it must be DISCLOSED and explained to the consumer so they can make an informed decision. The absence of disclosure is where the problem comes in.

If the consumer would shop for the best person, for the job, instead of the lowest rate, a lot of these issues would be non-issues.

Bryant... yes, as long as it's being disclosed. And most of us know, if it was disclosed in this manner, that the clients would have chosen someone else. Just my opinion.

Bryant - We heard of a "Buy with me, List for Free" option one agent was offering in the area - but this takes the cake!

BB, There is are agents, yes agents, that put for sale signs on their own property to achieve the same effect...signage for themselves.

www.HomeRome.com

Baltimore,Md

Bryant you need to read a book called ripping the roof off real estate you could have had a chapter with this blo!

Teri, You know I have never read a Real Estate book. Maybe I should make that a goal this year.

Margaret, I think an "agent" doing this would have some serious fiduciary issues. I think I'll just stick to "listing to sell", works for me. And you too, of course:)

Broker B, ...you hit the nail on the head with this statement.. "With our property values declining, my conservative estimate is that this six months, has already cost the Seller $15,000 to $20,000 in real dollars, due to depreciation." The consumers don't realize this.. all they see is the "saving's" of not paying the listing side, and not considering the market, or that they are locked into 6 a month- no cancel agreement (was he locked in with a cancell charge?).. Lack of consumer saavy in this case and greed to save a few bucks, or so they think.

Also, if I may add. On my block there is a house that is for sale. I appraoched him and he denied. So he listed with these mortgage broker/realtors that plug it into the MLS for free and put "call owner directly" in the comments with a sign for financing. 2% to buying side, when it should be 3%. (wow, saving $2,800 bucks! good move, NOT!). a 4% would of sold it in no time, below asking price, but sold. So after 6 months, 1 price reduction and the owner drops it by about 28,000. Guess what, still sits on the market and the didn't raise the commish!! still at 2%. Wouldn't common sense say, lower it by 10-15K and raise the commish by 2% to 4% (abut $5,200) rather than drop it by 28G's?! oh well.. its part of the game. For the seller, live and learn. for me, observe and learn to use in listing appt elsewhere. hhmm this topic will make for a good post on my neighborhood that Irecently started. thanks BB!!

btw, is that the pic of the property? did you get the listing. I love the attitude ="I went over with my arsenal of listing materials, fully expecting to walk away with my sign in the ground, as I normally do."

I can't even imagine listing a house without some sort of compensation. Discounters are one thing...and they're fading out a bit with the current market conditions. But the injustice that's already been done to this seller is horrible. He really would have been better off going FSBO!

What will they think of next BB. You guys have some crazy stuff going on there in S Florida!

John Novak

I agree with you about this practice being a bit twisted. I guess I need to come to terms with the fact that my business ethics and those of others are not neccessarily the same. Always learning about the business of my competition is interesting to say the least.

I was with a bigger brokerage firm prior to my present broker and at an awards dinner for the year's rising stars, one of the winners spoke about one of his tactics. He truthfully listed his own home for sale, but at a much higher price than it warranted. Since it was overpriced no cooperating agents ever called to show it. That was OK though, since this fellow's intention was not to sell his house, but just to get buyer calls off his sign. A good salesperson he must have been, for his sales during that first year of his were phenomenal. I don't know, I guess I sleep better doing things a little differently than that.

Wow....

Very interesting information...a dollar spent to save a nickel....

There is a cost associated with all choices, there maybe a short term gain for a long term loss which is the case here. Someone very dear to me thinks this way, he will never see the true life costs associated with his short term savings.

The ethical topic here is very enlightening to me. I really appreciate everytime an agent shares their run ins with fellow "agents" who have such low standards, it helps to know who/what you are up against.

Thank you

I'm a little late, but I'm sitting here shaking my head back and forth. I also think there's room for all kinds of business models in our market - but please educate the seller, let them know what you are doing. The costumers I appreciate the most are the educated consumers - those are the ones I want to work with or at least the ones that want to listen and understand how it works.

I'm late as well... had a six year old's birthday party this weekend. You can figure out the rest. I put this in the category of "huh?" You've done these sellers a huge favor by educating them!

Bryant, an excellent post that generated a great discussion. I have nothing valuable to add. But, I did want to tell you WELCOME BACK!

This was a really funny post! I'm still laughing.... I will give it my vote on www.realestatevoices.com if I can figure out how:)

Lola Audu, CRS GRI

JAN

2007

I get the strange feeling that the seller was confused. Did you see the old listing agreement? The MLS sheet shows only what the listing firm agrees to pay as a co-broke to a selling firm, and not the total commission. Maybe it was a variable commission rate, contingent upon if the listing agent sells it or another firm sells it?

Hi Steve, I did. I asked to see it because I thought he was mistaken, but he was right. We have companies in my area that advertise "sell your house for free". So this is nothing new in my area, I just hadn't run across it before.

Thanks everyone for reading and commenting.

Bryant, this is an interesting article. It is a good thing that you did not talk to the seller about "what the previous listing agent did" because you would have been setting yourself up for a slander lawsuit. I am surprised that no one has pointed it out yet, but this whole article is based on speculation and not fact. Yes the house did not sell, but that does not mean that the agent was redirecting buyers to other listings. As you pointed out the commission to the co-operating broker was normal for your area, so selling another home instead of selling his/her own listing would not really benefit them especially if they advertised the sale and the savings that his client reaped. The would still get the buyers side of the sale and they would probably get the purchase commission on the clients next home. Having a sign on a property that stays on for 6 months, and only advertises that you are ineffective, is not worth 2 commissions.

Why it did not sell may be a mystery but unless you can prove that this agent is redirecting buyers and not just unlucky, making public statements about what others have done is always a bad choice. They may have had some calls off of the sign, but most people who call off signs do not know what the house is like and therefore are often not appropriate buyers for that particular home. Without fiduciary duties it is also easier for other agents to black list an agent or brokerage as they are not liable to their customers if they do not show them a suitable property, for whatever reason.

Now if this is what that agent was doing they are not only unethical, but stupid. But you do need proof before making such statements.

I have to say that this post and all of the comments really feels like a "Bubble Blog" where people jump on the band wagon before really reading the post and looking at the facts. Each post seems to feed off of the previous posts that concentrate on an idea not the facts. There are many good comments about disclosure and ethical behavior but they all assume that the listing agent that you refer to has committed a wrong even though you have given no proof. Sorry but this is a sad day for AR. IMO

Hi Andrew, I appreciate your comments. You will notice in my post that I do not point fingers or name names. I would never do that. You will also notice that this post is tagged opinion. BUT my market area is very small and I do know what goes on in my market and how my competitors handle their business. In Florida these type of companies are everywhere. It's a common practice. This post was written to stimulate a conversation and to get opinions from others on the issue, not this particular case. If you are not exposed to these type of practices in Canada then you are very lucky. Move to Florida and your perception will change drastically.

This post was written to explore an issue. Even though the post is 100% true, I am not singling out a specific Realtor or company. Nor am I presenting facts. I am presenting an opinion based on my knowledge of how these "listing schemes" work. This knowledge was gleaned from having conversations with Brokers that own these type of companies. So this technique and business plan is 100% factual. The Realtors "intent" is an assumption based on facts. Hope this helps.

BTW, ActiveRain is all about, to me anyway, exploring, debating and conversing about these types of issues. This is a consumer post on purpose. I'm a strong believer that the consumer should know the questions to ask before hiring a Realtor so that they can make an informed decision.

Thanks for responding. Your opinion is always appreciated.

BB,

Home owners may decide this is a way for them to make money.

They can rent their lawn for a realtor sign and charge for the advertising space.

Now what would we call this business?

www.HomeRome.com

I found your idea about working for free amusing because I read the business model differently. I saw it as an incentive to market even harder because that's how the money would be made through my finding a buyer or through someone else finding the buyer and I get the seller's buy side. There are a couple companies here (Minneapolis St. Paul), one that has been here forever, that reduce the seller's agent side of the commission because their goal is to have the buy side. They have both been quite successful and agents who work for them are extremely loyal and have steady business.

Ahhh, the old bait and switch. I think there is plenty of that going around. Here's another one I hear that came out of another broker's/agent's mouth who was looking for a listing: "we have buyers already for your unit" (remember that when I do residential work it's generally very high end condos - expensive stuff that has a reduced buyer pool size from much of the industry). I love when I hear that someone told a would-be-lister that one. "So," I say, "that's great - they will get paid a full co-op commission as the buyer's broker then and I'll contact them as soon as you sign our listing agreement...oh by the way, the last five sellers I've talked to that got told that same thing by that agent and hired him/her to list their property never saw one of those supposed buyers from them after they signed the listing agreement...If they have these buyers already, why don't you tell them they don't need the listing agreement (who wants that dual agent issue anyway) and give them in writing that you'll protect them for the buyer's agent commission. Then you won't have to hire and pay me, you can just pay a half fee, since they already have the buyers for you." That wakes a few people up to the reality of the snow job.

If this has already been said in some way, sorry that I didn't care to read through 71 previous comments. I just felt like adding my own two cents. You're too popular BB for me to jump in late and take the time to catch up on all the banter...

JAN

2007

Gabriel Silverstein

-I hear of the same thing happening in my area. We have buyers for your property and then nothing. That ticks off a bunch of people. I don't see this model working long term--actually that is what I am counting on. I just need these other agents to continue ruining their name and people will learn who to trust.

JAN

2007

Broker Bryant,

Based on your earlier comment that the company's slogan was "Never pay a Real Estate Commission Again" I believe I know who you are refering to. If I am correct they are not really the tradition real estate brokerage rather more of a Marketing/Advertising company. And, if so, you have mentioned them in at least one previous post where they made some very misleading statements to their clients about their fees and how they worked or could be credited toward another future listing scenario. If I am right, I have some first hand knowledge on how they operate. They charge various levels of fees depending on the level of exposure in their marketing and advertising on a subject property. Their operating scenario does include lead capture and marketing of mortgage services as well. They control virtually all aspects of the sales transaction.

JAN

2007

Sure I would list for free!!

Actually my first big deal was a $3,000,000 house that I sold with a commission of $1 (3% for the buyer agent). A great way to get my sign in a great area and get phone calls from prospective buyers that might like that or another house.

I think it is a great system for hungry newcomers.

More thoughts like this over at: Blog.FranklyRealty.com

MAR

2007

WOW - What a con...I wonder how bad they they were ripping off the buyers that they did find on the mortgage points and fees, just to make up for doing work for free.

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