The Ethics of Open Houses
I’ve been bothered by something for a very long time.
Basically, since that day I entered the real estate industry back in 1991.
I’m going to call this problem the “ethics of open houses.”
What She Said!
I wrote an entire blog post on this topic last night. And while surfing the Internet this morning looking for a couple of additional points to include, I stumbled across this, written by Rebecca Diamond of Keller Williams Mainline Realty (sic) (emphasis added):
There have been a flurry of recent articles about Open Houses. Some say they work, some say they don’t. Here’s what irks me: we have to define what we mean when we say “they work”. My first year in real estate, in 2004, I sat at an Open House approximately 40 out of the 52 weekends. Not once did I sell the house I was sitting. Since then, I’ve garnered alot more experience and polish, but I still haven’t sold an open house that I was sitting. Don’t get me wrong, I have no problem with open houses, per se, if you can be honest about their traditional, intended purpose: to get Buyer leads for the AGENT.
HERE’S MY PROBLEM: we as Realtors are perpetuating the myth, to our Sellers, that an Open House is an effective means of exposing their home to the market. It ain’t. According to NAR, Sunday is the slowest day of the month for home sales and Open Houses are one of the least effective methods. Why are we combining these two abysmal statistics and saying that “it works” for Sellers? Why can we not have a very frank discussion with Sellers and teach them that time and money are better spent on ALMOST ANY OTHER form of marketing? I just don’t get it. Unfortunately, there are still enough Sellers out there that want Open Houses that I end up doing them just to make ‘em happy but I am very honest with them about the hidden, or the REAL, purpose of Open Houses. Are we so hard up for Buyers that we have to USE our Sellers in order to get leads? If you wanna get leads from an Open House, that’s fine. But tell your Seller that that is what you’re doing, that is why you’re doing it. Don’t lead them to believe it might sell their house when in all probability, it wont. Let’s be honest with our clients, shall we?
I like Rebecca’s version of my blog post better than my own, so I deleted mine and started over with hers as the foundation.
To amplify, I’ve encountered this idea – “use open houses to pick up more clients” – over and over in training sessions conducted by many of real estate’s biggest coaches and educators. It’s old school, a given, no deal deal, right? It’s ubiquitous, really. If you don’t believe me, Google “pick up buyers at open houses” and note the 446,000 responses!
How Would Our Clients Respond?
But humor me and answer this question: How do you think your client – the seller, the person whose home you are using to “capture more clients” – would react if you said:
“Hey, I’m going to do an open house on Sunday. Now, I’m going to lead you to believe that the primary purpose of the open house is to find a buyer for your home, but the hard reality is that the odds of that happening are very, very low. Maybe 1%, if I get lucky. The REAL reason I’m doing the open house is to attract potential buying clients. Once I realize that a given looker isn’t interested in your home, I’ll go into my song and dance and try to convince them that I should help them buy their next home. Is that cool?”
I have nothing to back this up other than 20 years of personally selling real estate at a relatively successful level, but here’s what I think the typical seller would say in response to this:
“As I am your client, you have a fiduciary duty to me, meaning that EVERYTHING you do as my agent should be in my best interests. As such, YOUR personal interests should always be secondary to mine. So, NO, you certainly may NOT use my home to conduct an open house if your primary objective for doing so is just to pick up more clients for yourself.”
THIS POST IS NOT ABOUT OPEN HOUSES!!!
Before I get to my ultimate point, allow me to add the following:
- THIS POST IS NOT ABOUT OPEN HOUSES. It is about REALTOR ETHICS and the myriad of agents who knowingly mislead their clients about the effectiveness of open houses simply because it potentially benefits those agents to do so (see my prior post re “Absolute Candor” and our responsibility to do what we know is right, irrespective of what our clients think).
- Similar to Rebeccas’ point, I’ve read a number of studies about open houses, and I’ve yet to find one that suggests the success rate ever exceeds 1% in terms of what SHOULD BE the primary objective, finding a buyer to buy the open in which the open house is being held (and, at that kind of paltry success rate, I cannot justify doing an open house at all when there are so many other things I could do as a listing agent that would likely produce a greater ROI in terms of my time invested). Also, my personal experiences with open houses is identical to Rebecca’s: I’ve done many, and I’ve never sold the “opened” home. Not once.
- I am NOT saying these things to begin a debate regarding the success rate of open houses. I am saying these things because I do believe it is generally accepted within the real estate industry that open houses are not very effective at selling the subject property, but are quite effective at picking up clients, and that most agents know these things.
- I know plenty of good agents who are staunch advocates of open houses because they truly believe they work. Since I know she’s going to vehemently disagree with this entire post, I’m going to go ahead and name one of these agents: Andrea Geller (@ AndreaRealtor). I have nothing but respect and admiration for Andrea. She and I just have radically opposed views on this topic. And her market – urban Chicago – is VERY different from mine – suburban Detroit. And I think that COULD make a difference. But my point remains: for every Andrea, there are a thousand on the other side of this fence, just like me, who truly believe – based on years of real-life experience – that open houses do not work. THESE are the agents to whom this post is directed.
This post was not written to slam open houses or the agents who do them. If you are an agent with pure motives and honest intentions and you truly believe that open houses work, that’s great. Keep doing them, and more power to you!
But what about the rest of us?
Comments feed
If I were your client, Michael, I think my response would be a bit different. I don’t think I’d go with “YOU BELONG TO ME, BIOTCH!” response. Rather, as a businessman myself, I’d look to negotiate with you.
Maybe you should be reducing your fees to me by a certain amount, based on buyer leads you pick up using my house as bait? I’m perfectly fine with you making money; in fact, I want you to make a lot of money, as long as you’re helping me make money (or not lose as much money since we’re talking about suburban Detroit…), but shouldn’t you share some of the gain there?
-rsh
Rob,
As always, you bring the unique perspective.
The problem with your specific idea is measurement/tracking. Agents would have to operate on an honor system, and, well, do I really need to complete that thought?
Thanks for the comment, Rob!
Best,
Michael
First let me say, great post and one that is – once again – spot on as we look at how REALTORS handle their business.
I do open houses, and a lot of them. Why? Because they tend to work for me and the numbers bear it out that people in Central Ohio still light to migrate around looking at potential houses. Have I sold the house I held open? Yes. Very often? Of course not. Have I picked up buyers? Yes.
This is where my response will diverge from your thoughts. I have virtually the exact discussion you outlined with my sellers prior to the open house. “I am here to sell your house – and we all know the chances are minimal that will happen – but if they aren’t interested I’ll pick up a potential new buyer or two.”
Maybe its the difference in areas, or a lack of knowledge on fiduciary responsibility, or that I’m just that nice of a guy — but I’ve never had a seller say a negative thing about it. The usual response is “of course, we understand” in regards to picking up potential buyers from their home.
Toby Boyce´s last [type] ..Appraisal Issues Fixed With Magic Powers
Toby,
To me, the only thing that matters is that you ASKED YOUR CLIENT. That changes EVERYTHING.
At that point, I have ZERO issue with holding an open house seven days a week.
But my experience is that I don’t think most agents ask. And that is the problem, as I know you understand.
Thanks for you thoughtful comment!
Best,
Michael
I have always found points of view are based on the success or failure to produce as a result of an action. From the very first Sunday in 2000 I left department store/developer sales and went to work as an independent agent Sunday open houses have always provided a commission check. First as a buyer’s agent and then as a listing agent.
Now to the year 2010. As of August 31, 2010 I have had 7 closed transactions (Volume $3,300,000) and 3 pending transactions (Volume $1,750,000). I had an additional contract on a $1.4 million listing that fell through in attorney review (you cannot win them all).
In pulling up the weekly open houses I have noticed something. Top producers – lots of open houses. In my market open houses range from lower bracket properties to multi-million dollar homes. I know most of these agents. They don’t waste their time doing something if it is not producing results. They are not holding them to get the buyers. They are primarily listing agents. Buyers are a by-product of their listing successes.
With the growth of online shopping, I have found that if a potential buyer is or is not being represented by agent, more often they are identifying the properties they are interested in themselves. This is where my success of selling listings generated by an open house seems to be growing.
With all that being said we all have to remember real estate is local and we all must respect local business practices.
Regardless of what market we work in, are fiduciary duty to our clients as listing agents is to get the property sold. Creating opportunities for home buyers to view these listings virtually and physically is part of what we all should be doing.
When I read/listen to the comments such as “you really are holding the open house just to get buyers” my mind goes to “raising the bar”. The primary reason behind our actions should never be to get more business it is to fulfill our listing agreements we have already entered into!
Andrea,
As I said in the post, the post is not about open houses per se.
It is about large numbers of agents doing something under false pretense, and, worse yet, for their own, selfish benefit, potentially.
As I also said in the post, if you BELIEVE that open houses are a good thing, then that’s all that matters. That’s totally cool: you are honestly doing what you think is right.
And even if you DON’T believe in them, but you obtain the seller’s permission after disclosing to the seller the realistic chances of success from holding the home open are nil, that’s OK too.
The problem is the people who neither believe nor disclose, but just go with the flow hoping to benefit selfishly, inherently misleading the client in the process.
And thank you for your thoughtful response! I greatly appreciate you and respect your opinion very much.
Best,
Michael
First, as Toby mentioned already, this is a fantastic post!
That said, the first lesson I was taught when I got my real estate license was that the best way to pick up buyers was to sit an open house. I realized that my role was to potentially pick up a buyer for the home, but in the end, most agents I’ve come across use them for their own purposes: to expand their own business.
It that wrong? I suppose you could look at it that way.
At the same time, when an entire industry accepts something as a norm, such as the real reason most people sit open houses, I become less convinced that doing so is unethical.
Do open houses make sellers happy? I think so. They show that agents are doing something for the percentage they earn, and once in a while, they bring in buyers for the home.
Nothing unethical about that.
Some clients insist on Open Houses even after I tell them that they do not sell homes and are only opening your home up to curious neighbors and looky loos or worse. I have even come straight out and told clients that Open Houses are more about self promotion and meeting buyers and getting other listings. My seller clients still wanted me to hold one, so I did.
I do not consider it unethical to hold an Open House, even if you know the odds are stacked against you. I do consider it to be a waste of time and money considering the turnout for the last 3 I have held. I had 4 visitors (total) to the last 3 Opens, and it was advertised in the local paper, on Craigslist, trulia and zillow and still the dismal turnout.
Mark,
See my response to Andrea.
My view: if you disclose and the seller still insists, that is totally fine.
It’s all about informing and educating the client.
Once you’ve done that, it’s all good…
Best,
Michael
exactly!
Ok Michael, I LOVE you to death, but I gotta’ go out on a limb here and disagree. SOMEBODY has to be the jerk
All areas are different and Vancouver is one of them. We list homes on the Monday/Tuesday and give them a few days of various forms of exposure. We show Thurs nite for the 1st time, for anyone going away on the weekend who can’t make the normal opens. Then we show Sat and Sun and try to get the ‘herd mentality’ going for the sale. You know ‘FIRST SHOWINGS’, ‘GRAB IT NOW’ kinda’ thing.
We also have ‘wine and cheeses’ open houses for the neighbourhood or people building (lotsa’ condos in Vancouver). Neighbours help sell the home. This is a VERY effective strategy for us.
Love your posts. Very informative and thoughtful.
Tom Everitt
http://www.ThinkTom.com Realty
Tom,
No worries! Variety is the spice of life, and I welcome dissenting points of view.
As I said in the post, I was/am NOT knocking open houses!
I AM knocking agents who don’t believe in them and use them ONLY as a way to exploit their sellers to pick up buyers.
As they obviously work for you AND you believe in them, more power to you!
And thanks for your kinds words – I really appreciate that.
Keep #CRUSHING,
Michael
I think it’s good to do them because though it’s unlikely I will sell the house then I might sell that client’s house to a buyer I met while doing another open house.
A single solitary open house rarely works. It’s a weak marketing strategy. The key to successful open houses is the combination of many within the same company that lead back and forth to each other. We had a lot of luck with this at a former company I was with – lots of yellow balloons, and I did tour sheets with directions to each open house. So if Buyer A was in Open House C, the tour sheet would show them where A was open, rather than aimlessly driving around. Of course, this kind of practice takes team cooperation, but it works better than a single home open – becomes a bit of an open house tour. Gotta be done in the aggregate – not to mention all the free advertising a company, and thereby their agents get when there’s 100 signs out on a single day, rather than 1.
I think there is no arguing the rarity that is an agent holding an open house actually writing offer on the house with an attendee of that Open. However, how many times have agents received a call from their buyer client saying “hey, we just went to this open house and want to make an offer”.
Would they have seen the house anyway, with you? Perhaps. But in my mind, one of the best thing an Open House allows is easy access to view the home. It can allows give buyers a sense of urgency if there are a number of other folks there at the same time, or the sign in sheet is full.
I have written offers for homes I have held open, though not many. But far more often I have received the call above from clients. It is not uncommon to receive that call after they have view homes in neighborhoods they didn’t necessarily think they were interested in. Again, that is all about easy, no pressure access.
Just a thought.
Colin Storm´s last [type] ..Unwrapping The February 2011 “MarketWatch” Report
After rereading the post and comments 7 months later I would agree with the ethics on misrepresenting to sellers expectations. You should never do that. Real estate is still local and some things are more effective than others based on the marketplace.
I would say that in my market the number of potential home buyers are growing that are identifying the properties they would like to view and attending the open houses as a result. It no longer seems to depend on price point or neighborhood. I would say that open house traffic does reflect online traffic which represents the sales activity in a micro area in a specific price point. In some cases open houses are the only thing generating traffic and sales of these listings have resulted from them.
When you add the mobile factor of how easily it is for the consumer to click on an app, click on “Nearby Open Houses” when the feeling comes over them, you never the opportunity of getting a buyer through the door unless you are on the map that comes up.
Going into my 12th year in this industry I still have not found one action that works 100% of the time. The way a buyer gets to a property and ultimately to contract is more fragmented than ever. I feel it is my fiduciary duty to provide my clients with the most comprehensive marketing plan to sell their home. That is what I am hired to do.
If anybody has figured out what works all the time please let me know.
Let me just say, Open House is just wrong any way you slice the real estate pie. In addition to everything you said in your brilliant post, there are more factors to consider. Realtors have been killed at at open house. Unqualified, complete strangers are permitted to enter someone’s home during Open House hours, which of course is publicized. Undesirables can just walk in, case the joint, not just for valuables but they snoop for drugs as well. They unlock windows, search for easy access and rob folks blind after the open house. With virtual tours, videos, QR codes, and cell phones with fancy apps, why on earth are we opening doors to who knows who???? Get safety facts from your board or online and scare the beegeezes out of sellers who insist on an open house . . . which is just so 70′s style real estate promotions.
U very much enjoyed your seller’s “hypothetical response” to the real motive behind open houses! In my experience, Sellers do in fact feel that way! Some dont and want the open house anyway most often saying “…it only takes one Buyer”. Your point is well taken in that it’s bit about do the work or don’t they, but rather that we should, nay we must, be honest with our clients about the pros n cons.
Thanks too, for your kind words about my original post.
Excellent post(s) Michael and Rebecca!
Check out this interview with Joshua Suess where he shares the truth about open houses! http://youtu.be/DtroBHGFOH4
Do you agree or disagree?
The Suess Home Selling Team´s last [type] ..Do open houses REALLY work
I must say, I have stuggeled with this over my 25 year career. I am sitting at an open house righ not while I am typing this comment. Here is another perspective.
1. Open houses create urgency…If the listing is priced right… having one interested buyer see another interested buyer looking at the property might motivate them both! (Heck Builders do open houses everyday)
2. Allows buyers with buyer’s agents that can’t make it see the home without having to coordinate schedules with their agent
3. You can demonstrate the property to those same buyers that are represented by another agent. Most of the time your seller will like this as they feel you should know the property better than an agent that has never seen the home.
4. Allows buyer’s agents that are out with clients on s Sunday the flexibility of setting appointments. ( I know when I am out with buyer clients on a Sunday I specifically seek out open house in their price range.
5. Though you might attract a few so called ‘looky lous’ They may know someonce that might be interested.
6. If a Brokerage Firm/agent is ‘picking up buyers’ as the original post states at several different open houses, might they not possibly pick up a buyer for another one of the firms listings. This works both ways.
7. Allows the seller to have some family time on a Sunday morning with out being interuppted with showings. The Sunday morning showings could just come during the open house instead.
8. Helps the agent gather additional feedback for the seller on price and condition.
Have to go, have someone coming in. Will re-visit
I flat out tell my homeowners that open houses are generally for the agent to get buyer leads. I explain to them I like to hold the first open house so I can see what kind of traffic the home is garnering. I have an short opinion sheet that buyers complete and review them with my sellers. When we have a price reduction, I do another open house. When I originally list the house, I prospect for buyers in the neighborhood. I do tell my sellers also that the odds of selling their home at an open house is very slim. They will have better luck in Atlantic City. They appreciate the honesty.
Jackie Connelly-Fornuff´s last [type] ..Swan Nest in Amityville NY
I always tell my clients this but they often want them anyway…just in case. And I have never sold the homes but have added more clients.
I hear ya and totally agree, but the one thing I’ve always found interesting was, I worked the Madison, WI market for awhile and there was a HUGE FSBO market there.
For some reason, many of these FSBO’s sold their homes via OPEN’s on Sunday. Why do you think that was?
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