Why do realtors love open houses?

#Real estate open houses are one sales tactic that may be more about the hype than about results. Some real estate agents play up the benefits far more than they should, considering how many drawbacks there are to the process. The fact is, open houses are rarely conducted to sell a home. Sure, some agents still believe that the #open house has a place in the sale of a home. There will always be home owners that do not know any better. However, the facts about open houses should discourage anyone from bothering with the process.

The fact is, open houses are rarely conducted to sell a home.

So when someone asks if we believe open houses work the answer is always the same. Work for who? Do they work for the seller? Rarely.

Positives about a realtor open house

Not all things are negative about an open house, and if you stretch your though, you can find some good reasons as to why you would want to have an open house.

• Hosting an open house could prompt the owner to get the home in its absolute best shape for all other (weeknight) showings, which is a big win for everybody involved.
• Open houses often function as a realistic trial run for those (what will be your real) showings.
• An open house might give you better visibility to where the #market is really at, straight from those making the purchases which fuel it (that is, if you get any real qualified buyers attending).
• Finally, since your agent is likely charging you a ridiculous commission (unless you’ve actually used us to list your home using a Flat Fee or self-guided #MLS mere listing), an open house might be a realistic way to see your agent doing something to earn their commissions. (I find it comical that I have to write this last point here).

Ultimately, an open house does not truly deliver much value for the seller, let’s examine if they even help you sell your home.

Do houses really sell during open houses?

It would seem that an open house is a great idea for a seller, right?  Ads go in the papers (old school), online (new school), signs are placed around the neighbourhood, people start to talk, new traffic comes in and out. It’s exposure afterall, isn’t it? Well, not really, you see; homes tend to not sell directly through open houses as frequently as sellers may think. Also, they very rarely lead to a higher price or a quicker sale.

One of the real estate agent’s little secrets is that open houses are mainly for the realtor’s benefit, NOT their client(s)’ (the sellers). The real estate agent uses the opportunity for anyone to come through in hopes of picking up prospects whether in the form of buyers or sellers.

Think of it this way, how many people who would be actually ready to buy your house, who are willing and able to purchase it right now would think – “if those #realtors don’t have an open house – forget about it I’m not interested!”

Real buyers almost always schedule a viewing with their realtor if they are serious in finding a home.

When weighing the pros and cons of an open house, the cons come in ahead by a large margin! Open houses rarely work to sell a home and put sellers at undue risk.

Let’s talk about some of the risks quickly.

What your realtor is doing during the open house

The theory is that someone who comes to see an open house isn’t usually interested in buying your particular house, but is at least thinking about buying another one, opening the door to your realtor picking up a new client. In other words, open houses are like the realtors Sunday afternoon equivalent of hanging around a bar, but with better lighting and no booze. And just like your local pub, there are rules of etiquette (or best practice) that they need to maintain:

Get everyone to sign the registration log

I would love to poll people to see how many have actually been asked by realtors to sign this.  It’s something that the seller has the right to see after the open house and it’s a matter of #security for them.  Too often, I notice that realtors use a different tactic, they just hand out their marketing material to anyone that seems promising rather than getting them to sign your registration sheet.

Sit around and play with their phone

Have you ever walked into an open house and see a very junior (looking) realtor sitting around at the dining room?  They’re often on their phone and hating their lives. These are generally inexperienced realtors who have been told by their brokerage (or other senior realtors) that the best way to drum up business is to host their open houses (yes, that’s right, many realtors don’t host their own open houses at all).

The funny thing is that this is such a known commodity (that open houses are the key to drum up new business) that it is even taught at the Ontario Real Estate Association’s education (the courses your realtor has had to take to get licensed). The entire industry is complicit in trying to get you (the home owner) to open up your house on a weekend to give real value to realtors and to validate their commissions.

Open houses, a risky proposition (for the home owners)

Some of the biggest issues we have with open houses is that they are risky for everyone involved.  First off, the realtor is at your home (often alone) and many realtors don’t even check in with their office to let them know where they’ll be.  This can be a tricky proposition if anything where to happen, as that realtor might be at that home for several hours before anyone would have noticed that something has happened to them.  Every year, realtors (often women) are attacked by people who notice them online (since we all post photos of ourselves everywhere) as you can see from this Arizona article from 2015.

Fortunately, those are few and far between, and luckily, our brokerage has a different model for open houses, an app we’re creating to ensure the safety and traceability of everyone involved with every house shown, every open house and all transactions.

An open house will often attract curious browsers and nosy neighbours. According to media reports, a #Toronto open house held last year in the Seaton Village home formerly rented by actress Meghan Markle brought in about 150 people, and barely any of those were interested buyers.

On the flip side of the coin, open houses are also risky for the home owners, from #theft to cleanliness all the way to giving away your tactics to #competition, here is a myriad of reasons why you may want to rethink hosting an open house.

Unqualified prospects

Most of the people visiting open houses are tire kickers. They are just there to taste the waters. They are not motivated buyers. Have you ever driven through a nice neighborhood and seen an open house – a really nice house – and thought about stopping in to check it out? The problem is, often the people coming into your open house are doing the same thing. Just stopping in to check things out, not to buy.

I have had many #clients (buyers) who legitimately wanted to see several houses in one day and it so happened that many of those houses were hosting open houses the same day. This is when you will actually see a realtor escort their buyer clients through a house (these are the qualified prospects).

Whenever we do show up with our own clients, the other realtor (the one hosting the open house) does not even give us the time of day. It’s quite comical.

Nosy neighbours

Your neighbours, who are very interested in the sale of your home (as it will impact the price and sale of their own down the line) are likely to be the majority of visitors. In addition to seeing how their home compares, neighbors like to stop at their neighbors open houses to see how the house is decorated.

Other than your neighbours, you often get people coming by who have nothing better to do with their time, what I like to call time-wasters and what others call lookie-loos. This is a person who stops at open houses with absolutely no intention of buying a home. Funny enough, it happens quite often and the fact is, these people are never going to buy the home and are looking because they don’t have anything better to do.

Seller competition

While you’re listed, you’ll wonder about your own competition, how many showings they’re getting and how busy their open houses are.  The opposite is also true, your competition is obviously thinking the same things.

We’ve had (neighbourhood or even same city) sellers go undercover to their competitors’ open houses (i.e. yours) and it’s a tactic we often employ when our own sellers are getting ready to sell their home. You’ll also wonder how much everything around you is selling for.

Lack of one on one attention

Of course your real estate agent is motivated to sell your home but he or she only has the ability to communicate with one set of buyers at a time. This means that if things get busy, there will be a lot of missed opportunities – people that may have been perfect prospective buyers that never even get to speak to the real estate agent.

There is no way for an open house visit to compare to an actual home viewing with your agent. Most people who come by and visit are probably going to want to return at a later date to really check things out if they are serious buyers anyways.

Security issues

One of the biggest drawbacks of an open house is the potential for theft. Letting strangers in off the street to wander around your home carries some obvious security risks. While the majority of visitors will most likely be there to view your home and learn more about it, some may be there for more other reasons.

The fact is, during an open house anyone can come in – even people who are looking for access points, security weaknesses and valuables. This is something most real estate agents who tout open houses never want to discuss. They will sweep this fact right under the rug at the sellers expense just to keep the prospecting train rolling.

Risk of theft

Thieves watch for open houses in nice areas. They look for a time when there is a lot of activity, such as the lunch hour or a weekend day. They will typically wait until you are busy with another potential buyer and then make their way through your home. As a general rule, the thieves will look for small items that can be slipped into a pocket or large handbag.  A few items that routinely disappear during open houses are:

• jewelry (even if it was in your jewelry box)
• cash
• prescription drugs
• cell phones, tablets, and other small electronics
• decorative pieces, including photographs (some fine china or nice silverware)
• designer handbags

Worse even the thieves who are there to “case” the house and take note of the nicer furniture (and accessories) you own. This tells them that you are possibly financially comfortable or well off. They look at your family photos and immediately know, you have a wife and two young children. They look at what you own and how easy it would be to remove it from you. While most open house crimes happen at the moment of opportunity, you must consider, if the temptation is too great, they could return when nobody’s home and finish the job.

The only time to host an open house

We have talked in a previous blog post about bully offers to push someone who is trying to hold back offers to sell to you. In a case where you are going to be holding back offers, you may want to have an open house the preceding weekend.

Here is the timeline of how that might work for you:

• list your house on a Tuesday or Wednesday the week prior to your hold back date,
• schedule open houses on Saturday and Sunday (with the expectation that many people will come and feel a bit of pressure to get the move on since all offers will occur the following week)
• have your realtor tell everyone of the urgency of the offer, since you will be accepting them all at one time
• the following Monday or Tuesday, host an offer presentation night where everyone can bring their offers

This can (and has) led to multiple offer scenarios and people getting overly excited. It also has the added benefit of motivating people who are on the fence to get in the ball game.

As a side note, this generally only works in super hot markets, like Toronto (and the #GTA as a whole) has been for several years. It’s unlikely to work in places such as Georgetown, Guelph, Fort Erie, etc… where there is not more demand (buyers) than supply (houses / sellers).

Open house preparation checklist

• Put all your valuables away.
• Have enough agents on site to keep an eye on all attendees (or only allow one at a time).
• Bake cookies, cinnamon buns or banana bread in advance to lend a great aroma to the home (seriously).
• Put away all personal items.
• Clean off your desk, removing all paperwork.
• Unplug all computers.

Our opinion

Personally, I believe open houses have many more negatives than positives and are merely just a common real estate myth.  Open houses are “old fashioned” and today’s home buyer’s are very savvy and do most of their research online, before visiting a home.

Keep this in mind…..94% of all real estate business is done by 6% of the agents. Lots of agents starving for business will try to convince you that holding an open house is a wonderful idea. If I didn’t know where my next sale was coming from and needed clients, I would probably be trying to convince sellers of this as well.

There are many things that a realtor should be doing before they need to resort to using open houses as a “selling” tactic.  Below are several of the things top producers, much like all of our staff, will provide as well as some questions you should consider when interviewing an agent to sell your home.

• Captures excellent photographs of a home utilizing high quality equipment and technology.
  • iListMLS has professional photographers do this for you depending on the package you choose.
• Has a strong online presence including the ability of their website to rank highly in competitive search terms on the major search engines, such as Google, Bing, and Yahoo!
  • iListMLS is strictly an online, automated real estate brokerage.  We are built exclusively for savvy buyers that understand that realtors are overpaid and are tired of paying high commissions.
• Understands the importance of search engine optimization.
  • iListMLS is built by our broker owner who is Canada’s leading #Artificial Intelligence executive, having built more than a handful of lucrative tech businesses in Toronto.
• Has a strong social media presence on many social media websites, such as Google+, Facebook, Twitter, Instagram, and many others.
  • Find iListMLS on Facebook, YouTube, Instagram, Medium, Google+, LinkedIn and Twitter.
• Demonstrates the drive to go above and beyond to develop videos, feature sheets, property information packets, and other marketing materials.
  • iListMLS has these as add-ons for all our clients

Next week we will examine what home buyers can do to use your open house to get a better read on you, your house and its flaws and hopefully figure out if your house is even worth buying.