Pros and cons of an in-house sale

Buying a listing before it hits the market isn't always a good deal

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Jun. 25, 2012

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Buying a listing before it hits the market isn't always a good deal

Dian Hymer
Inman News®

Maximum exposure of your home to as many prospective buyers as possible is the way to sell for the highest price and best terms for your needs. So why do some sellers agree to an in-house sale without the benefit of a marketing campaign?

An in-house sale is a sale in which the listing broker also represents the buyer in the sale. This means that the sellers' broker doesn't have to share the commission paid by the sellers with another broker that represents the buyers. This is referred to as double-ending the deal.

It's clear that the listing broker benefits from representing both sides of the transaction by retaining the entire commission. However, does an in-house sale benefit the seller who is usually paying the commission?

HOUSE HUNTING TIP: Real estate brokers have a fiduciary duty to their clients to put the clients' needs above others in the transaction, even their own interest in earning a commission. A fiduciary duty is the same duty attorneys owe their clients. When a listing is sold in-house before being exposed to the market, this could represent a breach of the broker's fiduciary duty to put his client's needs first.

There may be special circumstances that weigh in favor of a quiet sale without market exposure.

For example, years ago a bed-ridden elderly woman in an upscale Oakland, Calif., neighborhood needed to move to a retirement facility, but she couldn't do so until the house was sold. She specifically requested that her broker not list the property on the MLS and that there not be a lot of foot traffic through the house. It was in her best interest to handle the sale this way even though she might have sold for a higher price had she been able to move out first, have the house fixed up and then give it full market exposure.

Most sellers, however, need to maximize the proceeds from the sale of their house, which usually can't be achieved without an aggressive marketing campaign. This should minimally include submitting your listing to the multiple listing service; Internet advertising including a lot of good photos on sites like Realtor.com; and an open house for real estate agents. Public open houses can also be effective. All of these activities drive prospective buyers to your home.

Inventories of homes for sale are much lower now than they were last year at this time in many areas of the country. Effective market exposure can result in multiple offers and higher selling prices. An in-house sale would deprive you of this opportunity.

Buyers who buy a listing before it hits the market often think they're getting a good deal because they avoid multiple-offer competition in a low-inventory market. One of the downsides of in-house sales is that without testing the market it's impossible to know if the buyer is paying too much or the seller is receiving too little.

In order to make sure that you're not pressured by your broker to sell in-house before your listing has received a healthy marketing effort, make sure you select your broker carefully. Find out if a broker you're considering has a policy of pushing in-house sales on sellers. Work with a company that believes that client satisfaction is more important than market share, one that's interested in your repeat and referral business for a job well done.

Sellers who find they are being badgered into accepting an in-house deal once they're on the market should remember that they are the boss, not the broker. Your broker should counsel you on accepting or countering the best deal for you. If that's not the case, insist that the broker follow your command.

THE CLOSING: Never forget that your broker works for you.

Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author of "House Hunting: The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide."

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