‘Coming soon’ signs may not be in home sellers’ best interests, critics say
08/08/2014 12:00 AM
08/09/2014 11:53 AM
Real estate agents competing for commissions in Sacramento are increasingly using a device common in movie theater lobbies: the coming-soon sign.
The signs crop up in tight markets, when low inventory leaves buyers desperate for new listings. They can be used to whip up excitement about a house that will be available after the walls are painted and carpets replaced. House flippers often use the signs as they’re fixing up a home for sale.
Real estate industry leaders complain that they can also be used for another purpose: withholding a house from the open market while forcing potential buyers to call the listing agent if they want more information. That can generate new leads for the listing agent or even result in them representing both buyer and seller in the transaction – a relationship fraught with potential conflicts of interest.
“Buyers call the listing agent, and the listing agent will show the property and sell it before it even gets on the open market,” said Paula Swayne, president of the Sacramento Association of Realtors.
That may not be in the seller’s best interest or fetch the best price, she said. A new listing will have more impact, and get the best offers, when it’s immediately available for buyers to tour, she said.
“Generally speaking, homes that get on the open market sell for more money than homes that do not,” Swayne said.
There’s always been controversy about coming-soon signs in the real estate profession, but it’s been exacerbated by the recent “pre-marketing” of homes online.
Real estate website Zillow introduced a service that allows agents to advertise homes as “coming soon.” The new feature is ostensibly a way to spread the word that a house may be on the market, but, like the signs, it can benefit the agent who places the ad.
“The only reason my phone will ring is if someone’s calling off of one of my signs or one of my ads,” said Fair Oaks agent Chris Malone, who uses both coming-soon signs and Zillow’s coming-soon feature as part of his business. “The more signs and ads I have, the more phone calls I’m going to get.”
Malone said there isn’t anything wrong with the practice as long as the seller is fully informed of the pros and cons and agrees to the sign or ad. In many cases, sellers embrace the idea of generating buzz that their home will soon be for sale, he said.
“They want the marketing engine to be running,” the agent said. “They want people to know about it. They want people to be anxious to see it.”
By advertising houses as coming soon, agents are looking to make new contacts, he said. They rarely end up representing both buyer and seller.
“They’re going to call you because it’s not advertised yet,” Malone said. “Their own agent can’t look it up because it’s not advertised yet. So you’re going to get the phone call.”
“Very rarely do you get a call on that property and have that client end up buying that property,” he said. “They call because they’re interested in buying a house. They look at lots and lots of houses.”
The low number of homes for sale in the Sacramento region, especially those that most working- and middle-class buyers can afford, has prompted the return of coming-soon signs, which appear when demand outstrips supply.
Many buyers are eager to get into a home while interest rates are hovering around 4 percent and prices remain well below the peaks of last decade’s housing bubble. Yet selection in the Sacramento area is scant, and decent homes priced reasonably in good neighborhoods tend to sell quickly, often with multiple offers at or above the asking price.
The situation is much worse in the overheated markets of the Bay Area and Southern California, where coming-soon signs and coming-soon ads on Zillow have proliferated.
“It’s definitely indicative of the market,” Swayne said. “If we had a lot more inventory, this wouldn’t be an issue.”
The paperwork that agents use to market a house as coming soon varies.
In some cases, they sign a listing contract with a seller but put a future date on it, often a month in advance, as the home’s official listing date. In the meantime, they advertise it as coming soon.
Others have clients sign paperwork saying they understand their house won’t be placed on the open market.
MetroList, the Sacramento region’s multiple listing service, requires its participants to submit listings to the service within three days of the listing date, unless a seller signs a waiver.
The service provides information about homes on the market to more than 17,000 real estate brokers and agents in Sacramento, Placer, El Dorado, Yolo, San Joaquin, Stanislaus and Merced counties.
In its waiver, MetroList tells sellers the multiple listing service is the “most effective method of achieving the quickest sale and highest price for your property.”
“We try to get sellers the best price by exposing their home to the greatest number of buyers,” said MetroList president Tom Beede.
Pat Shea, president of Lyon Real Estate, agreed that advertising broadly on the open market is the best way to make sure sellers get the best deal when selling a home.
“Most of our sellers want to hit the open market and cast a wider net,” Shea said.
With the market as tight as it is, real estate professionals are concerned about an epidemic of coming-soon signs that are unhealthy for the profession and the market, he said.
Using coming-soon signs to attract clients and sell the house before listing is “a huge temptation” for agents, Shea said.
“Is it better for the seller? It categorically is not,” Shea said.
Rodel Romero, an agent who joined the industry four years ago, said casting a wider net now often involves pre-marketing a home on the Web.
He recently helped sell a home for the asking price of $289,000 in North Natomas after advertising it as coming soon on Zillow.
“My seller was happy to see about 300 pre-listing views on the website,” Romero said. “I flooded the Internet as well as I could: Craigslist, Zillow, Facebook. Who wouldn’t want their home to be showcased even more?”
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