Fritz Pfister

When the fourth quarter of 2009 tied the record for home sales it was predictable that there would be a slow down. With record low interest rates combining with the initial first time home buyer tax credit expiring on November 30th, it was easy to see what led to the record number of home sales.

Then sales pending began to slip in November with a decline of 2.72%, December with a decline of 3.71%, and January with a perplexing 27% decline. A drop that was unexpected with the tax credit extended, expanded, and continuing record low interest rates. Entering the final week of February closed sales are up by 29.16%. How can home listings going under contract in January be down 27%, and closed sales the following month be up 29% when it only takes about a month to close out a sale pending?

In my world 2 plus 2 still equals 4. So how can you close more home sales than went under contract? Then it dawned upon me that The Capital Area Association of Realtors changed the rules in the MLS and added a category titled sale pending continue to show back in August of 2009, which are not counted in the sale pending category.

Here’s a peek at the inside business practices of Realtors. In January 200 sales pending were reported, down 27% from 274 reported in 2009. However there was no sale pending continue to show classification in January of 2009. In January 2010 there were 60 sales pending continue to show reported. Add those to sales pending and you have 260 down by only 14 from the 274 in 2009, or by only 5.1%. This makes it more realistic that closed sales could be up in February. Seems like a lot of those sale pending continue to show are actually closing.

Why did the Association of Realtors add this category “sale pending continue to show”? The argument was that when a seller accepted a sale contingency the listing was marked as sold pending contingency and not as still available for sale on the internet. That this was confusing to consumers.

A second reason given was that when a seller accepted an offer from a buyer concerned about whether their sale would close or not, had their listing removed from the public view on the internet.

Agents were screaming that in either case of a sale contingent offer, or a troubled offer, the agent and their seller wanted the listing to remain on the internet for public view to allow showings for firm offers and for back up offers. Sounds fair enough, however I have some points to share with you regarding these sellers and agents actions.

First a seller that accepts a sale contingency offer, one that can only close if the buyer’s home sells, should now understand that these are risky offers to enter into. That the number of showings will be affected for them when agents with buyers that don’t need to sell skip over their listing.

Secondly a seller that would accept an offer so shaky that they want to continue to show the home for a solid offer is also accepting a risky offer. The majority of agents don’t show listings marked pending continue to show. Just canceled a showing I had scheduled for today when the listing hit the hot sheet as sale pending continue to show as an example. A preapproved buyer has just been eliminated as a possibility for this home seller.

Accepting a sale contingency has always been inadvisable in my professional opinion. Either the buyer is a buyer or they are a seller if they can’t or don’t want to buy before they sell. This will only eliminate a number of potential qualified buyers from seeing the home, and they won’t be sold until the buyer has sold their home. Why take that risk?

This new category, sale pending continue to show, however is ripe for abuse by the agents. Does the seller really understand the risk they are taking if it is a shaky offer? If the financing of the buyer is questionable why accept the offer before the buyer gets their issues resolved? If the seller is concerned about the home inspection, why didn’t the seller have the home inspected before they listed, or ask the buyer to have an inspection before committing to a contract?

The question I have is for these agents. Did you explain thoroughly the possible consequences and risk involved by accepting one of these types offers to your client? In my humble opinion, that conversation may not be taking place.

The real reason to place a listing into the “sale pending, continue to show” category is the agent wants the listing to continue to be visible on the Internet so that when a prospective buyer inquires about the home, they can tell them the listing is sold pending but there are other homes I can show you. In other words the agents have the potential to abuse this new category to their benefit, and not necessarily the benefit of their client.

Thanks to this new category it will be a little more challenging to predict the number of future closings. But that is not the issue. The issue is that agents will have the opportunity to abuse the system to their benefit and not the consumers. To me, that’s a problem.

Regardless, it appears February is headed for more closings than last February. That’s really good news because last February was in the tank while we were in the midst of the financial crisis. It wouldn’t be a good sign for the local housing market if sales fell below a bad month. There were only 198 closed home sales last February when we normally average around 250. Even if we surpass last February’s home sales, we’ll still be below normal.

The inside story this week is that although we have hundreds of wonderful real estate professionals serving this community, their ethics vary. There will always be those that are commission driven first. That’s why I believe there is a high number of sales pending continue to show on the books. There appears to be a number of agents taking advantage of the new system in order to try and give themselves an advantage over fellow Realtors, while the consumer is an unwitting accomplice.

The greatest sin in the real estate profession is usually not the act of commission, rather the act of omission. Reminds me of what a sage old Realtor told me when starting in the business back in 1987, God did not create all Realtors equal.

Make this a great week from Fritz and Kristie Pfister and The Pfister Success Team Inc. of RE/MAX Professionals Springfield. It would be an honor to serve your family, call us at 652-7653.

The opinions expressed here are solely those of Fritz Pfister, or identified sources,  and not those of RE/MAX Professionals Springfield, or RE/MAX International.