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 Rebecca’s 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?