Open Houses, Worth The Time?
Friday Feb 12th, 2021
A frequent question posed to us is whether open houses really result in home sales. In a nutshell, yes, no, and perhaps. Confused? Let us explain.
Prior to COVID, open houses were a common sight in neighbourhoods around Ottawa. COVID has changed that seemingly overnight, and homes continue to appreciate in value despite the moratorium on open houses imposed by the provincial government.
So why do agents do open houses? Well, like many things it comes down to money.
Firstly, you need to take a close look at real estate contracts to understand why some agents insist on opening your doors to the public. Let’s assume you’ve agreed to pay 5% commission. The commission in the listing agreement sellers are required to sign for MLS® service stipulates that the listing brokerage shall be entitled to 5% of the selling price of your home should the agent bring forth a sale. Now, if your property is listed on the MLS® service, your agent will typically offer half, or 2.5% to any other brokerage who may represent the buyer of your home. If no other agent is involved and your agent finds a buyer for the property, they reap the entire 5%.
Queue the open house.
Many agents host open houses with the goal of finding a buyer. This is often referred to as ‘double ending’, or multiple representation in real estate lingo. In reality, the odds of that occurring are actually quite slim - it’s estimated that fewer than 4% of open houses results in a sale. But those odds are of small consequence to the agent who stands to make both sides of the commission for a few hours of work on a Sunday afternoon. But there is some upside. Most agents will reduce their commission when they find a buyer without the involvement of a buyer's agent.
But the open house also serves another purpose. It allows your agent to prospect and promote their business to anyone who walks through the door. Nosy neighbours don’t pose a problem for most agents, as this is an opportunity to prospect and convert your neighbours into future clients. Likewise, visitors to your open house may hire your agent to assist them purchase another property if your home doesn’t suit their needs.
Hosting an open house can also pose some security risks. There are very few ways to vet a visitor, both from a security perspective, and also from a financial perspective. Some of these visitors may not have the means to pay for your home, but you would never know.
There are some genuine reasons to host an open house, especially if your strategy involves withholding offers until a certain date. But we will save this topic for another blog post.
The takeaway? Serious agents and buyers will simply call to book a private showing if your home ticks the boxes without the need to host an open house.