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To begin, and to be totally fair, I need to set the stage with a bit of background for this post. I want to discuss a facet of disclosure while at the same time understanding that disclosure laws for the sale of properties vary from state to state.
Some states have little or no seller-required disclosures, where caveat emptor rules the day. Others, such as California, mandate full seller disclosure resulting in packages that can easily exceed 100 pages.
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Discussions on disclosures are not always welcomed, as I discovered when reading responses to my post, “What should sellers disclose? Top 10 disclosure musts.” Written with high-disclosure states in mind, many agreed with the post and the need for full disclosure (especially those from states with very high disclosure standards), while others were almost rabid in their responses, including:
- “Is this author even a Realtor?”
- “I’m sorry, but this suggested list is a little ‘out there’ and borderlines on ridiculous.”
- “Heads up to any of my agents that might think this article is useful: no.”
These comments were from those in areas requiring less disclosure and, instead of taking this fact into account, responded less than gracefully.
So again, before I go any further, I will reiterate that “Disclosure laws vary from state to state.” I will also clarify that, in contrast to some parts of the Union, other states have instituted very demanding disclosure laws to fully protect buyers. In my opinion, the more that is disclosed, the lower the chance of ending up in court.
So many questions
Questions flowing out of this discussion, then, and without getting into a state-by-state debate, are
- “What exactly should be disclosed?”
- “What information should a buyer receive so they can make the best-informed decisions about any given property?”
- “What is the best way to communicate anything that should be disclosed to a potential buyer?”
Rather than open another debate about disclosures as a whole, this post only refers to one specific item rapidly becoming la patate chaude du jour. It was highlighted in a hypothetical question recently posted by Robert Reffkin of Compass, who stated, “My client asked not to have price drop history and days on market on their listing. Why won’t my MLS allow me to do what my client has asked?”
The truth is, quite simply, “Of course your seller wants that information hidden.” Most sellers want to disclose as little else as possible. Many I’ve talked to over the years believe that by disclosing critical facts about their property they will diminish their chances of an effective sale. While that argument might hold true for one seller alone, the fact is that if everyone in any given market has the same mandate to fully disclose, then all the boats rise and fall together.
Disclose it?
Without getting into disclosure details, (did I mention they vary from state to state?) and to answer the question, “Why won’t my MLS allow me to do what my client has asked?” I believe the answer is “Because Days on the Market (DOM) and repricing (up or down) are critical facts that buyers need to know to make informed decisions when looking at any given property.”
To reiterate, as a general rule of thumb, sellers are usually not interested in disclosing anything they believe might reduce the selling price of their home. They ask if they can therefore not disclose facts such as a cracked foundation or that someone committed suicide in the property or that there is a very large barking dog next door that has previously attacked a few neighbors or that the nice-looking addition on the rear of the home was built without permits.
What sellers want
Sellers want to make as little information known as possible, hoping that they can get a better price and push the facts down the road. Truth is, the truth will out. Neighbors have a remarkable ability, when greeting the new arrivals on the block, to disclose information the seller may have wanted hidden. In states like California, with its nation-leading disclosure laws, this can easily set the stage for a lawsuit.
Simply put, DOM and price changes are critical pieces of information buyers need to factor into their offer-writing process. For a moment, put aside the argument, and ask a simple question: “If you are a buyer, is this information you want to know?”
In my case, the answer is “Yes!” I have purchased many properties over the years and in every case, DOM and the seller’s pricing strategy have been a critical factor in determining what I am willing to offer on any given property.
The game
So how would this play out? A buyer walks into any given home and asks, “How long has this home been on the market?” Is the agent supposed to plead the Fifth? Even in some states where sellers are not required to disclose anything, an agent is required to disclose any facts they personally know. If an agent states, “I cannot give you that information,” that is all the incentive a buyer needs to hit the internet as soon as they get back to their car.
Ironically, even if DOM is omitted or an agent refuses to disclose, a simple online search will reveal the date the home went on the market, the date it might have been taken off to churn it and the date it went back on. Additionally, pricing history is also very easy to locate. Given this, what is the point of removing it from the MLS other than purposefully trying to conceal it from a buyer?
Used cars?
It is a bit like buying a used car: Knowing that consumers want access to as much historical information as possible on any car they are buying, and in an effort to provide full transparency, accountability and maintain high ethical standards, the vast majority of major auto dealerships in our area provide a free CARFAX report with every used vehicle on their lot. Why would we not want to maintain the same standards for the homes we are selling, especially in light of the recent smears to our reputation as an industry?
I will concede that high DOM numbers can cause a buyer to come in with a lower offer. The same applies to a property that has suffered price reductions. Again, in my opinion, that is the natural consequence of a seller’s decisions around initial pricing and the degree to which they prepare their home for the market.
Even in a slow market, homes that are adequately prepared and effectively priced tend to sell sooner than later. If a seller chooses to market a home that is not well prepared and/or is priced too high, then they should have every right to expect a corresponding response. To think that they should be able to cover up these facts by hiding DOM and any price adjustments is unrealistic.
A bridge too far
The inverse is also true: if a number of offers come pounding in shortly after a home goes live on the market, this is also critical information a buyer needs to know if they are going to write an effective offer.
I totally agree that there are many things within the current structure that need to be changed. To remove DOM and pricing information, however, in my opinion, is a bridge too far.
Carl Medford is the CEO of The Medford Team.