The fudge factor, a strategy

Once upon a time, the Multiple Listing Service was in its infancy and a small group of people sat around a table at La Fonda and talked about their listings; price, location, condition, size, etc. That was the start of the MLS for Santa Fe real estate. Licensing was kind of optional and brokerages were usually one or two people. The entire population of real estate sales professionals was less than 15 people.

Times have changed because everyone knew how EASY it is to make a good living in real estate sales. We have had enough people get licensed in the Santa Fe metro area over the last 40 years that more are “former” members of our Santa Fe Association of Realtors than are presently active members. And 10 years ago we had hundreds more than we do now, probably reflective of the average number of sales per month. Comparing improved residential sales of 2005 with 2015, the typical month back then saw 233 sales while the most recent complete year saw 167 sales a month. No wonder our membership is down over the last 10 years. There is less pie to slice and distribute. Or is it less fudge?

But what about fudge? Is there more fudge today, or less? I have to venture a guess that there is more, even with fewer sales. My use of the word FUDGE is to depict cutting corners or selectively sharing information. Maybe disclosing some of the facts, but not all of them, is anther way to put it. Like Sammy, when asked how he did on his school test, said he fudged a few answers. Maybe you have a better word?

The fudge factor in Santa Fe residential real estate, in this blog post, describes the behavior and habits of some of our members as they strive for advantage in finding success with their seller and buyer customers. There are easy-to-find examples seen daily in the MLS database. A property might have been listed off and on for the last 5 years under 123 Main Street. Now that its back on the market again with the 4th Realtor trying to sell it, the address shows up as Main Street. The numbers are gone. That way the “history” of the property does not include the failure of previous listings. And it makes it look as if it’s on the market for the first time. The listing broker needs to be careful not to say “never before on the market” because that would be false. Even though effort went into hiding the information that it had been listing before.

In our state, there is no requirement that the sales price be published in print or website listings. We are a non-disclosure state for that information, along with about 5 other states. So finding out what a home sold for in the past takes some work and fact checking. That is, unless you are a Realtor and are able to find it in the MLS database listed as a sale in the past 14 years or so. (Earlier records are in hard copy format). A sale older than 14 years or so is not all that relevant anyway, but a sale from 2 or 4 years ago can be quite informative for a buyer looking at a home today. Is the new asking price a great deal higher than what the current owner paid 4 years ago, or about the same? What kind of work have they done to the home to improve it? If they did a complete remodel and added on to the footprint, its likely worth a great deal more. If they kept it clean and repaired a few items that needed attention, it might only be worth what they paid in 2011, or 2008 or in 2004…

You see, appreciation has taken a holiday in the upper half of our price ranges. Little or no appreciation has taken hold, sadly for many sellers, so a home is not growing in value year over year these days (unless it’s in the lower price ranges where demand is higher than supply). Shifting information around to hide or disguise facts that are not publicly released can serve to throw off a buyer looking to find out what a home sold for in the past. Is it a trick that works? And whom does it work for?

Mostly the fudge stuff is with address, price, history of prior listings, etc. There are systems in place such that a prior listing should be linked to a current listing if it is the same property. That means the same tax ID # and legal description. But still people try to put a new listing into the system as if it had not been listed a year ago with a different brokerage. Some will say their client gave them lawful instructions to do what they did to hide the information. Those could be lawful, yet may also be unethical. The same Realtor is a member of a professional organization with rules that run counter to those instructions. Look no further than about 12 years ago when a sizable number of sales  were reported at a dollar value of Zero or maybe $1. The Realtor that reported that sale would usually say that’s what their seller or buyer (or both) wanted them to do. Yet it clearly undermines the value and integrity of the MLS database and indicates that they wanted to play by their own rules.

The reporting at $1 ceased long ago, but we do occasionally see a sale go unreported. The property was first entered into our MLS as an active listing, The buyer and buyer’s broker learned about the listing by its appearance in the MLS. Somewhere along the line, one or both parties thought it would be a good idea not to have the price information known in the real estate community. So that listing was withdrawn from active status in MLS and no sale information was ever reported. Years later you could track it as an active listing that was withdrawn, but no further information could be found, until you searched title and saw a chain of transfer documents ( a deed for example) that showed the change of ownership. Maybe someone had a tax issue, or a divorce issue, or just a paranoia or privacy issue. Maybe they were too proud to have it known that they overpaid years ago and did not even break even with the sale.

Some other kinds of fudge might include the use of confidential data in ways that could be defined by some people as less than full disclosure. When a broker meets with a seller to potentially list their property, the seller often has work to do on the home, ranging from painting to landscaping, from moving a tenant out to getting professional photographs. There is a form the broker can use to officially list the home but not enter it into the MLS database immediately. A home can be on “waiver” with a simple stroke of a pen by the seller and their broker and the brokerage Qualifying Broker. The time frame while it is not in the MLS can range from a couple days to maybe a couple months. During that time the listing broker can proceed to try to market the home “on waiver” without the 750 plus Realtor membership knowing about it to the same extent and detail as the listing broker knows about it. They might secure a buyer within the waiver period and that alone might make the seller quite happy. To secure a buyer before the home ever hits the market in a public manner might seem like a victory for the seller. But did the home’s sales price equate to what the entire marketplace of buyers would come up with had it been made public? When we see daily listings show up in the new listing category in our “Paragon” (MLS) website, sometimes its a new listing that shows up at first as Pending (status). It always makes one wonder what happened when none of us knew about it.

There is almost never anything wrong with the way those things are handled. The problem can be the perception and appearance, plus the dialog a broker might develop, in their presentation script, that they have a buyer waiting in the wings and they have a corner on the market that nobody else has. Is the waiver process used fairly and honestly? I would say likely yes about 98% of the time. But when I get a blast email from a broker that distributes listing info on properties that are on waiver, and there are seven of them all on waiver and they are now sending out emails to market them, I do wonder what is going on. Is the effort to limit which brokers know about the listings? Maybe I got an email because I have sold homes in every price range and am well known in the industry, while others are not sent those emails?

Get your sweet tooth out and get ready. Call a Realtor today and ask them what they know about fudge.

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