The real estate agents’ home page of the multiple listing service (MLS) has a special box that shows new listings within 24 hours, price increases, and price reductions. There is also a category called back on the market (BOM).
The goal of all real estate agents is to do their best to make sure their listings move smoothly from “active” to “active continued,” “pending,” and “sold.” Unfortunately, no amount of quizzing a buyer’s agent or a buyer in advance of writing an offer can prevent an occasional deal from falling out of escrow and appearing in the BOM category on the MLS.
Why do agents and sellers care if their contracts fall out of escrow? Here are four reasons:
1: Days on market (DOM) are prominently noted in MLS listings. Homes are more desirable when they are fresh on the market. Today in San Francisco, it has become an expectation of both buyers and sellers that a desirable home will be in contract and possibly even sold within two weeks of coming on the market. If there is not substantial interest and buyers talking about making an offer after two weeks, many agents will begin talking to their sellers about lowering their price. In as little as 15 days and definitely 30 days on the market, buyers are expecting a price reduction.
2: When a home falls out of escrow and is listed on the MLS as BOM, the count for DOM does not go back to 0. When a marketing period of two weeks is added to a contract period of 10-20 days before an escrow falls out of contract, buyers assume there should be a price reduction. This is bad news for sellers.
3: When a home falls out of escrow and appears in the BOM category in the MLS, buyers ask: What went wrong? Is there something wrong with the home? Are they reducing the price? The end result is that some buyers cannot get over worrying about what went wrong or that there is some problem with a home. Fewer buyers generally means a lower sales price for a seller.
4: Once a home is not showing in the new listings for the week, it is simply off the radar of many buyers, never to return, because they are only looking at the new listings as they come on the market.
When a home does fall out of escrow, it is common to find the agent prominently noting in agent remarks in the MLS “BOM no fault of the property.” This may mean the buyer’s loan was not approved, or the family from the Midwest came to visit the home and gave the buyers a thumbs down, or the buyers just got cold feet. It really doesn’t matter. The house is the same. Unfortunately for the seller, the number of days on market affects the end sale price, and BOM often means less money for the seller at close of escrow.
It is important to note that if new material facts are discovered about the home during escrow, they must be disclosed to future buyers. In that case, the seller’s agent cannot advertise “no fault of the property.” An example of this might be pest damage that had not been previously disclosed.
Today when there is so little for sale and so many buyers competing for homes, fewer homes fall out of escrow. Buyers are not willing to go through the stressful multiple offer process to find another home that might not be any better than the home they gave up and in fact could cost more as prices continue to rise. Buyers are not as easily swayed to change their minds by out-of-town relatives, increases in the interest rate, or unexpected additional work needed in a home.
Many real estate search engines have a feature with which a home can be bookmarked or saved so that it can be followed through the escrow process. This way, when a home falls out of escrow and is BOM, buyers will immediately receive electronic notification and follow up on a possible opportunity to find a home at a reduced price. I provide a website called CleanOffer.com for my buyers that is effective in immediately updating buyers of changes in status on the MLS. If you would like to try this, please send me an e-mail and I will send you an invitation to use the site.
Of course, the old-fashioned way of letting your agent know you are interested in properties that fall out of escrow works, too. This way, your agent can follow changes in the status of homes that interest you and will be ready to help you be first in line to make an offer when a home is BOM.