Open houses help sell homes
The real estate sector relies on marketing for success. Despite the innovations in digital technology, traditional marketing strategies of placing “for sale” signs on front yards and directional “open house” signs placed near intersections have survived the digital age.
Most municipalities, with some restrictions, allow realtors to post their temporary signs on public and private properties. However, the proliferation of signs has led some to impose new restrictions to limit visual pollution or possible interference with road and sidewalk use.
Stricter regulations on real estate marketing could adversely impact housing sales when markets are struggling. However, in the age of ubiquitous social media, posted signs on lawn fronts could be economically redundant.
Municipal bylaws regulate signage. The bylaws define when and where signs can be placed so that the signage does not interfere with vehicular and pedestrian movements. Signs are also monitored for size and the length of time they are displayed. Some municipalities impose additional restrictions by prohibiting electronic, blinking, or changeable signs.
The Toronto Real Estate Board ( TREB) has instructed its members to be mindful of the municipal bylaws about the installation of temporary signs and the Board’s professional standards department investigates complaints of bylaw violations.
Richmond Hill, a suburb of Toronto, has recently amended its bylaws to permit signs for open houses as part of a six- month pilot. Previously, the town did not allow such signage. Though the change is likely to be welcomed by the real estate industry, it comes with additional restrictions: The new bylaw restricts brokers from displaying their contact information on the sign.
TREB believes the identity restriction conflicts with the Real Estate and Business Brokers Act in Ontario, which requires realtors to include identification information on their advertisements. The move is also likely to increase the enforcement costs because bylaw enforcers will
have to search the particulars of the violating party.
But do open houses deliver better outcomes for sellers? Many home sellers believe that open houses attract prospective buyers resulting in a higher sale price and probably less time on market.
Realtors, however, have not always been as sure. As far back as 1988, one study of realtors found that “that 77 per cent of brokers surveyed who hold a public open house do so merely to appease the seller and only 41 per cent of the brokers surveyed believe the technique helps sell the house.”
Research by Marcus T. Allen and co- authors in the Journal of Real Estate Research explored the perceived benefits of several marketing strategies, including the staging of open houses for public and exclusively for other brokers. Working with a large database of 67,295 of single-family home sales in Dallas County, Texas, the researchers found that public open houses did indeed contribute to higher prices with estimates varying between 1.7 per cent to 2.1 per cent.
Exclusive open houses for brokers had even more significant price effects ranging from 3.3 per cent to 3.6 per cent. The researchers, therefore, concluded that “public open houses are worthwhile for the seller even if brokers, in general, do not believe they are that beneficial.”
Open houses, though, did not necessarily help sell the properties faster. The same research found that public and broker open houses were associated with longer time- on- market ranging between one to 25 days.
Online marketing of real estate also delivers desirable outcomes for sellers. A 2018 paper in the Journal Real Estate Finance and Economics showed that an “increase in the average daily number of views of a house’s listing” on the MLS increased the probability of sale and sale price, and reduced marketing time.
Research has shown that open houses result in a higher sale price. This implies higher land transfer taxes for municipalities. The challenge for municipalities is, therefore, to find the balance between better market outcomes and the concerns for safety and esthetics.