A 'New' Way to Buy a House: You Get to Name the Price
Under current tradition, a seller determines the asking price for his house generally after consulting with a real estate agent and comparing what other homes in the area sold for recently. The real estate agent who lists the house fronts the marketing costs out of pocket and doesn't make a nickel unless the house sells.
Under the Fred DeFalco way, a home would be offered for sale with essentially a "make me an offer" notice -- no predetermined listing price. Buyers would figure out what they wanted to pay for it and submit a non-binding letter of intention to buy the home. It works similar to a sealed bid auction where the seller doesn't actually have to accept low bids but can use the buyer's expression of interest as an entry point to negotiations.Sellers, under the public pricing model, pay $2,500 or more for the upfront marketing blitz, which includes a contest that invites the general public to say what they think the house is worth. DeFalco (in the photo above, on the right) and his partner Manny Gutierrez (left) use these entries to help the seller decide whether the sealed offers are close to what he can sell for. They are generally within 5% to 10% of what the (nonbinding) letters of intent offer to pay. "The public knows what homes are worth. It's just sometimes the sellers who don't," DeFalco said.
Think he's a crackpot? DeFalco would like to remind everyone that back in 1906, Colbert Coldwell revolutionized the California real estate market with aggressive pricing policies by his company, Coldwell Banker. He also forbid any of his agents from setting (artificially low) prices and then becoming the purchaser. Yes, they did that back then. When Coldwell laid down the law, the new way of doing business did quickly spread across the country.
DeFalco, a 30-year real estate veteran, has never understood why sellers had the "right" to determine the price of their home. He says that only buyers can establish what a property is worth, something that has been driven home in this housing crash. He says the system of using comps doesn't work because each home is different and has different features, is in different condition, etc.
His system ends the practice of real estate agents inflating a listing price just to "tell a home seller what he wants to hear" to ensure getting the listing. When you see homes on the market for years, says DeFalco, you know that's what happened.
Why trademark what is basically a clever marketing tool? "I want Public Pricing to be the Good Housekeeping Seal of Approval for the real estate industry," DeFalco says.