Quick Answer Series: Close the Door on Open Houses!



I’m often asked what I think of open houses. Well, I think it’s as good a way to waste a Saturday afternoon as any. My advice is to just take a long nap and catch up on your sleep instead. It will advance your real estate practice a lot faster than an open house! Let me explain.

An open house is simply an advertising idea. Nothing more. Nothing less. As such, it should be evaluated like any other advertising idea. Cost per lead versus budget per lead. So how do we do that? Get out your calculator, and let’s crunch some numbers.

First, let’s look at cost per lead. Any advertising idea has a cost per lead, and open houses are no exception. I know that you’re probably thinking, “Open houses are free.” That’s simply not true. First there is the cost of the ad to bring people to the open house. Let’s say it’s $50. Then there are balloons, streamers, directionals, refreshments, and such, for let’s say another $25. I’m being very conservative, you’ll have to admit.

Then there is your time cost. If you spend 6 hours counting setup, placing the ad, buying the refreshments, cleaning up, taking down balloons, streamers, and directionals, it will be a miracle. We’ll have to submit you to Guinness Book of World Records!! Now how much is that? If you are planning on making $100,000 this year, your hourly time cost is $50. Now, 6 hours times $50 is $300. Add that to the hard costs and you are $375, and we were being very conservative.

Now we count the leads. If you are really lucky, you’ll get 4 or 5 leads in one afternoon. Now do the math: $375 divided by 5 leads, and you have a cost of $75 per lead. And odds are that 3 of those “leads” are not leads at all. They are more apt to be curious neighbors. Either way, $75 per lead is just not going to work in most markets. Why? Because it’s over your budget per lead.

How can you know your budget per lead? Simple. Assuming your market has an average sale price of $200,000 and an average commission side of 2.5%, then your average GCI or gross commission income is $5,000. Your budget per closed deal is 10% or $500. Now take the $500 and divide it by the 24 average leads you need to close one deal, and you have a maximum budget of $20.83 per lead.

Now let’s evaluate the marketing idea. Cost per lead is $75. Budget per lead is $20.83. Survey says… ENGH! Now if you’re looking for a good excuse to get out of the house and at the same time feel like you’re being productive, by all means do an open house. Or if you can’t say, “NO!” to your sellers, go ahead. It’s OK. But don’t for a minute think it is the highest and best use of your time or marketing budget. From a business perspective, it’s just plain nuts! Don’t do it! And that’s my quick answer.

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Matt

I give away about 99% of all my technology and digital training content, completely free of charge, because I want to see other agents have the same kind of success that I've had. But one thing I charge for is my Ultimate Website technology. This is the web technology I created for myself that turned my real estate practice around overnight, and now I license it agents everywhere. But right now it's too popular and is currently waitlisted. Click here to get on the website as soon as possible and I'll notify you as soon as new invitations become available.

Comments 17

  1. author Lee Hudman, ABR CLHNS CNE GPA posted May 13th 2010. 5:04 pm Reply

    I’ve been taking Sunday off for almost 10 years, I’ve not done a public open house in 10 years. I tell my clients up front that they will only draw neighbors, tire-kickers and thieves and most of the owners issue a sigh of relief because they don’t really like them, but other agents look at me like I’m crazy when I tell them this. This is so good to see that I’m not alone in thinking that they are a total waste of time. Now, if I could just get them to see the same is true about Facebook and Twitter “marketing”!!! Even Top Producer software and my local board are really pushing Facebook and Twitter. Geez. What a lazy thing way to try and do business.

  2. author Rick Stroud (Dynamic Realty, Greenville SC) posted May 13th 2010. 5:36 pm Reply

    Your calculations make complete sense Matt, but agents (for the most part) dont think that way. They dont put value on their time and they operate under the (it might could happen) plan. I personally discourage my agents from doing them. Other brokerages dont put up much of a fuss about their agents doing them…I guess if you dont care about your agents wasting their time and money, whats the hurt in taking a chance on (it might could happen).

    Hope all is well with you.

    • author Matt Jones posted May 14th 2010. 4:57 am Reply

      Hi Rick. Doing great! You are exactly right… most brokers could care less if their agents waste their own time. Let’s see how many brokers log many hours pulling open house duty! Thanks for weighing in.

  3. author Corey posted May 13th 2010. 5:49 pm Reply

    I totally disagree. My first listing I ever achieved was as I was putting up Open House signs for my Broker on Pensacola Beach a neighbor stopped his car and said he wanted me to come by his house and tell him what it was worth. I did and we listed it for $450,000 and sold for $430,000, 5% commission(I had both sides) $21,500 commission on 1 Open House. This has not been an isolated incident for the past 4 years but more of the norm.
    Corey
    RE/MAX On The Coast

  4. author Jerry Gooze posted May 13th 2010. 7:43 pm Reply

    Mr. Jones,

    Your asssertion that you should close the door on open houses is very short-sighted. An open house used properly by a farming professional is extremely valuable. It afford the opportunity to have a branch office in your farm area of area of specialization. It affords the opportunity of having the neighbords drop in and meet you personally in a low pressure less stressful encounter. It certainly is an advertising vehicle. However, I’m advertising for other sellers not just buyers. I honestly don’t care if anyone comes into my open house or not! But they do, because I put out 30-40 open house signs winding throughout m,y entire farm! Talk about free advertising! It is an excellent way to control a farm area, and it puts your work ethic and name on display every week! It’s true that it is sheer happenstance that the perfect buyer comes along, but there are lots of buyers and lots of sellers to meet. You can either do this, or sit on your duff and watch football. You’re either in the game or out of it! I”d rather gather up a bunch of leads and screen them then be beholden to online leads that are even more likely to be a waste of time. At least these prospects whether they’re ready now or later have gotten off their duff to visit you. We are in a people business. You either meet the people or you don’t. You will always have less quality leads than good quality. But the more leads you have or meet, the better you’re set up for your career. At an open house they meet you in person, not by internet, not be e-mail, not by mail, not by print. Which do you think is better? Your article is misguided and much too narrow-minded. You are not doing a service to Realtors who want to succeed by relieving them of doing open houses. It can be a very valuable tool if usded for the right motivers, goals, and expectations. Sincerely, Jerry Gooze

  5. author John T. Altman, CCIM, CRB, CRS, SRS, ABR, SRES, CFS, GRI posted May 13th 2010. 9:07 pm Reply

    Matt, actually your “quick answer” is wrong, sorry! I know you already have your mind made up, so nothing that I would say can or will change that…

    That being said, using your analogy and the cost break-down represented ($100,000 GCI will only net an agent $60,000 after expenses and Co$$$), there may be “no advertising/marketing effort” that would pay off!!! Except of course, the one that you market…

    You state: “An open house is simply an advertising idea. Nothing more. Nothing less.”… That is because of a lack of understanding that many agents have of the “primary benefit” for doing an Open House. Done correctly, it should be a great prospecting vehicle & tool for both buyers and sellers. IF someone wanted to argue that not many homes are sold via Open House, I believe that is in fact correct… And that should be communicated to the seller.

    Further, it would seem that you have not learned how “most builders” sell their homes (Model Homes or an Open House)… Matt, many of your ideas shared are great, BUT this time you are really off base!!! Just like the agents or trainers that say “don’t, because of security”… Not sure but, I’ll bet driving home OR smoking probably has a “worst health ratio” and are more dangerous than doing the Open House”…

    I know the agents, you included, can find lots of reason “not to do any specific element of our industry, when they don’t want to do them”. And that’s OK, but Open Houses done “right” are great tool for our industry and for many agents… Oh, also Open Houses “aren’t just for Sundays any more”!!!

    John T. Altman, CCIM, CRB, CRS, SRS, ABR, SRES, CFS, GRI
    Broker /Owner, JT Altman & Associates
    (a residential real estate sales & marketing company)
    5694 Mission Center Road, #307
    San Diego, CA 92108
    D/L: 619/890-2581
    Fax: 888/679-6071
    CA License #: 00952726

    • author Matt Jones posted May 13th 2010. 9:30 pm Reply

      John,

      Chill, dude. Some people love open houses and it works for their type of business. In fact, I even teach one scenario where open houses are a good idea (again, my opinion). Here is a link: click here to read the article.

      You lost me on the $100,000 GCI / $60,000 after expenses / Co$$$…

      I personally believe that there are many better methods of finding buyers. Do some open houses sell the home? Sure. In the south we have a saying… “Even a blind hog finds an acorn every now and then.” As an agent builds his own business, however, I believe it is important to focus on marketing ideas that produce the highest return on investment. In my opinion, and my experience, open houses are not a high ROI.

      Thank you for reading and for your very thoughtful response. I love spirited debate and appreciate your input. You may well be one of those agents for whom open houses is a great strategy. On the other hand, I am one for whom it is a bad idea. Thanks again.

  6. author Halina D. Kraszewski posted May 13th 2010. 9:33 pm Reply

    Matt:

    I love your article on Close the Door on Open Houses. Would you allow me the permission to re-blog it? Thank you.

    Halina D. Kraszewski
    RE/MAX Suburban
    330 E. Northwest Highway
    Mount Prospect, IL 60056

    • author Matt Jones posted May 13th 2010. 9:35 pm Reply

      Thank you for reading and for your comment. I am honored. Sure, you are welcome to re-post it as long as you credit me.

  7. author John LaScala posted May 13th 2010. 9:46 pm Reply

    Sheesh ……

    I agree that Open Houses seem like a waste of time. That’s why my company decided over 10 years ago to train homeowners to hold the open house themselves. We advertise them in a group listing on Saturdays and hold them open on Sunday afternoon. I usually go around to each one to see how they are doing and collect names and numbers of people who stopped by that appeared interested. I have held as many as 9 open house simultaneously this way and never had a complaint from a homeowner … never. They actually prefer to stay home and just show people around and ask them to sign in and leave their name and number. The vast majority of people do just that . Doing this I sell close to 60% of my own listings…and I get plenty of listings in my target market. On Sunday afternoon it looks like I own that entire territory.

    Sorry, I love Open Houses…as long as I don’t have to sit in them. I use them for what they are intended for….get some exposure for the listing, advertise my business, and get more seller leads – and seel a few houses too !

  8. author Armin “J.R.” McKee posted May 13th 2010. 9:53 pm Reply

    Many good points have been made, however I think everyone will agree, that if you are going to do an open house, make sure it pays off!

    I have conducted open houses for years and regularly pull a buyer per open house, but……I advertise heavily days leading up to, I bring detailed CMA’s, lists of what’s sold in the neighborhood, lists of what’s available, and 9 or 10 other marketing pieces featured on a solid Easel, all in an effort to establish credibility as an expert and build trust through education.

    My goal is to win over the fence sitters, unhappy buyers with their current agents and grab buyers away from part time agents or agents who aren’t informing and educating their buyers as they should, and it works.

    When I don’t prepare for an open house and don’t set it up like I should, I pay a price that clearly isn’t worth the time away from my family and then would agree with Matt whole heartedly.

  9. author Andy posted May 14th 2010. 3:16 am Reply

    Right. Ask a builder why he holds Open Houses…every Saturday and Sundays

    • author Matt Jones posted May 14th 2010. 4:52 am Reply

      I am not against every instance of open house (although you will notice the builder is smart enough not to be wasting his time in his model home). Here is another article I posted on the subject: click here to read the article.

      I knew that this would article might challenge the status quo, but had no idea how emotionally attached some agents are to their open houses. At the end of the day, every agent needs to do whatever marketing is right for them. I simply wanted to reduce open houses to a simple economic and business decision, and in that regard it is nearly always a bad idea.

  10. author Bronwyn Merritt posted May 14th 2010. 11:09 am Reply

    While I still think some situtations may be worth evaluating, my basic response is “Amen!” More than ever we need serious buyers, and serious buyers make appointments to see the house, preferably before someone else snaps it up. To use opens for prospecting may work for some, but not most of the listings I have sold.

  11. author Melissa Stahl posted May 14th 2010. 12:21 pm Reply

    Thanks for your insight Matt. I have been fortunate with my open houses in a strange way. I’ve sold 80% of the homes I’ve held open which I understand is not usual. I’ve also picked up 2 listings and 3 buyers for other homes since the one I was hosting didn’t suit their needs. I also am a huge multi-tasker and use that time to complete all of my marketing pieces for that week including personal letters to my sellers updating them on their listings. This way I don’t feel I’m wasting my time in between customers. Now, I don’t hold open houses every weekend, only for those sellers who really, really, really ask me. But each time they have benefited my business. Only being in the business for 3 years (2 full time) I’m still learning and I really appreciate all the comments.

    Melissa Stahl
    EXIT Realty Capital Area
    Halifax, PA

  12. author Harriman Real Estate posted May 14th 2010. 4:12 pm Reply

    Open houses have their good and bad points, like everything else. However, when you tell a seller you’re holding their house open, what reason do you give them for doing so? Do you tell them it’s in order to garner more buyer/seller leads for yourself, catch up on paperwork or further your own business, or do you tell them it’s to try to sell their house? I’ll wager that in the vast majority of cases it’s the latter, and conversely most sellers ask their agents to hold open houses to attempt to get a buyer for their home, and most agents would probably not refuse.

    Of course, the success of open houses is fairly regional and there may be areas where open houses actually do result in homes being sold, but looking at national statistics, open houses rarely sell a home. I think the statistic that NAR quotes is less than 1% of all open houses result in the sale of a home. Now having said that, we do hold open houses occasionally, but we let the sellers know that the chances of a sale happening because of it are marginal at best, and they usually appreciate our honesty. Again, this does not hold true for all markets or all agents, is my own humble opinion, and your mileage may vary. Good article, Matt!

  13. author Pat Motley REMAX Good Earth Realty, Inc (Houma, LA) posted May 21st 2010. 12:27 am Reply

    OK, so we know not every open house will result in a buyer and while I don’t have one every weekend, like everything else… there’s a time and a place. I never do open house on an occupied home and inform the seller of this on taking the listing.

    The reasons I give are that I have no control over who comes into their home so for security reasons, an open house is only if they insist. However if the home is vacant its a great opportunity to meet buyers and help them find something else. I see the open house in 2 respects – a service for my seller client and a way to attract buyers. It’s worked quite well for me.

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