63 Percent of Malibu Home Listings Don't Sell

Malibu real estate report looks at reasons why it is tougher to sell in higher priced markets.

It’s simple, really. A Malibu homeowner decides to put his or her house on the market. They list it with a local agent. Everyone wants to live in Malibu, so it quickly gets offers and goes into escrow. A 30-day escrow closes and the new owners move in. And one last thing—the agent makes a giant commission for doing almost nothing.

Except, to paraphrase Mark Zuckerberg after he saw the movie “Social Network”: “That’s not really how it happens.”

Scenario No. 2 is more likely. The home is listed. It gets few showings. The buying public ignores the lofty asking price that graces all the marketing. At some point, that price is slightly reduced. There remain no offers, in most cases, and few offers in other cases. The sellers give up. The listing expires or is withdrawn. The agent is paid nothing, and may actually regret the enormous time and money spent on the futile effort.

As wonderful as real estate is in Malibu, and as glamorous as the Realtor profession has become, 63 percent of the listings signed and marketed in Malibu never sell during the course of a year. At least, that was the result in 2016, which was a very good year (as an abundance of buyers sent median values soaring up 17 percent).

That is, 606 times last year, a Realtor signed a listing (sometimes in teams, or co-listings), and the house was exposed to the public. But only 227 of those listings resulted in a sale.

That is a 63 percent failure rate.

Such is the summary of a review of every single home in the Malibu real estate area that touched the local MLS during 2016. The other 379 listings expired, gave up or went into this year unsold but still trying.

There is an irony associated with Malibu real estate, or any other property located in highly desirable areas. While it may be highly desirable, it is very difficult to buy or sell. The high prices raise the ante for principals on both sides of the table. With so much money at stake, the players are extra tough negotiators and particularly cautious to commit. 

As a general average, a home in Malibu takes a year to sell. And stories of homes needing at least 10 years to sell, or being listed with a dozen different agents over time, are sometimes true.

Two different games are in play during a listing. First, the obvious, is that the home is competing for buyers against other listings. It is a competition. That notion escapes many home sellers. The home will not sell until it has been vetted by a savvy buying public and determined by at least one prospect to be the best deal available for their needs. 

But another factor is prominent: The broker and agent are taking the listing in the first place, with only a 37 percent chance of success. Therein is a whole other dynamic. In some cases, the Realtor suggests a ridiculously high price to a naïve but wishful homeowner.

There is a battle, if you will, among agents who are fighting in a deeply competitive environment for scarce listings. The listing may never result in a sale, and agents know it. But a listing gets the phone to ring and brings the listing agent increased buyer contact. An unsuccessful listing can still lead to a sale with a newfound buyer on another property. So some agents are as guilty as the homeowners of listing properties too high. Sellers often are just using the agent to get free service on a foolish dream; an agent may also be using the seller.

There is a saying in real estate: “Best to be the first born, the second spouse and the third agent.” Often the long, hard work of one agent or two is needed to bring the seller to a proper perspective, all while they take out their self-inflicted failure on the first agent or two, and ultimately get a fair price and quick sale with agent No. 3.

The analysis above was developed by looking at all the listings during 2016, and counting how many sold during the year. Here is another way to measure:

Of the 40 most recent sales identified in the MLS from the time of this writing, how many cumulative listings were exercised before the sale finally occurred? The answer is 82. That is, the average house needed two listings before it sold. That breaks down to a 49 percent success rate. Some recent sales needed four or more different listings to finally find a buyer. And, don’t forget, these are the success stories.

When a home sells quickly, a seller may stew over how much commission is paid to the agent/broker. It does not seem fair, perhaps. But in the full scheme of things, they are also paying for the massive amount of free service Realtors provide otherwise. All showings are conducted for free. The work on behalf of a potential seller, including during escrows that never close, and paperwork and advertising and other forms of money and time expended, usually goes unrewarded.

Agents and sellers both know in advance that it is likely the marketing effort will all be for nothing. Or at least, based on the stats, they should know.