Open House Liability: The Risk and Benefits of Open Houses

By Audrey Sun

Although I have been with DeLeon Realty for over four years, I still remember my time as an independent contractor agent working at a big brokerage. At my old firm there was always a push for open houses. However, much of what I heard was focused on the benefit to the agent and the brokerage rather than to the seller of the property.

Some sellers may wonder— Are open houses really necessary, or even advisable, given the risk of injury, damage or theft?

Personally, I think the first weekend of open houses is necessary and important, but the pendulum may shift with regard to subsequent open houses. The first open house weekend is typically the busiest, especially with DeLeon listings, because of our intensive marketing efforts, which include multiple local newspaper ads, Google and Facebook ads, Chinese newspaper and radio ads, and aggressive networking. Buyers are always the most excited and engaged when a property first comes on the market because it is fresh and new. Additionally, many potential buyers may be interested in seeing a property, but they do not want to ask their agent to show it to them because they do not want to feel pressured by their agent.

Another factor unique to DeLeon Realty is that buyers who are not working with a buyers’ agent can come to us directly. If they do not have an agent, then we will waive 100% of the commission on the buyers’ side. Thus, they may feel most comfortable coming by the property during the open house. It should be noted that at other brokerages, the commission from the buyers’-side goes to the listing agent if there is no cooperating agent helping the buyer, so there are no savings to the seller.

Subsequent open houses, on the other hand, may pose more risks than benefits.

Seller Liability for Injury

DeLeon Realty had one listing where, during one of our open houses, a visitor tripped over a well-marked step and fell. In the process, he spilled a large cup of coffee all over the seller’s beige carpet. Despite being embarrassed, the visitor got up right away and said he was fine.

A few weeks later, the visitor contacted us and said that he was going to sue the sellers unless they, or we, paid him $25,000. Luckily, our seller was represented by Michael Repka, an experienced attorney as well as the listing agent. After Michael explained that he would represent the Seller (free of charge) in any related litigation, the visitor sheepishly went silent. One can only imagine the aggravation that the seller could have faced if they did not have free access to an attorney.

In another recent case, a seller represented by a large brokerage that sells a lot of homes in this area, found themselves involved in a lawsuit as a result of a more serious injury that occurred at an open house.

Theft

In a house that is not completely vacant and staged, theft is one of the biggest potential problems. During open houses, agents are opening up the seller’s home to allow everyone to come in and look through your personal items. There is no vetting process and the agent is often distracted talking to multiple buyers during a busy open house. At DeLeon Realty we offer the seller the option of us installing free wireless cameras around the house, both inside and out. However, few, if any, other real estate brokerages offer this same option to its clients.

Damage

As illustrated in the example with the visitor spilling coffee, sometimes accidents happen at open houses. While our client was fortunate that DeLeon Realty had one of its Field Coordinator vans in the area which had carpet cleaning equipment in it, few other agents can respond as quickly.

Brokerages and Agents Disclaim Liability

As many sellers blindly sign listing agreements provided by listing agents, they do not actually read the agreement carefully. Agents generally dismiss the importance of the agreement and make it seem like it is a standard form that everyone signs. However, the agreement puts no responsibility on the agent and shifts liability from the agent to the seller. For example, there is a provision regarding “shoes off at premises” (see PRDS Exclusive Authorization and Right to Sell para. 6(c)), which states when the shoes off requirement applies, there is a possibility of slip and fall. It further states that if a slip and fall happens, the provision of Paragraph 10 applies: “Seller agrees to defend, indemnify and hold Broker, its agents and employees harmless from and as to any and all injuries, claims, liabilities, judgements, demands, losses, disputes, damages, legal fees and costs arising as a result of… a decision by Seller.”

Similarly, the California Association of Realtors’ (“C.A.R.”) form of the Residential Listing Agreement paragraph 10 warns sellers that the “Broker is not responsible for loss of or damage to personal or real property…” even though the agent is the one encouraging open houses while the seller’s belongings are out in the open and strangers are coming into their home. Seemingly, the listing agreement provides no protection to the seller, which is why the seller should always ask their agent to provide an addendum to the listing agreement, in order to balance out some of its unfair provisions.

Why Buyers’ Agents like Open Houses

As a buyers’ agent, one of the easiest and most effective ways of recruiting buyers is by hosting open houses. When buyers walk in, many successful agents are able to charm or impress them with their charisma and knowledge. Irrespective of whether the visitor is interested in that particular property, the open house gives the agent a great opportunity to make connections, which could lead to future sales.

“Your house is the agent’s best free marketing platform around,” wrote Chrystal Caruthers in a 2015 article on Realtor.com. As a young real estate agent at 25 years old, I was taught that once you’ve gained the potential buyers’ fondness during an open house, you’ve already got a great chance of making money off of whatever home they purchase. I was coached “Just collect that contact info and follow up more than your competitors.” All of this is great for the buyers’ agent, but not necessarily the seller.

This also creates a higher chance of conflict of interest – what if the buyer is interested in this particular home that the agent is hosting? Is the agent going to represent both the seller and buyer? If the listing agent is also making money from the buyers’-side of one of the offers, can you really be rest assured that the agent is going to do everything possible to get the competing offers higher? This is one of the very important reasons why DeLeon Realty does not take commission from both sides of any transaction. You can read more about this on our website article: DeLeon Realty’s Most Significant Innovation Yet.

Aside from the agent being able to generate more client contacts, ask yourself, what are the benefits to holding an open house? Then ask yourself whether these benefits outweigh the risks. Every situation is different and there is no absolute right answer.

If asked to generalize, the DeLeon Team recommends that newly-listed homes be held open the first weekend. After that, one day every two to three weeks strikes a good balance between buyer access and the risks to the sellers. We generally recommend fewer open houses for homes that may have any marginally unsafe conditions, or that still contain the seller’s personal property, and more for homes that are fully staged and in great shape.

The marketing of a home requires consideration of many different factors. These range from important questions, such as whether to have open houses, to smaller details, such as whether visitors should be asked to remove their shoes. If a seller does decide to have open houses, the real estate agency should take steps to make sure the visitors are safe and the sellers’ property is protected.