As if buying a home weren’t hard enough, the lack of properties for sale has made the process even more daunting. The problem has resulted in more intense bidding wars for the slimmer pickings and many house hunters – particularly those with modest means – being shut out.
What if you found out there are a lot of homes for sale but you and your real estate agent just don’t know about them?
That’s what some buyers’ agents say has been happening with greater frequency, particularly in highly competitive housing markets such as Seattle, San Francisco, Los Angeles and Washington, D.C.
Now the National Association of Realtors (NAR) is cracking down on “coming soon” or “off-market” designations, which generally allow sellers to unofficially solicit buyers under the radar without having the number of days it is listed count against them when they go on the market. In addition, keeping these listings off the public multiple listing service means buyers won’t know if a seller has dropped or raised their price expectations.
NAR voted Monday at its annual membership meeting in San Francisco to bar Realtors and brokers in its 640 affiliated multiple listing services from keeping listings off the services. It recommended that the dozens of other multiple listing services it doesn’t oversee adopt similar standards.
The move is aimed at generating a discussion about the practice nationwide. A handful of multiple listing services — including Bright MLS in the D.C. area, Midwest Real Estate Data (MRED) in Illinois and Northwest MLS in the Seattle area — had previously taken steps to fine brokers and agents who fail to put their for-sale properties on the open market.
“This new policy will bring all available properties into the MLS,” says Greg Zadel, a real estate agent with Zadel Realty in Firestone, Colorado, and chair of the MLS committee of NAR. “This way, every seller will get maximum exposure of their property and every buyer will be able to find all the properties for sale in their area. The consumers will benefit more than anyone because this will mean the MLS marketplace will be complete.”
The new NAR measure, in line with the Bright policy adopted in October, requires properties to be listed on the local MLS within one business day of being marketed to the public.
Marketing includes flyers, yard signs, email blasts, applications available to the general public and digital promotions on public websites, such as Zillow or Realtor.com, brokerage websites, and agent networks that share listing information within a closed group.
Compass real estate brokerage sent a pre-litigation letter when Bright’s policy was announced in October that said the policy was anti-consumer and anti-competitive because it restricts the ability of agents to market properties outside of the MLS. Representatives of Compass and Bright have exchanged letters and discussed ways to resolve their conflict over the policy and its implementation.
NAR members approved the Clear Cooperation policy. The measure requires affiliated MLS systems to adopt the changes by May 1, 2020. The new rules pertain to other practices similar to “coming soon” or off-market listings that may go by other names:
– “Pocket listings” are so named because listing agents keep them in their pocket, making them available only to specific buyers or agents within their office instead of sharing them on the open market.
– “Private exclusive” or “office exclusive” refers to for-sale properties that can be found on real estate office websites but aren’t on the MLS. Because they are marketed a little bit – and maybe on social media, for example – they aren’t considered the same as pocket listings.
NAR and Bright, however, have made one exception. They allow “office exclusives” for sellers – mainly high-profile people who are concerned about privacy. But the policy says they can’t advertise publicly through signs, social media, blast emails or brokerage websites. They can only be marketed with one-to-one promotion within a brokerage and sellers must sign a waiver that they want this and understand that their property won’t be publicly marketed.
“Finding a home to buy is hard enough without having your options limited by pocket listings,” says Glenn Kelman, CEO of Redfin real estate brokerage, headquartered in Seattle. “Buyers and their agents shouldn’t have to know the secret handshake or play tennis with the right listing agent in order to have access to any property on the market.”
Pros and Cons
Supporters of off-market listings say the practice offers sellers an opportunity to generate buzz for their home sale as they are prepping the property and gives them a chance to test the waters to see if they can get the price they want.
“A divorcing couple, for example, may not want their neighbors to know they’re selling their home, so they put the house in ‘coming soon’ status and quietly start marketing it,” says Kim Harris, regional president of Compass real estate brokerage in the District. “We had another client, a 91-year-old, who didn’t want to fix up his house if he didn’t have to, so he could test the market in ‘coming soon’ without exposing it to the full market.”
Top Agent Network (TAN), which has 33 chapters with 9,900 agents across the United States, shares information about non-MLS properties and other topics through a private online community. TAN membership is available only to agents who are in the top 10 percent of home sellers in their region.
“The top 10 percent of agents do 90 percent of the business in their markets, so marketing within our network is not the same as pocket listings, which are bad for buyers and sellers,” says David Faudman, CEO and founder of TAN. “The majority of the properties discussed on our site end up in the MLS but with a better outcome for sellers because of the discussion about pricing and market conditions.”
If a buyer comes through the TAN network before a property goes on the MLS, Faudman says that’s convenient for the sellers and the agent.
“Expert agents in our network share information with each other about homes and get input on pricing and suggestions about what improvements need to be made,” Faudman says. “These agents can show the property or not. We also have agents posting about what type of property their buyers want so they can find out about properties before they go on the market.”
But opponents say buyers can sometimes be disadvantaged by the process.
“It happens often that buyers call an agent and ask why their agent didn’t tell them about a house they might have wanted to buy,” says Christine Richardson, president of the Northern Virginia Association of Realtors (NVAR) and a real estate agent with Weichert Realtors in Great Falls, Virginia.
“Often, that house wasn’t listed in the MLS but it was on a third-party site or had a sign in the yard,” Richardson adds. “Buyers have a terrible fear of missing out. Eliminating the pre-MLS listings will eliminate that shadow market.”
Limiting the ability of all buyers to know about every property on the market has a more insidious influence on the housing market, including an unintentional negative impact on minority home ownership, according to Elizabeth Korver-Glenn, an assistant sociology professor at the University of New Mexico in Albuquerque.
While real estate agents having the inside track on listings is nothing new, Korver-Glenn contends that the ramifications of exclusively marketing to a network of other agents and clients rather than the general public limits the ability of people of color to compete for homes. She says she believes eliminating pocket listings is one of the easiest ways the real estate industry could increase home ownership among people of color.
“During a year of research on the Houston housing market, I found that many of the white real estate agents I interviewed engaged in pocket listings, while only one of the agents of color did this,” Korver-Glenn says. “The white agents promoted their business around exclusivity to their clients, but none of them considered what they were doing exclusionary even though they had overwhelmingly white clients and marketed only to other whites.”
Kelman of Redfin agrees.
“If you’re a top agent, you want people to think that they won’t see all available properties without their help, which is a powerful message,” Kelman says. “But from the perspective of people of color who may lack that same kind of network, they should be able to see every property, too. There’s a long history of the real estate industry being a mostly unwitting accomplice to all sorts of segregation in America and one of the simplest solutions is to eliminate pocket listings.”
Leveling the playing field
The practice of pocket listings, or pre-MLS or off-MLS listings, has grown in recent years, according to NAR. Pocket listings can generate more money for a brokerage – or even an individual agent – if the buyers and sellers are both represented by the same company or by the same agent, known as dual agency.
“In a highly competitive market like ours, with fewer houses to sell, some brokerages try to control the market by keeping more of their listings in-house,” Richardson says.
Private exclusive listings, while not only limited to expensive homes, are often used by wealthy people to protect their privacy and limit the exposure of their homes to the general public.
New policies from Bright MLS and NAR also differentiate between “coming soon” properties and pocket listings. Pocket listings, says Jon Coile, chairman of Bright MLS, typically are not marketed to any other agents, only to potential buyers of a property.
He says the only issue with brokerages announcing a “coming soon” property is that it needs to be announced in the publicly available MLS as well as on individual brokerage sites.
“Some brokerages do all their marketing of ‘coming soon’ properties as if the property is a totally public listing, except that they keep it off the MLS, so the only people who can’t see it are other agents unless they go to the broker’s website,” Coile says. “We’re leveling the playing field so that everyone has access to the same information, which is good for small brokerages and good for large brokerages. Most of all, it’s good for consumers.”
Sellers of pocket listings may be doing themselves a disservice, some agents say. A handful of sellers may care more about an easier sale than a higher price, Richardson says, but most want the highest possible price.
“While some agents think off-MLS marketing is creative and they have a big network of potential buyers, sellers won’t always get the highest sales price if their property isn’t exposed to the full marketplace,” Richardson says. “The bottom line is that it’s absolutely in the best interest of sellers to be in the MLS. It doesn’t make sense to not expose your property to licensed agents who represent buyers.”
Bright’s policy allows sellers to sign a waiver to keep their listing out of syndication to other websites and their agents can also put notes in their listing to limit showings if the sellers prefer.
Richardson says NVAR supports the Bright MLS and NAR policies that require listings to be placed in the MLS within one business day of marketing.
However, the Greater Capital Area Association of Realtors (GCAAR), which represents the District and Montgomery County, Md., says that about three-quarters of members who responded to a recent survey were opposed to the policy.
“Real estate agents need to provide value to their sellers and one way they can do that is to pre-market the property while it’s being fixed up and staged,” says Koki Adasi, GCAAR president and a senior vice president with Compass in the District. “Pre-marketing includes exposing the property on social media, to personal networks and to other agents through the Top Agent Network. This policy changes the value proposition of agents because it says the property must be on the MLS within one business day.”
Impact on inventory
Agents are divided on whether more or less inventory will be available to buyers as a result of the new policies on off-MLS listings.
“I think buyers will see less inventory with NAR’s policy, because it allows for office exclusives, which agents can market to other agents in their brokerage,” Faudman says. “They can’t market those outside their brokerage unless they talk to one person at a time.”
But Adasi says buyers have the potential to see more inventory.
“There’s no real downside for buyers in this policy,” he says.
In his view, sellers will be impacted more by the Bright policy because they won’t be able to show their property to potential buyers or market it while they are getting ready to list it.
As MLS policies around “coming soon” status and private office listings evolve, one major benefit for the housing market is the increased accuracy of data, Richardson says.
“Sellers need to know how to price their homes and buyers need to know how much to offer,” Richardson says. “Accurate data that reflects all homes on the market and all recent sales, as well as the number of days it took to sell a home . . . can impact the ability of agents and consumers to make informed decisions.”