The Invisible Market

Let’s touch on this topic one more time as a new season opens up.

While our 2020 market should be promising, the actual results won’t be as obvious.

Reasons to be optimistic about this year:

  1. Rates are really low, though we expect that now and it won’t set off a frenzy.
  2. Prices have been moderating, which gives the buyers some confidence.
  3. We are overdue for more boomer inventory.

But don’t expect to see a bunch of hot buys hitting the MLS.

Now that the N.A.R. has laid down specific rules for off-market sales, agents are going to take advantage.

While every brokerage will have an internal network to promote new listings within the company prior to MLS-input (which is allowed), the individual realtor teams will run their latest hot listings through their stable of buyers first, before giving the rest of their company a crack at it. Only when those attempts have been exhausted will a listing find its way to the MLS.

It may only be 5% to 10% of the market, but it will be the very best 5% to 10% – those listings that every buyer wants.  Without seeing those hot buys flying off the MLS within days, there will be less urgency and a false malaise setting in with those who are judging the market just based on the MLS activity.

The public won’t have a clue, either.  They will be forming their own opinions about the market based on what they see on Zillow, never knowing there is a secret pre-marketing – and selling – of the best listings.  It will only be those who attend open houses who will get pitched to leave their contact info to receive their off-market buys (it will be the most-heard pitch of the year at open houses).

Don’t sellers object?  Not really, not when it is presented as a better alternative to having strangers traipsing through their house at all hours with little or no notice.  It also becomes the happy option in between selling to Zillow for less and taking a chance on the open market.

Are the off-market sales valid comps?  Everyone is going to assume they are, so let’s include them and figure they may have fetched a little more on the open market.

The rest of what happens in 2020 should look similar to what we had in 2019 – with the amount of inventory dictating the outcome.  Even though buyers may be more active early on, as Diana claimed today for a second time, the higher-end areas should find the buyers being more deliberate, especially if they can’t get their hands on those prime listings.

Seller Instruction to Exclude

The new C.A.R. forms for 2020 are available, and the most interesting is the MLS-exclusion form in light of the NAR Clear Cooperation policy that begins on May 1st.

Last year I asked the C.A.R. lead attorney about their stand on Coming-Soon and off-market listings, and Gov said it is up to the brokerages.  Their new form reflects it too – they have left it optional for agents sellers to choose to comply:


The form does a better job disclosing the listing-agent shenanigans, and makes them a choice for the seller.  But will the listing agent discuss the choices?  Or just write it up and send for sigs?  The sellers just want their money – they assume their agent will be implementing the best ideas to achieve top dollar.

On May 1st, the Clear Cooperation policy will be in effect, which was intended to discourage off-market sales.  But in paragraph 9A you will see that office exclusives are permitted, which will legitimize selling properties in-house.  The realtor shops with the most listings will prosper if they pitch them hard to their fellow agents – and most already have an internal marketing system to facilitate.

There is an argument that off-MLS sales are good for the seller because the buyers are pressured to pay all the money before the property goes on the open market.

But off-MLS sales add some uncertainties:

  1. Did the buyers steal it, or did they over-pay?
  2. Were there other buyers that would have paid more?
  3. Are the off-MLS sales legitimate comps for the next guy (seller or buyer)?
  4. Are we still committed to sharing our listings with other agents?

The MLS will still exist, and be the market of last resort because the best properties with the best prices will be sold in-house, or to the aggressive, professional salespeople.

Richard just procured a new sale for his investor client by calling agents who had sold similar properties recently. One told him that he did have a Coming-Soon that was a 6-cap, and gave him the address. Richard hustled his buyer over to the property and promptly submitted an offer, which got accepted yesterday!

Why are Coming-Soon/off-market sales attractive to listing agents?  Because they can save time and money on marketing, and hurry up to the next deal.  But that selfishness will change the landscape for buyers and buyer-agents, and both will need to be well-connected to succeed.

Compass and 8.0

Compass intends to comply with NAR’s Clear Cooperation Policy MLS 8.0. In addition, the corporate staff will work the MLS to see if we can create a Coming Soon section, like many other areas are doing.

The 8.0 policy legitimizes the Coming Soon marketing, and allows for the Office Exclusives, which is already set up on our internal website.  This is why we went to Compass, because it was clear that the game was changing, and the biggest brokerages with the best listing agents would be the most successful – while the little guys get squished.

After less than two years in business, here’s how Compass is doing in Encinitas. Year-to-date sales:

Click to enlarge

How Agents Will Game the MLS 8.0

The MLS Statement 8.0 Clear Cooperation Policy is ‘a lightweight, middle-of-the-road policy that will just make the problem worse’ because it doesn’t go far enough.  It’s so full of holes that it will only exacerbate the problem, and by the time they figure it out, it will be too late to fix it.  It might be too late already.

The new policy just helps to define the ways that agents can avoid putting their listings on MLS:

  1. Office Exclusives Are Allowed. Agents will shop around their new listings for days or weeks among their fellow agents in the office. Only once that avenue is totally exhausted will listings find their way to the MLS.
  2. Submitted to MLS Within One Business Day.  From now on, all listings will be signed on Fridays (or postdated).
  3. Sellers Can Market Publicly. The listing agent isn’t supposed to publicly advertise the home, but……..
  4. Showings Aren’t Required. Just because a listing is in the MLS doesn’t mean agents can show it. This is the oldest trick in the book.  When an outside agents calls to arrange a showing, he/she is told that the property can be seen any time….as long as it’s between 5:00-5:05pm next Thursday.
  5. No Penalties Mentioned. There has never been a MLS police, so any enforcement will be sketchy at best. But realtors love to rat out their fellow agents so complaints will be flying – but what will be the penalty?  Most likely it will be the usual, which is a letter in the offender’s file for six months. Will it be that much?
  6. Stop Using the MLS. If it gets too complicated to navigate the rules, agents will just stop using the MLS.  This is why being on the right team is so critical now – if all the hot deals are sold in-house, then working at a small brokerage or being an independent broker will be detrimental. Those agents will only see the leftovers as the MLS becomes an afterthought.

Local compliance was first scheduled for March 1, 2020, but they pushed it back to May 1, 2020 so agents have six months to contemplate.  Will we be sitting around discussing how important it is that we share our listings with each other via the MLS?

What’s missing is that no one in the industry is demanding that we share our listings with one another because that is what’s right for consumers and agents alike. Instead, our leaders come up with a lukewarm policy full of holes and no teeth. The spotlight will cause more people to find ways around the 8.0, and proudly conduct off-MLS sales because now they are the even-sexier option.

MLS Statement 8.0 Clear Cooperation Policy

Yesterday, we entered into the final phase of the MLS implosion, with the latest blow being delivered by the National Association of Realtors themselves.  Instead of strictly forbidding Off-MLS sales, they have tried to appease everyone by concocting a lightweight, middle-of-the-road policy that will just make the problem worse:

The National Association of REALTORS®’ Board of Directors approved MLS Statement 8.0, also known as the Clear Cooperation policy, at its meeting Monday. The policy requires listing brokers who are participants in a multiple listing service to submit their listing to the MLS within one business day of marketing the property to the public.

NAR’s MLS Technology and Emerging Issues Advisory Board proposed the policy as a way to address the growing use of off-MLS listings. The advisory board concluded that leaving listings outside of the broader marketplace excludes consumers, undermining REALTORS®’ commitment to provide equal opportunity to all. The policy doesn’t prohibit brokers from taking office-exclusive listings, nor does it impede brokers’ ability to meet their clients’ privacy needs.

Here’s the full text of MLS Statement 8.0:

Within one (1) business day of marketing a property to the public, the listing broker must submit the listing to the MLS for cooperation with other MLS participants. Public marketing includes, but is not limited to, flyers displayed in windows, yard signs, digital marketing on public facing websites, brokerage website displays (including IDX and VOW), digital communications marketing (email blasts), multi-brokerage listing sharing networks, and applications available to the general public.

MLSs have until May 1, 2020, to adopt the policy.

Rationale: Distribution of listing information and cooperation among MLS participants is pro-competitive and pro-consumer. By joining an MLS, participants agree to cooperate with other MLS participants except when such cooperation is not in their client’s interests. This policy is intended to bolster cooperation and advance the positive, procompetitive impacts that cooperation fosters for consumers. The public marketing of a listing indicates that the MLS Participant has concluded that cooperation with other MLS participants is in their client’s interests.

https://magazine.realtor/daily-news/2019/11/11/nar-passes-mls-proposal-to-strengthen-cooperation

The End of Coming Soon/Off-Market Deals?

The National Association of Realtors is attempting to regulate a change in the Coming Soon environment – see above. The way it is written, however, will just take us back to the days when off-market deals were done behind closed doors because they are permitting the ‘office exclusives’.

Coming Soons were the industry’s public admission that we do off-market deals, and to give you a chance to get your piece of them. But now the N.A.R. wants brokerages to pick a lane.

The choices:

1. Comply with the new rule, and change the name of your off-market deals to ‘office exclusives’, where no one can see them.

2. Don’t do anything, and pretend that off-market deals aren’t happening at your shop.

3. Declare publicly that off-market deals are a vital part of your business, and keep marketing them as Coming Soons to the public, in spite of any changes in the N.A.R. rules. What are they going to do?

Numbers 1 & 2 above are the less-transparent choices, and the easier way to go for the agents who justify their off-market deals by saying the seller got what they wanted.

Number 3 is the fully-transparent admission of the truth – agents like to pad their wallets with off-market deals, and don’t see anything wrong with that.

Off-market deals aren’t going away, regardless of the rules.  The existing rules already state that all listings are to be inputted onto the MLS within 48 hours, but it gets ignored and there is no policing or penalties.

It’s better for everyone involved – agents, buyers, and especially sellers – to put every listing onto the MLS to ensure full exposure so everyone can compete. Buyers would feel they had an equal chance to buy, sellers get top dollar, and all agents get a fair chance to earn a paycheck.

But N.A.R. and the industry’s upper management looks the other way.  It will take a class-action lawsuit or new regulations from the federal government to bring real change.

Here are Rob’s thoughts:

https://notorious-rob.com/2019/09/on-nars-mls-policy-statement-8-0-a-step-forward-into-confusion/

Whisper Listings

Pocket listings should keep the excitement level higher for now.

From the Business Insider:

The ultra-wealthy are known for being exclusive, and the way they handle the purchases and sales of their multimillion-dollar homes is often no exception.

Now, that’s not to say the market hasn’t seen some very prominent, top-level listings. There’s the most expensive home for sale in the Hamptons, which is listed at $150 million, and, of course, Los Angeles’ Chartwell Estate, which was listed at $245 million and, before getting a major price cut, was the most expensive listing in the US.

But for those looking to keep the sales of their homes a little more under the radar, there are whisper listings.

Whisper listings, also known as pocket listings, are for-sale homes that aren’t available to the public. Off-market listings are popular among the ultra-wealthy and are bought and sold by word of mouth.

Los Angeles real-estate agent Aaron Kirman recently told Business Insider that he’s a veteran whisper-listing agent -and revealed three main reasons why sellers keep their homes off the market.

Kirman is a top real-estate agent at the real-estate company Compass. He’s been in the industry for 24 years and has sold over $4.5 billion worth of real estate since the start of his career. In 2019, REAL Trends named him the 10th-best real-estate agent in the country by sales volume.

Here’s a look at what compels wealthy homebuyers to keep their houses off the market and to instead opt for whisper listings.

1. Sellers can list their homes for higher prices through whisper listings.

By not putting a home on the market, the seller avoids value expectations, Kirman explained to Business Insider. With whisper listings, sellers have the advantage of pricing their homes above an area’s median listing price.

According to Kirman, sellers see this as an advantage because they are able to price their homes as high as they want regardless of the current state of the market.

“If you go live on the market, you have to publish a price. By not going live, you’ve never been public on a price so you don’t necessarily have to go down,” Kirman told Business Insider. “I’ve had sellers up the price of a whisper campaign because they have nothing to lose.”

2. Whisper listings can be used to keep a seller’s personal business out of the public eye.

Whisper listings can serve specific purposes, particularly when it comes to privacy.

For example, if a seller doesn’t want to put a home on the public market for political reasons, such as a divorce, they’ll use a whisper listing instead.

“Sometimes there’s political reasons as to why people don’t like them on the market whether it’s divorce, business reasons, or they just want to keep it quiet,” Kirman told Business Insider.

3. Whisper listings are exclusive and often viewed as a symbol of wealth.

Some sellers prefer to use whisper listings because they are more exclusive than public listings and, as such, are oftentimes seen as a symbol of wealth. However, Kirman told Business Insider that he doesn’t think using a whisper campaign, for the sake of exclusivity, is effective in today’s market.

And within that, there’s the potential downside of missing a prospective sale simply because the agent is not connected to the right person.

“The thing is, I don’t know everybody. So I always tell people there may be that one multimillionaire or billionaire that, because you’re not out there [on the public market], you missed – and they will go buy another house that was public,” Kirman told Business Insider.

https://www.businessinsider.sg/how-the-ultra-wealthy-sell-mansions-whisper-listings-2019-7/

More talk here:

Link to Discussion of PLS.com

Private Listing Clubs

I participated in the PLS webinar recently:

We’re excited to be hosting our first ever ZOOM meetup with James Harris (Million Dollar Listing Los Angeles & Founding Partner, ThePLS.com). We’ll be discussing Los Angeles real estate market trends for Q2 (and beyond) and James will be sharing his take on things.

There was a CB realtor from Santa Monica who said his market has slowed down, with many price reductions, fewer multiple offers, and longer market times.  A discussion ensued – my takeaways:

A. The market is level (at best) and sellers need to be realistic.  You can spend a million dollars on advertising, have the best photography and videos, and do open house every day, but if the price isn’t right, it still won’t sell.

B. James thought open houses are a good way to expose a property to the market, and for knowledgeable agents to impress the attendees about the value.

C. James also said that when it’s slower, it’s better to test pricing off-market first. (But wouldn’t it be natural for sellers to say, ‘let’s test the price on the open market to find out for sure.’)

D. When a home is on the open market but not selling, it’s better to lower the price in weeks, not months.

Those sum up the basic fundamentals for today’s market.

I suggested that to enhance the value of private-listing clubs, they should limit membership to the top agents only, but they didn’t want to get into it.  They did like my idea of having more webinars where agents can discuss topics and listings.

The club hasn’t made much of an impact yet in the San Diego area.  There are only 34 listings county-wide on the website, and some are older and/or already sold. Curiously, one had been on our MLS this year, but expired and is now on the PLS only as an off-market opportunity at virtually the same price.

https://thepls.com/

The other large private listing club, Top Agent Network, is limited to the top 10% of agents in a region (based on volume).  They were thinking of opening in San Diego, but I haven’t heard any updates lately:

https://www.topagentnetwork.com/

There may come a day when the private listing clubs have an impact, but it would take their leaders to constantly sell the benefits to agents – and those are people who have become wary about the benefits from the traditional MLS (if any).  If an agent wants to pursue an off-market sale, then it’s too easy for them to throw a sign in the yard and wait (if the price is right).

One-Year Anniversary @ Compass

We’ve been at Compass for one year!

How’s it been, and where are we going?

I was the 160th agent hired in the region.  Now there are 565 Compass agents in San Diego County!

In the beginning, we thought that Klinge-Realty-Powered-By-Compass had a nice ring to it, but it proved to be a mouthful, so we changed to the Klinge Realty Group for ease of use.

We’ve hired Brittnie Dixon to be our licensed assistant.  She has been doing a wonderful job with marketing and special projects!

We’ve joined the company’s sponsorship of the Del Mar Thoroughbred Club, which means you will see Donna and I in the race program this weekend.

We are also contemplating a move to the office at the La Costa Resort.

We have a new website being developed that should launch in the next few weeks.  I was hoping to combine it with bubbleinfo.com but formatting them together is still being explored.  There will be a blog!

Most of all, I’m glad Compass has a strategy to dominate the real estate universe.  It’s not perfect, but at least we have a strategy!  I’ll get into our Coming Soon program in more detail as time goes on, but consider how the entire industry has rushed to Coming Soons as a primary marketing device.

Want a sample of how the public perception has changed about selling homes?

A consumer (not an agent) said this month, “If you don’t sell your home off-market, and have to put it on the MLS, then people think something is wrong with it…..or the price.”

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