More tip-toeing around the Coming Soon topic in Realtor Magazine yesterday:
The surge in off-market “pocket listings”—those held off the MLS in favor of secret channels and networks between agents or within a brokerage—is a growing issue in the real estate industry.
In markets starved for inventory, real estate professionals are struggling with being kept out of these secret dealings for homes that their buyers could potentially want.
In markets such as Los Angeles, for example, reports say that up to 30 percent of sales are being withheld from the MLS for the sake of more private channels, according to some brokerage estimates.
In response, some brokerages—and even MLSs—are looking for ways to expose these listings to a larger audience. One of many recent launches in the past month came from the brokerage Compass, which allows its real estate agents to post their listings to Compass’ website days before sharing them with the local MLS and third-party portals, like realtor.com®. “Compass Coming Soon” is available nationwide in markets where the brokerage operates.
“This will help our agents get a head start on marketing while still getting the property ready for market,” Compass CEO Robert Reffkin reportedly shared with Compass real estate professionals in an email. “By harnessing the power of pre-marketing, [the listing] actually shows up twice in everyone’s alerts: once when it hits Compass.com, and again when it hits the open market, doubling potential exposure.”
Pacific Union International, which Compass acquired in late August, had launched its own solution to handling the disruption from the growing prevalence of pocket listings in May with “Private View,” debuting $400 million worth of exclusive property offerings. But its portal of off-MLS listings can be viewed by any registered users—real estate professionals from other brokerages as well as the general public. Registered users can see exclusively signed listings before they’re publicized on the MLS. The portal is currently available in northern and southern California.
“Our agent-to-agent portal allows our sales associates exclusive access to Long & Foster properties that are not yet in the MLS,” Barry Redler, chief marketing officer for The Long & Foster Companies, said in a statement announcing the portal. “Having this platform not only allows us to respond to certain seller requests but also gives our agents a leg up on the competition by helping their buyers more easily find a home in a tight inventory market.”
MLSs are searching for the answer to expose these homes listed for sale, which the seller may wish to keep secret. The Chicago area MLS, Midwest Real Estate Data, launched the Private Listing Network in 2016 as a separate feed to share information to registered brokers about “coming soon” listings. These are not displayed publicly. MRED officials cite it as a way for real estate professionals in their area to premarket listings that aren’t ready to show yet or that are in the process of being renovated, repaired, or staged prior to being marketed publicly. It’s also a way to test the price, as a range can be entered.
But some brokerages and MLSs are taking a firm stance against the practice of pocket listings or “coming soon” forms of premarketing. Since 2013, Northwest Multiple Listing Service—serving the Seattle area—has prohibited its members from promoting or advertising a property until it is listed in the MLS.
Off-MLS deals amplify concerns about limiting exposure of the property “to a select group of agents to the detriment of the seller and other MLS members,” Tom Hurdelbrink, president and CEO of NWMLS, told REALTOR® Magazine.
Nobody wants to project how this will play out, but it seems obvious. Every brokerage will operate a Coming Soon program, and the MLS will become the marketplace of last resort.
When the bluff-top mansion at the end of Malibu’s Sweetwater Mesa Road sold for more than $30 million in 2016, it looked like the end of a years-long intrigue involving the playboy son of the president of an oil-rich African nation.
Instead, the sale and a quick flip of the property for nearly $70 million has opened a new, scandalous chapter. This time, instead of an accused kleptocrat and the U.S. Department of Justice, the key players are a celebrity real estate broker and an insurance company.
For those who ‘specialize in the off-market space’, here’s a new excuse to justify your unethical and probably illegal practices: “some buyers don’t want photos of the home they’re purchasing on the internet”.
The real estate market has heated up so much in certain regions that brokers are taking transactions into their own hands—or, rather, their pockets. With increasing prices and, seemingly, more buyers willing to pay an amount that’s leaving sellers with nice profits, the question these sellers keep asking is, “Why bother with the MLS?”
While the answer to that question varies greatly depending on who is asked, more and more brokers are saying don’t list on the MLS, or even Zillow, for that matter.
“It’s an opportunity for a savvy agent, who uses his or her network properly, to make more money for their client,” says Jon Paul Molfetta, a broker with Keller Williams Realty in New York and New Jersey.
“If sellers aren’t familiar with the concept of a pocket listing, I would expect that their area/location doesn’t warrant it. Savvy sellers know when they live in a hot market. They understand the value of having a strong broker with a large network. If they contract with the right agent, they can realize top dollar without the hassle of having every nosy neighbor or unqualified buyer through their home,” says Molfetta.
“Agents who lose touch will lose deals (and) miss opportunities,” says Molfetta. “When someone misses out on a property, they might be willing to overpay for the next one. Regardless, people will not underpay for a pocket listing. If you’re a strong listing agent who controls a portion of the inventory, you provide added value to both the buyer and seller. For the buyer who wants into the neighborhood, you offer the unique opportunity of finding a home before it hits the market. For the seller who is ready to list, you provide a pool of qualified buyers from months of successful marketing and proper lead capture. It’s a win-win.”
California seems to be a haven for pocket listings, where sellers are coming to their brokers and demanding it. Lori Steele is a specialist with Beverly Hills, Calif.-based The Agency, which launched a private national off-market platform last summer called The Pocket Listing Service (PLS). Steele says it’s been incredibly popular among sellers who value privacy and speed, and it helps all the agents under The Agency roof generate business for clients and cultivate their networks.
Steele is involved with The Agency’s expansion through Orange County, Calif., and she says The PLS is a big part of the appeal.
“About 40 percent of all of our deals are done off-market,” she says. “It’s important for seller discretion, and some buyers don’t want photos of the home they’re purchasing on the internet.”
If the uber-elite believe they need the privacy and are willing to leave mega-money on the table, then fine – pocket all you want. But the typical seller is better served by open-market exposure.
All brokerages are getting into the game, and before long, pocket listings could be the standard, which puts those who aren’t connected on the sidelines.
Buyers who feel a slowdown (and who wonder where the values really are) should proceed with caution when offered an off-market deal – how do you know if the price is right if it never hit the open market?
Do you have a trench coat?” the real estate agent asked, only half joking. The listing he was about to describe was so hush-hush that he and other agents had been required to sign nondisclosure agreements just to obtain the address. In order to get the broker’s tour of this supersecret, $16 million–ish Russian Hill home, I’d have to agree to keep quiet on the pertinent details—and maybe wear my best Deep Throat disguise.
Sound crazy? Not in housing-mad San Francisco, where mum’s the new buzzword in real estate. As many as 20 to 30 percent of agents’ high-end listings are now totally underground. That means no advertising, no listing sheets, no email blasts. In place of open houses, sales tactics for these homes include password-protected websites, phone-call-only marketing campaigns, and, as I found out, NDAs.
Alternatively called whisper, private, or pocket listings, this secretive sales method is increasingly common in the Bay Area, especially among wealthy, privacy-obsessed sellers intent on keeping their names and asset valuations away from prying eyes. Gregg Lynn, an agent with Sotheby’s International Realty, says that about half his listings these days aren’t officially on the market—and his clients’ rationales for doing it that way run the gamut.
There are pre-IPO tech founders who want to keep speculation about their financial outlook to a minimum; or Sand Hill Road types trying to project an air of modesty. And then there’s that oh-so-Silicon-Valley notion that building a whisper network of potential buyers gives a home a level of intrigue, and buzz, that’s priceless. “It’s like if you’re in a wine club: Are you in the basic wine club, or do you get invited to the exclusive events?” says Rachel Swann, a Noe Valley–based agent with the Agency, a luxury real estate firm with offices in Los Angeles and San Francisco. “People like that. Especially at the high end.”
In a typical home sale, agents upload information about a property to the local Multiple Listing Service, or MLS, as soon as the house is photographed. That info—photos, specs, property history—is then distributed to dozens of websites, including Redfin, Trulia, and Zillow, where it’s publicly available. To the would-be anonymous seller, however, that’s simply too much data for the world to see. And they’re willing to trade the extra half a million the house might fetch in a heated bidding war for the peace of mind that comes with privacy. “I try to make sure clients understand it doesn’t necessarily help them price-wise,” agent Nina Hatvany says of pocket listings. “It’s nice for other reasons. But does it get you the price? Probably not.”
The standard knee-jerk response about pocket listings is to insist that some sellers don’t want to be on the open market for personal reasons, and that’s fine. In reality, those should be limited to major Hollywood icons who are unsure of how much their star-power adds to the price of a home, AND those who are flat-out bamboozling the buyer – like these sellers, who just sold this property off-market for $11,000,000. The buyer’s agent has been in the business for two years and this is his only sale ever on his Zillow profile!
Eight months ago, the sellers paid $7,195,000 for it after 1+ years on market:
If the sellers are fully aware that they are engaging in an off-market deal, then fine. But most are being duped into thinking they are on the open market, but then all of a sudden – whiz, bang, boom, whoosh – and there is an offer on the table that is good enough to get them on their way.
It moves so fast that they never realize they weren’t on the open market.
For many high-priced and desirable properties, especially in metros such as LA, the sales process rarely involves actually going out on the market. Many realtors often rely on pocket listings—offering homes to a small circle of select potential buyers and brokers through connections or word-of-mouth—to float potential sale prices or restrict who has access to a particular sale.
The process has been widespread but informal (according to realtor.com, pocket listings account for under 10 percent of home sales), at least until earlier this year. In August, a group of four Los Angeles real estate professionals, Chris Dyson and Mauricio Umansky of The Agency, and James Harris and David Parnes, stars of Million Dollar Listing Los Angeles, launched the Pocket Listing Service, a play off the multiple listing service (MLS), a national property database.
“There are many sellers that quite frankly demand a certain level of discretion,” says Dyson. “They’re selling but don’t want people to know their house is for sale. Other want to test a certain price point. The PLS gives them a more efficient platform.”
According to Dyson, who has been involved in LA real estate since 2005 and focuses on Hollywood Hills, Malibu and the west side, pocket listings have become an increasingly large part of his business. But there was an obvious void in terms of an organized, widely accessible way to find these listings. Before the PLS, he would announce, or hear about, such sales via emails sent to a handful of brokers and other friends in the industry. Now, his new site allows users to search a database that’s not open to the public.
“You’re only as good as your list,” says Dyson. “The PLS gives you wider access to an agent network.”
Since the site launched in August, the PLS has attracted 1,500 new agent accounts, covering all 50 states, and has had $1.4 billion in assets listed, according to Dyson. Most of the activity in facilitating sales has come from Los Angeles, though Austin, Dallas and Miami have also been very busy.
Agents must be licensed (for instance, agents from California need to enter their BRE number to sign up) and can give as detailed or vague a property description as they want on the site. After signing up, they’re given a year of free access.
Previous sites have attempted to create a similar database, such as Top Agent Network and offMLS, according to The Real Deal, but the personal nature pf pocket listings, as well as the oxymoron of a “public database of private listings” has proven challenging.
The GSDAR is still suing their fellow realtor associations in town over MLS data syndication. But that didn’t get in the way of them forging an agreement with this outside company to promote pocket listings.
But I don’t think they understand the ‘pre-market’ listings. Realtors who ‘pocket’ their listings are looking for their own buyers. If they are going to share them with fellow realtors, just put them on the regular MLS.
If any agent uses this new system as a private club to promote their Coming Soon listings only to their buddies – and are willing to cut a deal prior to MLS submission – it shouldn’t take long for them to get sued for breaching their fiduciary duty to their seller. The evidence will be everywhere!
I’m all for the international initiatives, and hopefully that will be the main thrust of this partnership. But it sounds like GSDAR is trying to set up their own MLS too.
VANCOUVER, BC–(Marketwired – March 01, 2016) – RESAAS Services Inc., a cloud-based social business platform for the real estate services industry, is pleased to announce that it has signed a five year agreement with the Greater San Diego Association of REALTORS.
This agreement will allow all 12,000 member REALTORS® of SDAR, the largest real estate association in San Diego County, to share lightweight property listings with one another while providing SDAR visibility into this pre-market activity.
This is the second real estate association to take advantage of the revolutionary real-time listing sharing solution that gives member REALTORS® and the MLS themselves instant visibility into listings that are of pre-market status. In addition, the creation of a SDAR network on the RESAAS platform will allow its members to grow their international referral business and expand the exposure of their property listings.
“We pride ourselves on continually offering progressive technologies to our 12,000 members,” said Michael Mercurio, CEO of the Greater San Diego Association of REALTORS®. “We see RealTimeMLS as a key addition that will allow our agents to share listings and referrals quickly and easily amongst each other. Apart from communicating about local news and listings, we are looking forward to expanding the international reach of real estate in San Diego County. We have a number of international initiatives underway and see RESAAS as a vital component in facilitating those goals.”
Pre-market transactions are often difficult to track and measure, which can lead to a large percentage of sales not being recorded in the MLS records. As a result, there is incomplete sales data, making the Comparative Market Analysis (CMAs or “comps”) inaccurate. The solution provided by the RESAAS platform will allow MLSs to track data more easily, in an efficient manner.
“The increase in pre-market activity has heightened the need for real estate associations and MLSs to continually enhance their value proposition for their membership,” said James Hayden, VP of Enterprise Accounts. “At RESAAS, we always focus on real scenarios that are facing the real estate industry and use our technology to provide complete solutions that are implemented to benefit the entire organization at large.”
Part of the story about the Pre-MLS sales was that the local rules require that agents have 48 hours to input their new listings.
The last paragraph of the story:
The waiting period before a listing is submitted into the MLS was originally put in place to accommodate paperwork demands before MLSs were electronic.
“Is this two- or three-day waiting period an anachronism?” he asked.
The 48-hour rule was in place before Al Gore invented the internet, and should be revised. But unscrupulous agents will game the system no matter what the rule is, so other provisions should be implemented too.
The listing contract was revised so both agent and seller acknowledge the benefits of MLS exposure, and are aware of the pitfalls of not utilizing it.
But more could be done.
The MLS should make it mandatory that a listing can’t be marked pending for at least two days after input. At least if an agent is going to have to field phone calls about showing and selling, after a while they might catch on to the program.
Sure, many would just ignore the calls (many already do) but at least the message would be sent – there are other buyers interested in your listings, and you should accommodate them.
Part of the problem is pure ignorance – because agents see other agents throwing new listings right into the pending category, it gives them the impression that it is acceptable business.
Why is this allowed now? We have a fiduciary duty to the sellers!
If the MLS folks and the governing boards of the associations of realtors don’t take action, then eventually lawsuits will follow from sellers who figure out that they got screwed.
Their comment section dissects the article pretty well, so let’s go straight to checking the sales in our own market.
The MLS and the tax rolls limit how many records you can search, so here is a comparison of NSDCC closed sales for the first two months of 2014:
Sales of SFRs, condos, and PUDs on tax rolls: 629
Detached and attached-home sales in MLS:576
Percentage of sales in the MLS:92%
You would think that sellers would insist on exposing their home to the maximum number of buyers. But there are always going to be non-MLS sales that occur for various reasons, including new homes, for-sale-by-owners, homes sold to occupying tenants and/or family members, plus investors and flippers.
Off-market sales create a sexy headline, but around here the vast majority of sellers want open-market exposure, via the MLS.
Once lawsuits start flying over pocket listings (which limit exposure, and thus selling price), the practice should end quickly. Agents don’t think there is anything wrong with them because they see so many other realtors doing it – heck, there are websites devoted to pocket listings!
Their views on pocket listings were refreshing and unequivocal. Osher was particularly frank. The main takeaway: There is no place for “premarketing” or “coming soon” in an MLS-accessible market. If a home is being marketed in any way, it’s for sale. Limiting its exposure puts an agent’s personal financial gain at odds with a client’s financial return.
Possibly more striking was the conversation with Neil Garfinkel, a partner with the law firm AGMB in New York. In his personal opinion, those who engage in pocket listings are opening themselves up to potential litigation. A former client who felt they were led into a practice that didn’t maximize their financial return, and didn’t fulfill the agent’s standards of duty, will at some point be the bellwether for pocket listing litigation in the industry. Real estate licensee duties can be fiduciary or statutory depending on the state, but almost always call for a high standard of care for a client’s well-being.
While the liability discussion on that day centered on a single former client suing their personal agent, there are a number of much larger issues that seem to collide at this one point.
As real estate brokers and agents battle over opening large sets of agent production data to the public, the executives of most of the largest real estate companies seem to be signing on to the idea (Realogy’s and Re/Max’s CEOs concurred at Connect).
It’s becoming clear that the dissemination of agent sales data is becoming a question of “how” as opposed to “whether.”This new look into the practices of real estate agents and their brokerages will allow consumers to see everything their professional service providers do in a new light. Individual sales and practices will be boiled down into averages, probability and patterns.
"Jim and Donna Klinge are by far the most professional, personable and responsive realtors I have ever worked with. They provide VIP concierge level service in every area of the process of selling your home. My home was marketed so successfully that we received an offer the day after our first and only open house. Thanks to Jim's pricing and negotiating, our house is now the highest sold in our community... more "
by Ann Romanello
"Jim educated us, helped us find the perfect house, and then negotiated us a great deal. I would hate to be sitting across the negotiating table from ... more "
"Jim is thorough and will be brutally honest about the homes he shows you. He provides great service and follows through until the very end and even ... more "
"I highly recommend Jim as a buyer’s agent. Working with Jim, we closed this week on a San Diego condo. Jim prepared a list of comparable sales to ... more "