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.
Realtors will put a twisted spin on any new gadget in order to justify hoarding commissions. In this article, one manager convinces himself that because he gets ‘300 emails a day and four actually apply’, it’s good to use a separate system that enables pocket listings:
That means agents no longer have to fool with emails selling Viagra, unwanted notices about office pools, and other non-work-related messages. That frees them up to spend more time listing houses, showing and selling properties, and attending closings. Agents found that the software allowed them to “preview” possible listings with their fellow agents and market them internally before they hit the open market.
That’s a form of so-called pocket listings, which are somewhat controversial in and of themselves.
With a pocket listing, a property for sale is held out of the local Multiple Listing Service while the seller’s agent shops it among his list of clients and friends. If the agent finds a buyer, he gets to keep the entire commission rather than share it with a buyer’s agent.
But while a house is in the agent’s pocket, so to speak, it is not exposed to the entire market, as it would be if it was on the MLS. And in theory at least, if the house was listed, the seller might have been able to secure a higher price.
Under the rules of most MLS systems, a property must be listed within 48 hours of receiving a signed listing agreement. So a true pocket listing is only a short-term ploy at best.
But the Yapmo software makes the process more efficient. Agents are able to automatically shop the property in-house directly to buyers and other agents who have expressed an interest in that kind of house, that price range or perhaps that area.
It isn’t intended to limit exposure to keep the deal in-house, Van Eck said. Rather, it is intended to maximize exposure during the “downtime” between when a listing is taken and the house is ready to show.
“Nothing in the MLS defines what people are looking for,” says Boehmig, the Atlanta broker. “But with this tool, a conversation can ensue while a house is getting ready to come on the market. Our agents can say, ‘I want to hear about that kind of stuff but not that kind of stuff.'”
Yapmo also works well for sellers who don’t know what their homes are worth, or for those who value their privacy and don’t want to tell the world that they are getting ready to put their properties on the market or what price they are asking.
“One of our agents just took a listing but was concerned about the price,” Boehmig says. “He was able to email other agents in the company saying, ‘Here’s what the seller is thinking. What do you think?’ And when the house actually came on the market, it was positioned properly to sell.”
They can dress it up all they want, but when they prominently mention that they have closed 275 pocket sales, you know their objective. Realtors won’t police themselves – sellers need to insist on their home being placed on the open market!
Other agents say pocket listings are never a good idea.
If being on the open market is good enough for Kobe Bryant, arguably the biggest celebrity in the O.C., then it’s good enough for everyone,” said Jim Klinge, a Carlsbad Realtor. Bryant’s 8,471-square-foot home in Newport Coast’s gated Pelican Ridge, with a shark tank, hair salon and “extra deep” swimming pool, went on the MLS in August for $8.59 million. The home is still for sale.
Often, homes start out as de facto pocket listings without the sellers’ knowledge, Klinge said, as many agents ask sellers to sign a form allowing them to exclude a home from the MLS for longer than a 48-hour period.
“Agents will tell you it’s because they need time to develop their marketing, but in reality they are shopping around the listing first to their own buyers, then among agents in their office and their waiting buyers, and then if all else fails, the listing gets inputted onto the MLS,” he said. “This practice happens in virtually every office, big and small, and among the most successful agents to the rookies.”
His advice? “Sellers should check the Internet themselves to verify their home has been properly listed on the MLS for sale, and advertised to the open market, before negotiating an offer.”
Klinge thinks that off-MLS listings hurt not only sellers, but buyers, too.
“If a seller has found a buyer, and wants to dupe him into paying too much, he might try to tantalize the buyer with an ‘off-market opportunity,” Klinge said. “It is the reason why buyers should insist on buying only those homes on the open market.”
Lily got into the pocket-listing conversation yesterday. Note how cagey agents are about their own position of right or wrong. They want to leave the door open in case they have another shot at doing a round-tripper off the grid – the commission is more powerful than ethics for most:
Benefits may include quick, private sales without intrusive open houses and wading through multiple buyers’ offers. On the flip side, pocket listings could result in sellers missing out on the best prices and depriving the wider pool of potential buyers of more for-sale supply.
Wading through multiple offers – the agony!
This practice is a sexy option that is unconsciously promoted within the MLS system – agents see others doing it, and want to get in on the big-commission action too!
Did you catch Yunnie’s comment on the last NAR video? He danced around it at the 3-minute mark by saying it is the sellers that don’t want expose their property – yeah, right! Another ideal time for NAR to take the lead in educating realtors and the public, and one more whiff.
The “pocket” realtors usually don’t tell the sellers they are going to pocket the listing – and if the sellers aren’t paying attention, they will never know.
Seller will see the sign pop up in the front yard, and think that their agent is doing the job. Even if sellers verify that their home is listed in the MLS, they don’t know exactly what goes on behind the scenes unless they are really paying attention:
The listing agent can input the listing, but then shut down the showings. Once they get an offer or two, some will start telling other agents that it’s too late, even though they haven’t accepted anything.
Listing agents can also throw away offers. I submitted a cash offer that was $40,000 over the list price on an REO listing on the first day it hit the MLS. The listing agent said that the bank wasn’t taking any more offers, which I told him was hard to believe. Sure enough, 30 days later it closed for full price, and he represented the buyer too.
Brokers and managers promote in-house sales, and some pay bonuses too. They have weekly office meetings where they discuss new listings to see if they can match sellers with buyers prior to MLS input.
You would think that the primary motivation is for the listing agent to represent the buyer too and get both commissions. But you’ll see several of these completed where the buyer is represented by a different agent. Either the listing agent is going to extreme measures to hide the facts, or it was a pre-arranged deal.
Some of these sales close for what appears to be top dollar, but you will never know for sure unless the property is exposed to the open market.
There is no enforcement of any laws, rules, or ethics – realtors are expected to treat their own clients honestly. But you’d be surprised at how many of the highly successful and well-known realtors participate – and the president of the association of realtors confirmed it on our talk show.
It is old-school to look the other way, and by now it is deeply embedded throughout the industry as new agents see the old veterans rip off their own clients regularly in order to score a bigger payday.
They describe how agents think that pocket listings are OK, as long as the sellers sign the MLS-exclusion form.
But the exclusion form isn’t a permission slip for agents to ignore their fiduciary duty to expose the property to the open market, and go find their own buyer instead. Unfortunately, no enforcement is in place, other than the Code of Ethics – so you better behave!
They also have an article on multiple offers, which concludes with this gem:
Or, as Krull puts it, “For buyers or sellers, I tell them that multiple offers are the reason they invented bourbon whiskey!”
The writer called these ‘pocket listings’ but this activity should be called something else – and the buyer should paying the commission – because a “listing” implies a contract with a seller. If any agent has a written listing agreement with the seller, they have a fiduciary duty to put the listing on the open market – it is what’s best for the seller.
The California Association of Realtors addressed the ‘pocket listings’ topic.
It took them an hour to boil it down to this – the listing agent is bound by California law to properly explain the benefits of exposing the property on the MLS, and how it is in the sellers’ best interest.
The webinar finishes with this threat: “Regulate yourself before the regulators/trial attorneys/legislators regulate you.”
So there, problem solved.
Data from the five counties around Silicon Valley were used to demonstrate the issue. Of last year’s sales in Santa Clara County, 15% of them weren’t in the MLS. The median price of those was 10% lower than the median SP of those that did sell in the MLS.
They only touched on one important question during the Q&A session:
What can be done about listings being inputted as ‘sold before processing’?
The MLS rules require that all listings be submitted onto the MLS within 48 hours. They wimped out on answering the question, saying that it is possible to consummate a sale within the first 48 hours, but the listing agent is still bound by their fiduciary duty to the sellers.
Sellers or other agents can complain to your local MLS to report violations. Those found guilty are faced with the possibility of severe hand-slaps and letters in files, though for good measure they did add that you could lose your real estate license. Yeah, right.
