Managing the Disruption From Pocket Listings
How brokerages and MLSs are coping with the effects of growing off-MLS listings.
September - October
They go by various names—pocket listings, office exclusives, “coming soon” properties—but whatever you call them, the growing phenomenon of off-MLS listings is a reality that practitioners are struggling to come to terms with, especially where inventory is tight. The handling of this hidden trove of homes, often by a handful of dominant brokerages in a given market, is making housing shortages worse for consumers and their agents, real estate pros are reporting in a host of markets .
Brokerages are sharing these private listings with agents within their offices, select agents in other companies, and even directly with consumers. The information travels via word of mouth, private Facebook groups, or exclusive portals created by brokerages or third parties. In markets like Los Angeles, up to 30 percent of sales are being withheld from the MLS in favor of private channels, according to the brokerage Pacific Union International, which was recently acquired by Compass.
Exact numbers on the growth of off-market listings are impossible to come by, but first-hand reports from agents and brokerages and an increasing number of busy national exchange portals like the Pocket Listing Service, HomeQT.com, and Top Agent Network suggest an increasing growing influence. Off-MLS listings cause the greatest concerns in markets where inventory is tight and where buyers and their agents are scrambling to provide options.
The subject of private listings is the focus of strenuous industry debate. Some agents say sellers are demanding the privacy afforded by keeping properties off the MLS; others want to test a list price before going public. Critics argue off-market listings are anticompetitive and a way for some agents to gain an edge over peers by holding a listing exclusively, which could jeopardize their fiduciary duties to clients by limiting a property’s exposure to buyers.
The issue was on the agenda at a June workshop on real estate competition cosponsored by the Department of Justice and the Federal Trade Commission. Panelist Glenn Kelman, CEO of Redfin, complained that too many listings are showing up on the MLS as immediately having been sold. “The MLS is not a performance database for agents,” Kelman said.
Luke Glass, executive vice president at Move Inc., acknowledged at the workshop that more brokers are asking realtor.com® to add a separate feed for “coming soon” listings in response to the growth of off-MLS listings. “To date, we haven’t done it,” Glass says, “but we need to find ways to work with the industry to get these listings in front of more consumers. I don’t think buyers or sellers are best served by not seeing everything on the market. I don’t think appraisers are best served by not seeing what all homes sold for and the trends.”
Having followed the DOJ workshop online and the broader discussions over off-market listings, industry veteran Russ Cofano, former president of eXp World Holdings, says he would be concerned if the government sought to limit pocket listings through new laws or regulations. While not an advocate of pocket listings, Cofano says any efforts to reduce the practice should come from the industry itself. “The short-term economics that are driving more of these off-MLS listings because of inventory constraints could have longer implications for the industry if the government intervenes,” says Cofano, who advises REALTOR® associations and brokerages. “Once the government gets involved, it’s very difficult to get them uninvolved.”
5 Risky Off-MLS Scenarios
NAR offers ethical and legal guidelines for those who use these marketing strategies. You can view them here.
The National Association of REALTORS® has no official policy on pocket listings, “coming soons,” or other off-market approaches, as these are local matters for MLSs to decide. In a video available at nar.realtor, NAR General Counsel Katie Johnson offers a broad warning: “As a general practice, actively discouraging the submission of listings to MLSs is inconsistent with the fundamental cooperative nature of the MLS and the obligations of the Code of Ethics.”
Lifting the Veil of Secrecy?
While it may be an uneasy peace, some brokerages and MLSs have found ways to coexist. Here are some of the ways off-market listings are being promoted:
To the Public
Pacific Union International’s new listings portal is giving the public an exclusive look at properties before they reach the MLS. In May, the brokerage launched Private View in northern and southern California. Registered users, whether consumers or real estate professionals, can view exclusively signed listings before they’re publicized on the MLS.
“We didn’t want to preclude anyone from the marketplace in accessing these listings,” says Nick Segal, president of Pacific Union Los Angeles. “Properties are sold because they are exposed. We want to offer customers who are frustrated at the lack of inventory a head start on what’s coming on the marketplace. Our intention is to be as authentic and transparent as possible. Inventory is such a big issue right now and we’re getting these properties to the market quicker.”
The properties listed are premarketed—after a listing agreement is signed with a Pacific Union agent—usually while any repairs and marketing, like photography or video, are being completed. The vast majority of the properties, Segal says, will end up on the MLS. Still, three Private View properties were sold in the first two-and-a-half weeks after launch. Whether such listing and sold information is ever entered into the MLS is up to the agent and client.
To MLS Users
Some MLSs are handling the disruption by establishing their own feeds to “coming soons.” The Chicago area MLS, Midwest Real Estate Data, launched its Private Listing Network in 2016 as a separate feed to share information to registered brokers about “coming soon” listings. Listings in PLN are not displayed publicly or to third-party sites. MRED officials say PLN maintains the spirit of cooperation and compensation by giving real estate professionals a way to market listings to each other while preparing them for the open market or respecting sellers’ wishes for greater privacy.
The main reasons agents use PLN, says MRED CEO and President Rebecca Jensen, are to premarket listings that aren’t ready to show yet or are in the process of being renovated, repaired, or staged prior to being marketed publicly. She also cited the desire of some sellers to test the market for pricing. (A precise price doesn’t have to be set in PLN—a price range can be listed instead.) It also appeals to sellers who want to avoid lots of showings. “We wanted to provide our customers with a safe and trusted place within our MLS system to market their properties as they see fit for any given situation,” says Jensen. In July, there were nearly 1,900 active PLN listings. A valid listing agreement is required to list a property as “coming soon” into PLN. No market time accrues when properties are listed there.
Last year, four Los Angeles real estate professionals from the luxury brokerage The Agency launched a national, membership-only website created exclusively for real estate professionals called the Pocket Listing Service. Listings can be viewed by any registered, licensed agent.
“An off-market strategy is not for everybody, but there is a group of sellers who insist on discretion,” says Christopher Dyson, a co-founder of the site. “In our opinion, the only way to market an off-market listing is through an agent-only platform. We still give sellers the shield of privacy they’ve requested, and the agents have access to these listings to leverage for their competitive edge.”
Agents can give buyers a peek at listings before they’re listed on the MLS (if a seller chooses to list publicly). The database currently has about 1,000 properties with an estimated $5 billion in listed assets, available at price points from $195,000 to $10 million and up (both residential and commercial). The PLS has about 5,000 registered agents with free membership for the first year and then $19 annually.
Agents use the PLS to test price points prior to listing on the MLS, especially when sellers think their property is more valuable than the agent does. “You’re not letting it sit on the MLS, accumulating days on the market and letting it look stale.” Dyson says many of the listings that do eventually go on the MLS after first being tested on the PLS are often set at a lower, more competitive price point: “We are giving agents the ammunition they need to achieve the price points that make sense.”
The Way Forward
As brokerages and MLSs grapple with off-market listings, some have drawn a line in the sand. 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,” says Tom Hurdelbrink, president and CEO of NWMLS. “Northwest MLS members believe this system provides for the greatest possible market exposure of the property and gives all agents (and their buyer clients) an equal opportunity to submit an offer.”
This spring, the Real Estate Board of New York tried to crack down on the practice too, but ultimately scrapped its plans after pushback from some real estate brokerages. In Texas, the Austin Board of REALTORS® gave the “coming soon” status a try on its ABoR MLS, but voted in June to remove the field after members voiced concern in a survey that their peers were misusing the status by limiting access to the property to select groups of agents. Others reported that offers were being accepted on the properties prior to being switched to active on the MLS, a practice that may violate the association’s Code of Ethics, the board noted in removing the status.
Some brokerages are calling for industry changes, too. Redfin’s Kelman wants NAR to mandate MLSs to “modernize listing agent attribution” by requiring every website that shows a listing to prominently feature the listing broker’s contact information and offer a link to the listing broker’s website. Doing so, Kelman argues, would offer greater incentive to brokers to share their listings rather than hold them privately because they’ll be gaining greater recognition online as the seller’s agent. A similar proposal to Kelman’s that could influence how agent information is syndicated on third-party sites will go before the Multiple Listing Issues and Policies Committee during the REALTORS® Conference & Expo in November.
As inventory shortages persist in many markets and off-MLS listings raise the eyebrows of the DOJ and others in the industry, brokerages may want to assess carefully how frequently their agents are using delayed showings, pocket listings, “coming soons,” or other alternative marketing statuses and be sure they’re doing so responsibly.
More education involving brokerages and consumers is needed about whether an off-market listing is truly serving the client’s best interests, says Rodney Gansho, NAR’s association and MLS governance director. Taking a listing private limits the buyer pool. Conventional thinking is that will also limit the sales price. “It’s important for listing brokers to have conversations with sellers about the pros and cons of using such alternative marketing strategies,” Gansho says, and for agents to ask themselves why they are recommending this path.
“The industry is changing so much right now, and the inventory is so low in many markets,” Gansho says. “Some brokers are using these strategies to create a competitive edge and to single themselves out from other brokerages.” For some real estate pros, they’ve practically become the standard way to conduct business. But these practices clearly involve gray areas that the industry is still trying to sort out.