The National Association of Realtors has all but put a stop to one controversial practice some agents use to hide their listings from other agents. But some crafty realty pros are already finding their way around the new rules.
The questionable practice is known as a “pocket listing.” It happens when agents resist entering their listings into their local multiple listing service until they can shop them to their preferred list of buyers, other agents in their offices or agents in affiliated offices.
If they are lucky enough to nail a buyer from their own sources, they get to keep the entire commission. They have to share the fee if an agent within their company finds the buyer, but at least the entire charge – and subsequent fees for their bosses – is kept in-house.
If they are unsuccessful, they then turn to the MLS, which serves as the database of almost all homes for sale in every market. There are some 800 listing services nationwide; they are where all agents go to search for houses that meet their clients’ parameters.
Buyers’ Agents Demanded Change
It can be days, or sometimes weeks, before pocket listings see the light of day – and there are circumstances in which some sellers wouldn’t mind their listings being held back for a while. Perhaps someone doesn’t want their neighbors, say, or their boss to know they are planning to move. Maybe they aren’t ready for potential buyers to be traipsing in and out of their house at all hours. Or possibly they have no desire to keep their place squeaky-clean and ready for showings.
At the same time, though, sellers are not getting the full exposure to the market they bargained for when they signed their listing agreements. And pocket listings run against the cooperative nature of how houses are bought and sold. Agents of competing companies work together – one representing the seller, and another, the buyer – to sell millions of houses every year. But when an agent effectively keeps a listing in his or her pocket, the system breaks down.
Buyers’ agents have howled for years that they and their clients are not getting a fair shot at such listings, at least not right away. And the million-plus-member National Association of Realtors has finally agreed, concluding that off-MLS listings not only skew market data and reduce buyer and seller choice, but also undermine the commitment to provide equal opportunity to all agents.
So, under NAR’s new “Clear Cooperation” policy, starting May 1, listing brokers and agents are required to submit listings within one business day of marketing the property to the public – in other words, within 24 hours of offering listings to a select audience. The rule was originally set to take effect Jan. 1 but was delayed to give local services time to make technology changes and educate users.
“We made sure that cooperation remains at the heart of organized real estate,” said Denee Evans of the Council of Multiple Listing Services, which represents these listings portals, to NAR’s trade journal, Realtor Magazine.
NAR Allows Huge Loophole
This new rule isn’t likely to put a stop to the practice, however, because agents can use another classification – “coming soon” – to hold properties out of the MLS and off the market.
Underhanded agents have always tried to game the system in one way or another. Some cancel listings that have languished on the market for months, and then resubmit them to make them appear fresh. Sometimes they change the wording of the address – say, changing “Drive” to “Dr.” – to reset the number of days the place has been on the market. Or they drop the price a small amount to boost its standing on the service.
Some agents try these and other tricks at their own volition; others, at the behest of their clients. Either way, it is a violation of NAR’s Code of Ethics. But saying a listing is “coming soon” is not prohibited under the new rules. Office exclusives and marketing to private networks aren’t verboten, either.
Remember, once a listing contract is signed, agents have 24 business hours to enter it into the MLS. So, an agent who wants to keep a property as close to the vest as possible can ask a client to sign the agreement late on a Friday night. That way, it won’t have to be entered until Tuesday morning, leaving 72 hours to peddle the house on their own.
‘Coming Soon’ Becoming More Common
As with pocket listings, there can be good reasons for a “coming soon” listing. Some people need time to prepare their places for sale; others are waiting for their new homes to be completed. Others have to wait for a tenant to move out.
A “coming soon” listing tells the widest possible audience the house isn’t ready to be seen just yet, but it is for sale and will be ready to be viewed on a “go-live” date. But as long as the seller doesn’t sign a listing contract, the house need not – actually, cannot – be entered into the MLS.
Thus, an agent who wants to skirt the rules can shop the house to their own list of would-be buyers or those of agents in affiliated offices without consequences. Yes, without a signed agreement, there’s a chance that another agent might swoop in and take the listing out from under them. But it’s a chance some are willing to take.
According to a recent survey by the WAV Group, a research and advisory firm, “coming soon” listings are becoming more prevalent.
“A ‘coming soon’ status is not only in high demand today,” its recent white paper said, “but brokers believe that it will become increasingly important in the future.”
Unfortunately, as the report points out, while many listing services have policies regarding such listings, the survey found they are “locally contrived” and far from uniform. Others, meanwhile, are still in the process of crafting their own policies to give sellers time to manicure their properties for optimal results.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers may contact him at firstname.lastname@example.org.