Pocket Listings, Coming Soon and Off Market Properties Headed for Extinction Says NAR

On November 11, 2019 the National Association of Realtors voted to ban “Pocket Listings” (also referred to as “Off Market” or “Coming Soon” listings). This is effective Jan 1, 2020 with an implementation deadline of May 1, 2020.

Brokers and Agents will be required to input listings into Realtor run MLS services within one business day of publicly marketing them.

Let’s hold that thought for a minute before we jump into the analysis and implication for Buyers, Sellers, Agents and other stakeholders and look at how we got here.

If we roll back the Real Estate time machine to an era before social media, online listings, Zillow and everything else related to current practice, agents could only sell the listings of the Brokerage they worked for. At least in CA anyway. So basically every sale was an “in house” sale.

Then somewhere before IDX, apps and the public viewing listings on their phones, we moved to an environment where any Broker could sell the listings of any other Broker that were offered in the MLS - basically the concept of co-operating Brokers. But you could even sell listings that weren’t offered in the MLS. These became euphemistically known as “Pocket Listings” because agents were holding them “in their pocket” so to speak. Along the line they also became known as “Off Market”. And then just to round things out “Coming Soon” became a thing also.

What is being referred to here are homes that for all intents and purposes are for sale in that a seller would accept an offer and open escrow but that were not offered for sale in the Multiple Listing Service and then syndicated through IDX to every major portal, brokerage website and elsewhere displaying listings online.

You might reasonably ask why, in the low inventory environment we have been in for quite a while, would a Seller not want to expose their home to the largest number of potential Buyers possible and that would be a great question. So hold that though for a minute while I briefly digress.

There are instances where limiting exposure to the market makes sense for privacy or security purposes. Let’s say you are a well known celebrity, or have a valuable art collection, or an ill family member in the house. You probably don’t want every looky loo in the area in your home. For good measure you might throw in divorce if you don’t don’t want your friends and neighbors asking questions. But realistically, that’s about it. Everyone else should strive to maximize their market exposure.

So how did we get to the point where NAR felt this was pressing enough that they had to weigh in?

Very simple: Agents were abusing this practice to the detriment of the public and possibly in violation of various housing laws because in theory circumventing the MLS “excludes consumers, undermining Realtors’ commitment to provide equal opportunity to all.”

Things came to a head recently when a high profile Brokerage got into a pre-litigation back and forth with one of the large MLS groups who had already adopted this policy thus forcing the issue.

How were Agents abusing this practice?

The most egregious practice was in trying to hoard listings to “double end” (represent both sides) of the sale and double the sales commission. We can have a lengthly separate discussion as to whether this form of dual agency should even be allowed (I don’t think so) but suffice it to say that in an environment with less inventory and fewer transactions, many Agents have been tempted to try to maximize every dollar they can possibly pull in. To me this is a clear violation of the fiduciary duty that Agents owe their principles.

Next on the list is Agents marketing the listing to other Agents (some of whom may be at competing Brokerages) in order to get the same reciprocal treatment. This was often accomplished through networking groups or private online sites. This hurts not only the Seller but possibly discriminates against Buyers and was one of the main reasons NAR addressed this.

And then you have the “Coming Soon” (but often available today at the right price). This one is somewhat easier to defend as possibly having an less nefarious intent. Some Agents use it to get a feel for the price and how the market will respond. Others want to give notice to the Buyers in the market that a property that might fit their criteria will shortly be available. It could reasonably be considered a demand generation tool. But if as an industry we are defining what “on the market” means and leveling the playing field it makes sense to get rid of this one too. You would see a lot of “Coming Soon” on Facebook. But the MLS got smart and in some areas redefined “Days on Market” (DOM) to mean “Days of Marketing”. At issue for the public is how long has a property been offered for sale. Presumably properties on the market longer would sell for less than the asking price and the public is entitled to know such things. So it becomes a transparency issue.

As an aside, it has been almost impossible for a Buyer to attend a public Open House in a hot market over the last few years and not have the Agent working that OH pitch them on how if they only work with that Agent they can get access to all the great off market listings that only that Agent has access to. That was the current version of the secret list of foreclosures that Agents touted during the previous housing downturn. I guess Agents working opens will have to come up with a new pitch.

So, where does that leave us?

Here’s the wording of MLS Statement 8.0 also known as the Clear Cooperation Policy::

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.

Now here’s the ironic gotcha in all this. If you only publicize the listing within your own Brokerage or office (harkening back to the old days) then you can work around this new rule. This clearly would benefit some of the larger Brokerages.

Some of the pushback from the Agent community has been framed as this somehow stifles competition. Simple enough - if you don’t like the NAR rules, don’t join and use the MLS. But this also brings to light a larger issue: are regional MLS entities or Multiple Listing Services themselves heading towards extinction?

The closest thing there is to a “national” MLS are the major portals such as Zillow and Realtor.com who aggregate all the listings from the local MLS feeds in one place. The issue is that the data integrity is (imho) lacking. That’s because there are no national standards and unlike products that can appear on Amazon, there are state and local laws and disclosures that have to be complied with as well as Federal statutes regarding housing. But the technology certainly exists and national standards would go a long way towards solving problems far beyond the scope of what I’m addressing in this post.

For example, if a Seller or their Broker truly wanted to put the public on notice that a listings is “Coming Soon” there could be a “Coming Soon” MLS status with a “Buy it Now” price. Want to preserve your client’s privacy? How about “anonymous” listings? Show the interior pictures, the floor plan and a general location but not the exact address.

As this era of pocket listings fades from our collective memory - to be replaced with something else I’m sure, what will stick in my mind is how many Buyers actually told me they didn’t want to see anything that was listed in the MLS. Not because they had already seen everything but because it was somehow not cool or hip enough to buy a house that someone else could buy. They actually wanted the exclusivity or perhaps bragging rights or Instagram post that the home they bought just wasn’t available to everyone.

It will be interesting to see how this new rule plays out because in many areas the associations and Realtor boards only enforce these rules when someone, usually another agent, complains.