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In any industry, insider information is valuable. Having a tip gives you an advantage. It has been the MO of successful real estate agents for decades, but business as usual is coming to a halt on May 1, 2020.
On November 11, 2019, the National Association of Realtors board of directors voted 729-70 to ban the practice of “pocket listings,” also often referred to as listings coming soon, private listings, exclusive listings or off-market properties. Specifically, “within one 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.”
Pocket listings are defined as real estate listings “retained by a listing broker or salesperson who does not make the listing available to other brokers in the office or to other multiple listing service (MLS) members.”
Wanting what you can’t have has created this situation while FOMO has popularized it. The premise of the decision to ban pocket listings stems from the practice of withholding inventory from ready and able buyers. In any market, but especially tight ones, this infuriates fatigued buyers who are unable to find their way home.
This hardship is well known for any buyer who can’t find their dream home. When it does come online and they rush to submit an offer, they are often met with a multiple offer situation, often losing. When wanting an explanation of why they lost, they are only met with “There was a stronger offer.” A few months later they see the closed property online and respond back with “I would have paid that!”
What’s missing from the public discourse is the benefit that pocket listings have brought sellers. Homeowners benefit by cutting through insincere buyers and avoiding inconvenient showings, uncompetitive offers and multiple open houses where unqualified consumers, nosy neighbors and researching future sellers peruse the home while the owner takes the dog for a two-hour walk.
Buyers benefit from pocket listings too. Anyone who has purchased a home will tell you to pay a premium (that you’re comfortable with) to put the right home under contract. Searching is exhausting, and pocket listings force you to make a decision. Private listings create a unique situation for decisive buyers to put their best foot forward to get what they want.
Forcing a seller to publicly market their property cheats them of the opportunity to test the waters on price and interest. No two homes are created equal, and price per square foot is a high-level vantage point complicated by finishes, floor plan, elevation, location and orientation. Pricing a unique home is more art than science and only becomes more difficult as the price increases.
The opportunities pocket listings bring may not be easily found by everyone, but if a buyer is serious, or their agent is working hard for them, they will find them. Most every established real estate brand or portal in the country has a “coming soon” section. If an agent found an off-market listing for their client, they would approach the listing agent, and the two would make a deal.
Smart companies conduct focus groups before they release a product and often release it in test markets before launching to major ones. This isn’t any different. Listing something as “coming soon” allows an agent to take it to the market and get input from colleagues and the public before finalizing the price. Pocket listings allow sellers to do this without adversely affecting the property by adding market time. If the public decides they want it, the situation will persuade a buyer to make an offer and avoid competing with other buyers. If they are willing to pay a premium acceptable to the seller, who is using their best judgment to weigh the risk/reward of bringing the home to market or not, why should a trade organization tell a seller their thinking is faulty?
This policy has created tension in the industry, with the public and for regulators, due to a lack of education and transparency. In most cases, these properties are not being hidden from the public — they just aren’t available in one place. Real estate brands want you to use their app instead of a competitor’s. Knowing you can find exclusive inventory is a good way to get you there. This is a long-established practice. In places like New York, there is not one central database or MLS.
For as long as agents have been selling real estate, there have been pocket listings. This change will make a slightly more equitable landscape for buyers while hurting sellers who don’t own cookie-cutter homes or don’t want to announce to the world they’re selling. I also see it as un-American. Sellers should have the right to make this decision, not a collective of Realtors who are pressured by politics and optics.
Parking spaces in the same building on the same floor don’t command the same price. It varies due to demand like any market, but the distance to the elevator, proximity to a column, where it is in the garage and other seemingly inconsequential factors have varying degrees of importance to everyone, and they adjust the price accordingly. Now apply all that to a home.