In this age of multifarious means of communication and a chronic lack of residential home inventory the practice of “Coming Soon” listings has increased, dramatically in some hot market areas. So much so that the National Association of Realtors has issued a new policy disallowing this practice.
What are “Coming Soon” Listings?
These are properties that are advertised for sale without being listed with the local multiple listing service (MLS). Agents advertise these properties through broker websites, Facebook, Zillow, e-mail blasts, yard signs, flyers, etc.—but not in the MLS. This can be done as a pre-listing marketing campaign, in which case the home will be listed in the MLS if it is not sold within a certain period of time, or the plan may be to never enter the listing into the MLS. Pocket listings, whisper listings, off-market listings and shadow market listings all can refer to essentially the same practice as coming soon listings (with some nuanced variations on the theme).
The new policy.
So in November, 2019, the National Association of Realtor’s (NAR) board voted to approve the following policy to be adopted by all MLS’s that subscribe to NAR (this includes our West Penn Multi List): Sellers—by way of their brokers—will have to list a property on the MLS within one business day of any public marketing, which includes, but is not limited to, flyers, yard signs, digital marketing, brokerage websites, digital communications and multi-brokerage listing sharing networks.
This new rule is called the Clear Cooperation policy and goes into effect January 1, 2020 but MLS’s have until May 1, 2020 to implement the policy.
What is the problem?
One problem cited by the NAR is related to the recent, ongoing shortage of residential inventory. Not all buyers know about coming soon listings and so some buyers can lose out on opportunities if they are not tuned into the right information channels outside of the MLS. This is not fair to those buyers, many of whom may have already made offers in multiple offer situations, did not prevail and are getting frustrated. The new policy is designed to give equal opportunity to all buyers.
The drawback for sellers can be that their home gets very limited exposure compared to the MLS. Maximum exposure creates the maximum competition which is good for the seller. Multiple offers are considered the dream come true for sellers and will get them the best price, terms and conditions. The best chance for multiple offers is the broad exposure provided by the MLS. Informal advertising may snag a buyer and a contract quickly but it may not be the best deal the seller can get.
Why would a seller agree to not listing with the MLS?
Privacy is one reason for not exposing a property to the broad reach of the MLS. Sellers who are celebrities or are going through a sensitive divorce may feel their privacy is more important to them than the benefits of a larger buyer pool.
Advertising a property as coming soon can allow a seller to test the market while final repairs, decluttering and staging are being done. In this case buyers may be allowed to see the home before it is listed or they could just be held in the queue until the listing is launched in the MLS. Agents and/or buyers may provide helpful feedback to sellers before they start racking up days on market on the MLS.
An agent could offer a seller a break in the commission for a sale prior to listing in the MLS. In this case, the agent spends less time, does less work and invests less marketing dollars so it makes sense for the seller to pay less commission. As long as the break in commission compensates for the difference in sale price, etc. compared to what an MLS listing would bring this arrangement could benefit a seller.
Dual agency may be another reason why sellers end up avoiding the MLS, at least for an initial period. Dual agency is the case where the seller’s agent also represents the buyer and collects the commission from both sides of the transaction. Advertising directly to buyers is more likely to put the seller’s agent in a position to double end the deal. The doubling effect on the commission is a real win for the agent, but may not have a benefit for the seller. Could very well result in the seller getting less than the maximum the market has to offer for their home. I would love to hear the sales pitch by which an agent convinces a seller that this is in their best interest!
A concern has been expressed that when homes sell outside of the MLS the normal data collection process is sidestepped and appraisers and real estate personnel do not have the benefit of the full complement of information provided on a property by the MLS. This, of course, is also the case in home that are sold by owner. This is true and it is frustrating when I am doing a market analysis and I cannot use a good comparable sale because I don’t have enough information to include it in my analysis. However, I don’t think this is an adequate reason to determine how you choose to sell your home.
The new rule does not apply to the “office exclusive listing”. In this case, a listing is taken by a broker and is only advertised within the brokerage and possibly directly to some buyers, but not to the public in any of the ways mentioned above. This type of listing would have very limited exposure and usually the seller would have to sign a waiver indicating their awareness that they are foregoing MLS exposure. A seller may choose an office exclusive listing for the sake of privacy or a broker may promote an exclusive in order to keep both sides of the commission in house. This practice actually has been employed regularly by a particular broker in our western Pennsylvania region in recent years. Again, I would love to hear the conversation that convinced the seller to go this route.
In most MLS’s, even under the new rule, a listing can be advertised as “coming soon” but only after it has been put into the MLS. Showings can be delayed for some days, sometimes for weeks, building the anticipation and lining up buyers in the queue. If the house is a good one, this often results in overlapping showings once the showings start and ends in multiple offers. This can be a successful strategy for sellers but many buyers and agents resent the sense of contrivance and manipulation and will hope to find another home before the coming soon listing actually comes around.
I should also note that multiple offers may be a seller’s dream come true, but they can also turn into a nightmare. The frenzied atmosphere under which a buyer makes an offer when showings have been compressed into the first day or two and a deadline for best and highest is given results in a fall through deal later more often than contracts signed without multiple offers. After the dust settles buyers start to think that maybe they paid too much and gave away more than they should have to get the house. Buyer’s remorse sets in and they start to look for a way out. Once a deal falls through, the seller will never be in the same position as they were when the house was first made available for buyers to see.
In a very hot market it may not take much to find a buyer for a nice home in a good neighborhood. This combined with the many, many ways we now have to get the word out creates the opportunity to try to work outside of the traditional real estate approach using the local MLS. This new NAR policy may help buyers to see more listings and may keep sellers from unnecessarily limiting market exposure for their homes. In any case, it will push more listings into the local MLS’s. As with most regulation the cure will have some side effects. Agents will have less flexibility in marketing properties for their sellers and some legitimate pre-listing marketing strategies will be lost. Surely some clever brokers and agents will find work-arounds. Let’s see how it plays out