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The NAR Power Broker Roundtable: ‘Coming Soon’ and ‘Pocket Listings:’ Are They Right on Any Level?

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Coming_Soon_listingThe Power Broker Roundtable is brought to you by the National Association of REALTORS® and Steve A. Brown, NAR’s Liaison for Large Residential Firms Relations. Watch for this column each month, where we address broker issues, concerns and milestones.

Steve A. Brown
, Liaison for Large Residential Firms Relations, NAR

David Cabot
, President/CEO, Berkshire Hathaway HomeServices, San Diego, Calif.
Chad Ochsner, Owner, RE/MAX Alliance, Denver, Colo.
Jeff Sposito, President, J. Rockcliff REALTORS®, Danville, Calif.

Steve A. Brown: Maybe it started with the shortage of inventory. Maybe it was the lure of exclusivity…and maybe it was dollar signs in the eyes of a few unscrupulous agents. Whatever it was, the rise of “off-market,” “coming soon,” and “pocket listings” is quickly becoming one of the hottest issues in our industry. How do such listings impact sellers? Buyers? How are brokerages and associations reacting to the practice, and what about policies or guidelines? David, this has been a topic of interest in California. What’s your take on the issue?

David Cabot: I personally think it’s bad business and I don’t permit it in my company. Off-market listings create an underground market that doesn’t help anyone but the listing agent and damages the industry as a whole. I think the practice gained a little traction as a way to control inventory when listings were really scarce, but it kind of peaked, at least in Southern California, in 2012 or 2013, and I believe it’s continuing to wane.

Chad Ochsner: It’s a hot-button issue for me, as it should be for every agent who has their client’s best interest at heart. There have always been exclusive listings on a small scale, mostly in the high-end when, for example, a Federal judge or a famous ball player asks to stay off the MLS. That says, pocket listings limit exposure, restrict access by bona fide buyer agents, and can fly in the face of industry ethics and MLS rules and regulations. It’s the reason why the Colorado Real Estate commission was one of the first to establish a position statement putting REALTORS® who are abusing the system on notice.

Jeff Sposito: Sad to say, we’re still seeing a lot of pocket listings in the peninsula and other high-end San Francisco Bay properties—as many as one in four home sales, according to the California Association of REALTORS®, which is warning agents to tread carefully. They’re not illegal, but as David pointed out, they are hardly in the best interest of sellers and they’re undermining the agent cooperation that’s always been at the heart of the industry. As I see it, it’s clearly greed on the listing agent’s part—and the “coming soon” advertisements popping up in the online media are adding fuel to the fire.

SAB: NAR has made it clear that protecting the interests of our clients is job one, and that brokers must adhere to the NAR Code of Ethics when advising clients on whether or not to advertise properties as “coming soon.” For now, what can brokers and owners do to keep pre-market, off-market and so-called pocket listings from tarnishing our professional trust?

DC: Articles and company brochures need to remind sellers that an agent is duty-bound to represent the client’s best interests and that withholding a listing from the MLS restricts marketing opportunities and severely limits the pool of buyers. And brokers need to inform their agents about the misuse of pocket listings and the potential for violating MLS rules and/or the REALTOR® Code of Ethics.

CO: The same is true at the association level. The common rule is that to comply with MLS rules, a property must be filed with the MLS within 48 – 72 hours after the listing is signed. Unless the seller has instructed otherwise in writing, not doing so is clearly a breach of ethics.

JS: Unfortunately, we can’t take the right to decide away from the seller—and greed is a powerful motivator for agents who are willing to work the angles. Discipline is a start…and reinforcing the rules. NAR’s position on “coming soon” advertising is a very welcome start.

SAB: A very welcome start, and one that needs to be replicated by every REALTOR® association in the country, coupled with education and enforcement. A 2011 Gallup poll reports that real estate agents are seen as trusted professionals by more than 73 percent of responders. That’s a healthy number we want to see improve.

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9 thoughts on “The NAR Power Broker Roundtable: ‘Coming Soon’ and ‘Pocket Listings:’ Are They Right on Any Level?”

  • Gary Frimann says:

    It has waned in my area, but I mainly saw it as agents being greedy, and perhaps trying to keep it in-house. I’m in Silicon Valley, and personally, I think sellers coulde’ve gotten more for their house had it been properly exposed. I am furious when it is a short sale… Especially when it sells in one day to somebody using an agent from the same office. The lenders should crack down on that practice. Doesn’t bring top dollar, and hurts the neighbors who may be trying to refinance.

    1. Jeffrey David Halpern says:

      I can see some changes in the in-house short sales point you brought up as I am seeing several companies putting their short sale inventory on auction sites like Hubzu after an offer has been accepted by the seller, to protect themselves from situations as you are talking about. I like the protection for the property, however, it makes for an even longer waiting period and a buyer who’s offer may be outbid after they have already spent time and money on the property.
      It does avoid the appraisal issue where we have seen plenty of “differences” in price opinion, which has also terminated transactions.
      There is no easy answer.
      However, we really need to bring back the Mortgage Debt Relief Act, which would alleviate the up-tick in foreclosures we are seeing in the northeast.

  • Jeffrey David Halpern says:

    Thought I share a blog I wrote in March of 2013 and am in total agreement of the PB’s

    “I am a huge advocate on exposing listings to as many potential buyers for a property. It allows buyers to have access to a home for sale and gives every Realtor the opportunity to show the home. This in turn, gives the seller the greatest chance of obtaining their highest selling price.

    Sounds simple and yet I am seeing one or two companies out their asking (almost telling)their agents and in turn, those agents asking their sellers, to sign a “Waiver of Broker Cooperation” to list the homes with that company versus list it so other companies have the opportunity to sell it, also known as cooperation. The result is less exposure to potential buyers that equals possible lower selling prices.

    Let me explain. Most listings are known as “Exclusive Right to Sell”. In other words, the listing agency has the exclusive listing to market the property but must distribute the listing to its multiple listing service in a timely manner, so it is open to other real estate companies to show their potential buyers (HINT: when interviewing listing agencies, always ask the number of ML systems a listing is on – 2 is much better than 1), and to post it on their company websites, too. (Internet Data exchange). However, if a seller agrees to the aforementioned waiver, it prevents the listing to be posted on MLS systems, additional company websites and more so, the maximum pool of buyers to see a property and make offers on that property.

    It is not to say that a homeowner may want the waiver for various situations, but if not for anything specific, such as security, anonymity, etc., it is the wrong thing to do for both buyer and seller. But as per real estate law and the Realtor Code of Ethics, it is the seller’s decision, not the Realtor’s.

    So why would a real estate company push this. They will tell you that it better controls a transaction and keeps everything in one place, but the answer is – GREED. When cooperating with other brokers, the fee paid towards the sale is split between the seller’s agents and the buyer’s agent, whether it be with one or two companies. Conversely, if the waiver is signed, only one company receives the entire fee. Most cases for the same amount. Why does the greed come about without any concern for the client? It is possible they want to take advantage of the perceived buyer’s market we are experiencing or the company has grown a yellow stripe on its back and is afraid of losing market share or needs the income because of greater competition for that commission dollar.

    Whatever it is, beware of what a real estate company is trying to sell you. You, as the seller, are the client, and the service you deserve is that of obtaining the highest price your home will obtain in this market. The only way that can occur is with your home having the highest exposure it can get.”

  • Nina Gaspich says:

    Way too much for abuse, especially if the seller clearly wants the agent to keep it off the MLS to avoid having “certain people” looking at the property. There are ways to preserve owner confidentiality without risking an open-housing complaint.

  • Kerry Helm says:

    I like the idea of being able to post Coming Soon but I’m not sure about posting a Pocket Listing; you better have it firmly in your pocket. But that may be all the listing you can get and you should be able to market it. The Coming Soon makes sense, since there are many reasons that a new listing may not be quite ready to be officilaly listed and it’d be nice to be able to get it out there… and sell it yourself. Isn’t that what all of this is really about?

  • Although I support broker cooperation, I feel that pocket listings are still a legitimate business activity. For one thing, listing agents aren’t required to cooperate if doing so isn’t in the seller’s/landlord’s best interest. Also, it’s important for us to remember that the listing broker isn’t obligated to compensate cooperating brokers or agents.

    This is clearly illustrated in Article 3 of the NAR Code of Ethics. Consequently, what we have in our industry is a “free market” system. Pocket listings or off-market listings are the result of an agent building a successful book of business – similar to that of a physician’s or attorney’s practice. Now, that may not be fair in “general market” terms, but that’s the case.

    Pocket or off market listing assignments come from an agents’ existing client/customer base as opposed to coming from new clients or customers. In every business, you’ll find that in order to grow sales revenue you must generate sales from your existing customers or from new customers or do both. It’s more profitable and less expensive to grow sales from existing customers/clients. This is Business 101.

    And since most of us REALTORS® are self-employed business owners, we too, must conform to these business standards if profitability is one of our goals.
    In addition to being small business owners, agents are also in engaged in a sales profession. Now, I know that some of us are still uncomfortable being called “salespeople” nowadays but that’s exactly what we are because we’re engaged in selling products (i.e. real estate) and services (i.e. brokerage). As salespeople, this means that we must possess account management skills.

    If an agent develops an effective customer/client (account) relationship program, that agent’s activity will naturally grow into long-term client relationships that will yield future returns (e.g. pocket or off-market listing assignments). This is Sales Management 101.
    And there are many agents who, over the years, have built up their database with hundreds and even thousands of buyers and sellers. This database then becomes their personal “marketplace.”

    Again, these are legitimate business principles and practices. So, I don’t think there’s anything wrong with off-market listings. I think that off-market and general market listings can both exist in a free market environment.

  • Toni Adams says:

    Finally…someone is bringing attention to an unethical practice of which I am seeing more and more. Particularly in large condominium complexes that have an independent on site office. And while we are at it, the same agents also fail to change the listing to “contingent or pending” when they have an offer. I have called about several “active” listings, only to be told by an office clerk, that it has been under contract for weeks! They do this hoping for a better offer, or multiple offers! Again, in my opinion unethical, and upsetting to that serious buyer, who thought they found their dream home! Two very good reasons why public opinion of Realtors has gone down!

  • Douglas Jacobs says:

    Coming Soon…………..We do this to drive traffic to this home. The anticipation in a tight market, like we have here in Austin, increases the buyer traffic on opening day. Does not matter if they have an agent or not. We will not accept showings or offers until it is no longer coming soon and actually on the market. This is what is in the best interest of the seller to drive possible multiple offers.

  • You know, I, too, have worked as a buyer’s agent and understand the frustration felt by many buyer/tenant brokers who don’t feel that they have access to the entire property inventory. But, I also recognize that as a buyer’s broker or “co-op” broker I don’t have control over another agent’s listing. And emphasis is placed on “another agent’s listing.” It’s the listing broker’s deal.

    If I choose to work as a cooperating broker, the value that I bring to the listing broker’s deal is that I have a buyer who’s ready, willing, and able to purchase his/her seller-client’s property. In exchange, I get a portion of his/her (i.e. listing broker’s) fee. If the offered fee is less than what I initially charged my buyer-client, it’s my responsibility (as the buyer’s representative) to recover the difference from my client – the buyer.

    Regardless of whether the listing broker has an exclusive agency or exclusive right-to-sell agreement with the seller, the listing broker is ultimately the one responsible for selling or disposing of the seller’s property. This is with or without the assistance of a co-op broker. As the responsible party, the listing broker establishes the fee for his/her services based on scope of work and what’s negotiated with the seller-client. If the listing broker sells the property without assistance, he/she is entitled to receive “his/her” full brokerage fee.

    There’s nothing illicit, unethical, or greedy about that. All of us engaged in this business are profit motivated whether we want to admit that or not. Without profit, there’s nothing left over for expenses, salary (or draw), taxes, dues, and other costs of doing business.

    So I think the underlying issue really has more to do with collegial camaraderie. And that’s not something that’s easy to enforce especially in a free and competitive business marketplace. Among REALTORS®, competitors usually cooperate. I think that this is one of the benefits of being a REALTOR®. Cooperation is encouraged. But, among non-REALTORS®, it’s hit or miss. This is especially true if you practice commercial brokerage.

    The real estate industry has more than two million agents/brokers, but approximately half are REALTORS®. In addition to that, independents dominate the industry. So broker cooperation isn’t something that’s easy to mitigate without crossing the line of antitrust laws.

    Also, many of us have focused on the seller not getting a high price if the property is sold off-market. This is not true in all cases. There are some agents with large databases of buyers and sellers. Believe it or not, there are agents with databases as large as 15,000 people! Even if a quarter of those people are candidates for a “pocket listing,” that’s an impressive “marketplace.” I’ve observed this activity to be true for both residential and commercial agents.

    Another thing too is that we must remember that the seller isn’t always primarily profit motivated. In fact, profit motivated sellers can be the most difficult to work with because they are so focused on “their price.” In contrast, there are sellers who are emotionally motivated to sell their properties. I don’t know about you, but these are the seller-clients I have truly enjoyed working with the most. Why? Because they want out of the property! And if you can help them do that quickly – i.e. through a “pocket listing assignment” – they’re going to love you for it.

    So though “pocket listings” do have disadvantages, they have advantages too. I think that buyer brokers just have to get a little more creative in sourcing properties for their clients and not rely so much on the listing broker’s offer and MLS.

    As real estate agents and REALTORS®, we’re businesspeople and must be able to navigate within a business environment that’s still extremely competitive.

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