‘Pocket’ real estate listings come under fire
Realtor panel to consider proposal to ban covert practice keeping homes off listing sites
The search for a home often begins online. But if you set up an alert on your favorite centralized listing site and assumed you’d be pinged every time a home meeting your criteria came on the market, you’d be wrong.
Many brokerages are quietly marketing homes only on their websites or through emails or phone calls before they ever upload them onto centralized websites known as multiple listing services.
The practice is now the target of a proposed ban that will be decided in the coming week. Supporters
of the ban say preventing a wide audience from knowing a home is on the market leads to worse deals for sellers and potential discrimination against prospective buyers. Opponents of the ban say sellers should have a choice in how they market their home.
A committee meeting Saturday at the annual conference of the National Association of Realtors will decide whether to send a proposal banning Realtors from the practice to the association’s 900-person board. The board could vote as soon as Monday, and if approved, the ban would be effective Jan. 1.
The outcome has the potential to reshape both neighborhoods and the division of power between multiple listing services and large brokerages. The Houston Association of Realtors does not keep records on pocket listings, but estimates are that as many as 10 percent nationally and as many as 30 percent in certain markets are listed in this manner.
For buyers, the quiet listings — called “pocket listings” if they never intend to be marketed on a Multiple Listing Service or “coming soons” if they will be listed at a later date — mean the chance to buy could depend on who you and your agent know.
That’s a problem, according to sociologist Elizabeth KorverGlenn, who spent a year research
ing real estate practices in Houston.
Contributing to segregation?
While Houston is diverse, zoning free and filled with relatively affordable housing, its level of racial segregation is high and has remained largely unchanged over recent decades. For Korver-Glenn, that made the city a perfect place to search for other issues at play in housing inequality. She quickly noticed something curious. Nearly all of the 18 white real estate agents she interviewed said they had marketed homes in that way at some point. All but one of the 20 agents of color never had.
“White agents work overwhelmingly with other white individuals. And to the extent that they’re advertising within their own network, they’re disproportionately excluding people of color,” said Korver-Glenn, who published a paper with her findings in the Southern Sociological Society’s journal, Social Currents in 2018.
She was not alone in her conclusions. A counsel for the California Association of Realtors and vice president of risk management for the Charlotte Regional Realtor Association have both warned that pocket listings risk running afoul of antitrust laws and the Fair Housing Act.
The listings have also made the websites of large brokerages, where pocket listings and “coming soons” can be found, more important for staying in the know. This has shifted power from multiple listing services such as HAR, which were formerly regarded as one-stop-shops for listings.
Driving web traffic
A review at the website of Compass this week, or instance, found 83 listings in the Houston region that were not yet on the MLS.
“If a broker has a listing and they only put it on their own site, you’d assume it’s to drive eyeballs to their site,” said Curt Beardsley, Zillow’s vice president of MLS operations. “We’ve been watching the industry for a long time and believe that some of the way that pocket listings have been done may not be in the best interest of the consumers — either on the buying side or the sellers themselves.”
While Zillow had seven “coming soons” listed in the Houston region this week, Beardsley said it doesn’t exclude potential buyers because of Zillow’s high traffic. He also said that Zillow will not be negatively impacted if it can no longer advertise them.
Tony King, Redfin’s Texas broker, said the company featured “coming soons” on its website to stay competitive, but would happily drop them if NAR’s policy passed.
“It’s for the greater good for the seller if everyone gets the chance to view it,” he explained, because more views means more potential for offers. “On the buy side, there are even some fair housing concerns of selling pocket listings before they hit the open market. It’s definitely an opportunity for bias to occur.”
Compass, on the other hand, has moved aggressively to defend the practice. When an MLS in the Mid-Atlantic region instituted a policy similar to the one proposed by NAR, the company wrote a letter threatening to sue the MLS for damages including lost exclusive listings if the policy was enforced.
Cory Perkins, Compass’s head of inventory, strategy and operation, said the company has prioritized its coming soon section in response to demand. “We’re trying to be as responsive as possible to the needs of homesellers, and this is something that came up repeatedly across the country as an ask,” he said.
Local real estate agent David Atkins is among those who agree homesellers should have the right to choose. His brokerage, Martha Turner Sotheby’s International
Realty, advertises high-end Houston properties that are not on HAR.
High-end impact
To show why he believes homeowners can sometimes benefit from not listing their homes, he described a house in Bellaire he recently sold. The sales prices of comparable homes suggested the home was worth $1,375,000. But Atkins believed the pool, a lavish, resort-style affair fitted with fire pits, added more value than were captured in comparable sales prices.
So he and his seller discussed the situation and agreed to call, email and send flyers to buyers agents who usually dealt with high-end homes in the area, telling them it was going for $1,450,000. If there was no interest, Atkins reasoned, they could list it on HAR for the amount comps suggested without having to enter a price reduction into the system, which could raise questions in the minds of potential buyers. Instead, the home sold off market for $30,000 above asking.
He also said developers often avoid listing their homes on the MLS until they’ve completed construction but want to advertise in the meantime. That’s why new construction often appears as “coming soon” offerings on brokerage websites. Under the proposed policy, they would either have to delay advertising the home through a brokerage or risk the listing becoming stale.
Others may not want their homes listed on the MLS at all.
“I sold a home for an individual off market — they did not want it online because they had tenants, and they were afraid they would lose their tenants,” Atkins said. “I sold another home off market — they were the owner of a home furnishing store, and they didn’t want their clients to know how nice of a home they lived in and think they were making too much money.”
He called fears of discrimination inaccurate, noting there are pocket listings in minority neighborhoods.
Shadrick Bogany, a Bellaire real estate agent, disagreed. “If I’ve got these listings that are off market, and I’m only showing certain agents and only certain agents know about it — in some cases, that could cause discrimination.”
Question of fairness
Bogany chairs the NAR group that spent two days crafting the proposal that would require MLS members to enter properties in the MLS within one business day of marketing them to the public. He noted that in situations where sellers don’t want their property shown on the MLS — perhaps because they’re a celebrity, or in the midst of an divorce — agents can obtain a waiver exempting them from the policy. “But if you bring me 100 waivers…” his voice trailed off.
The proposal is especially powerful in Texas, where homeowners do not have to record how much their homes sold for. The only way to obtain sales data necessary for pricing a client’s home is through the MLS, where real estate agents share information about their deals. That makes it difficult for anyone to opt out of the policy by giving up membership to the MLS.
Bogany was recently driving a client around to see homes in Bella Terra, a neighborhood near Cinco Ranch. There, he saw several properties with signs in their yards that had not shown up in the MLS. Since he had not known about them in advance, he had not made the necessary arrangements to show the homes. As someone who shared all of his own listings, he felt the off-MLS properties were not operating in the spirit of cooperation.
“You know about all of my listings, but I don’t know about any of yours,” he said. “If every broker felt the same way, the system would break down.”
rebecca.schuetz@chron.com twitter.com/raschuetz