It’s been widely accepted for years that off-market sales are part of the real estate landscape. After the (fraudulent) short sales went away, realtors needed another sexy lure to attract new clients, and rather than crafting the high demand and bidding wars into an auction-like experience, we went the other way and are using restricted access as our ploy.
None of the industry players want to even talk about it, let alone do anything.
In the meantime, it’s the way the business is trending.
With no public objections and so many off-market deals happening right before our eyes, every agent and brokerage wants to take advantage and create an effective off-market strategy.
It restores control of the inventory to the agents – we decide who gets exposed to the listings, and when. It will also turn the MLS into the website of last resort, used only when a listing agent can’t find their own buyer. The real estate portals will suffer, and full access for consumers won’t be the same.
We might as well go back to the MLS books!
Many agents claim it’s just ‘pre-marketing’, but what happens if a buyer makes an offer before the listing hits the open market? Are you going to turn it down? Or are you going to make a quick deal and move on to the next one?
The phase underway now is the building of realtor clubs.
There’s the PLS, as well as the Top Agent Network, which is operating in 31 markets and should be coming to San Diego soon. They offer club membership to the top 10% of producing agents in each region so they can network and market their listings to each other. I’m also a member of 4-5 groups on Facebook, where the focus is pre-MLS exposure of listings and ‘making deals’, plus there are several realtor meet-ups around town too.
The shift to private, off-market deal-making isn’t just coming soon – it’s here.
I think we should just admit it to ourselves and to the consumers, and then find a way to make the best of it – because it’s not going away.
While some folks can’t make sense of a move up or down, there are others who have specific wants/needs, and are willing to forge ahead – if they can just sell their existing home and pour their equity into the next one.
I’m three for three this year with contingent sales already, and I wouldn’t be surprised if half of my sales in 2019 will involve contingent buyers.
The challenge gets more complex when multiple sales are contingent! They stack up like dominoes, all dependent on sales on either side to be completed successfully – and risk all crashing if a problem pops up that can’t be solved.
Up to now, listing agents and sellers haven’t had to deal with contingent buyers because we’ve had enough non-contingent buyers to go around. Not any more.
The #1 reason sellers and listing agents should consider a contingent offer?
Contingent buyers pay more.
They know they are asking a favor, and in effect, they are purchasing a favor.
Plus, their purchase is contingent upon them selling their house (read: getting the price they want), so everybody gets what they want. Win-win!
Contingent sales can be highly speculative, however, and our existing system doesn’t provide a safety net, so there is a risk that every seller could get left holding the bag.
How can we tighten these up?
Have buyers obtain full loan approval. At least if the buyers are fully approved by the mortgage underwriter, that concern is satisfied. A pre-qual letter isn’t solid enough to tie up a property.
Review the lender downstream. If there is a chain of contingent sales domino-ed together, let’s take a good look at everyone’s lender letter – because we’re all in it together.
Review the agents downstream. Is everyone competent? If my sale is reliant upon an agent downstream finding and solving problems, then it’s not asking too much to know who it is. What else have they sold lately?
Supply comps and photos of contingent properties. Every agent involved should know – and get to render their opinion – on the price/value of the other homes in line.
Bridge loans. Bridge loans are out there, and Compass should have a good alternative ready before too long. A fantastic option that solves everything.
There is another viable alternative that every contingent-buyer should consider: Selling your home first. The immediate reaction is usually the same – I don’t want to be left homeless, or I don’t want to have to move twice, which is understandable.
But we do have the seller contingency that allows us to find a suitable buyer for your home while not binding the seller to move until they find suitable housing:
Our ability to master the contingent sale will probably make or break the market this year. Without them, will there be enough buyers with the equity, desire, and ability to keep the party going? It’s doubtful.
Most realtors, let alone buyers and sellers, are unfamiliar with contingent sales. But this is where our creativity will pay off in a challenging market!
Yesterday we heard from Gov Hutchinson, the assistant general counsel for the California Association of Realtors. He travels around the state to inform realtors of the basic changes to forms, and helps define other aspects of the business – here’s a summary of what we heard:
Transfer Disclosure Statement – The buyer has a five-day rescission period after receiving the completed TDS from the seller (the form where the sellers disclose pertinent facts about the property). If the form is delivered to the buyer’s agent late, incomplete, or unsigned, the buyer can still cancel the transaction even if they have already released their other contingencies.
The CA Department of Real Estate is unhappy with compliance to the rule that realtors need to have their license number on every flyer, business card, sign, social-media account, etc. They have hired additional personnel to chase us around.
It’s acceptable for landlords to say ‘no pets’, but they must accept tenants with service animal (seeing-eye dog) or emotional-support animal with a note from a licensed caregiver – as long as it is reasonable. If the animal affects the landlord’s insurance, or is a threat, the landlord can say no. The law supersedes HOA, C,C,&Rs, and city codes, and the landlord cannot require a pet deposit or higher rent for these animals.
A landlord cannot require tenant insurance.
A landlord cannot be compelled to take a Section 8 tenant.
Low-flow plumbing is required in all homes throughout the state. Sellers don’t have to fix/update if the buyers will accept as-is.
If a house for sale has hidden cameras, there should be a sign near the front door to alert buyers and agents who are showing the property that the house is under surveillance.
No laws, rules, or guidance on Coming Soons – it is a local MLS issue.
I think we can say that the Coming Soon dilemma has been decided – nobody wants to address it globally, so it will be left up to the agents.
Realtors love the Coming Soons, and are now pitching them as a vital part of the marketing program. But with no rules or guidelines, what happens when a buyer wants to see the home? Do you show it during the Coming Soon period? Do you field offers? If you do get an offer, do you throw the listing on the MLS to give everyone a chance too? Or do you just make the deal and hurry off to the next one? How do you know if you got full value? (you don’t know)
Virtually every listing will go this route in 2019, and then most will be uploaded to the MLS with diminished urgency because the motivated buyers already saw the sign two weeks ago, and forgot about it.
Instead of relying on instant market data from the internet, we’ll need drivers to patrol for new Coming-Soon signs, and rely on word-of-mouth between agents to make these off-market deals we now crave for some reason.
1. ‘How do you keep alligators from coming up into the toilet?’
Michael Lyons, a real estate broker with Lyons Realty Group in Hollywood, FL, has certainly heard his share of concerns about alligators lurking in yards, ponds, and swimming pools. But sneaking into the house? Through a toilet? That left him stumped.
2. ‘Do any swingers live in the neighborhood?’
While home buyers often have questions about the neighbors, this one was a first for Kate Julian, a real estate agent with City Chic Real Estate, in Washington, DC.
“They said they were swingers and that’s something they were looking for,” she said. Unsure what to say, she countered with, “drive around the neighborhood and see.” After all, aren’t swingers very friendly?
Is there a chance our home values could drop 20% to 30% like we saw in 2009?
There aren’t enough homeowners who will sell for today’s market value. If prices drop, wouldn’t there be fewer homeowners interested in selling?
Probably – unless there was a panic.
Who might panic?
Some think it would be the recent home buyers – they were the ones who paid too much, and would panic to get out while they could before losing money. But this isn’t the stock market – they bought a home for the long-term, and like we saw during the last crisis, people don’t sell just because they are underwater – or heading that way. They have to live somewhere, and they will hunker down.
It’s the long-time homeowners who could sell for substantially less, because they have a boatload of equity. If they had to dump on price to sell their home, they could do it, and still make out fine. But would they?
We see articles claiming that 40% of boomers are broke or close, and they all can’t be renters. But for long-time owners to finally capitulate and dump on price in a panic, other things would have to happen:
They would NEED the money.
Somebody else would have to go first (and second and third).
We’d go back to cyclical real estate.
Realtors encourage dumping.
Need the money? They need to live some place too, and does anyone really want to move to Hemet? Selling the long-time homestead and renting doesn’t sound desirable either. But if older folks can cash out by selling the house and move in with their kids, they might do it – but do the kids want them? It’s more likely that the aging will stay put, and have nurses live-in or visit, if for no other reason than to avoid the capital-gains tax on profits over $500,000.
Somebody else needs to go first – and it will take a few lower sales nearby to make it obvious that it’s time to panic. Denial is more than a river in Egypt!
Previously there were real estate cycles. In the 2000s, the exotic financing stretched out the up-cycle, but then the reversion was shorter than usual too – just a couple of years. Why? THEY CHANGED THE RULES, and stopped foreclosing. This is the key fact – lenders always led the previous down cycles by dumping REOs for whatever they could get, and sucking down home values for all. But now banks don’t have to foreclose on defaulters, let alone dump houses for whatever the market will bear. Without banks being the catalyst to start the dumping, who else will do it?
Realtors could get the party started by telling sellers to dump and run. But in reality, it works in the other direction. Somewhat-desperate sellers would rather shop around for a realtor who will take the listing at their lofty price, than believe they’d have to sacrifice their hard-earned equity (not!) just to sell. Desperation is so high among realtors that it’s not hard to find one who will take a listing with a price based on comps +10%. For most agents, that’s all they’ve ever known, and they don’t read blogs.
Bottom Line: There may be a slew of negative soundbites, but unless homeowners see panic happening right around them, they won’t believe it. Real estate ignorance is bliss!
Our broker-cooperation model of sharing listings though the MLS has been the lifeblood of selling homes since the early 1960s. But it is breaking down right before our eyes.
It’s not going to happen all at once, or even happen out in the open. Instead, the sharing of listings through the MLS will just quietly go away.
Whether it is the emergence of the PLS, or brokerages developing their own Coming Soon program, or individual agents doing off-market sales out of sight, the sharing of listings is doomed – even though it is what’s best for consumers and agents alike.
Can we just admit it, and carry on like the commercial brokers do?
Everybody for themselves!
The first thing to do is to stop the automatic listing feeds to Zillow/Trulia, and make it broker-optional, which is what’s happening in Las Vegas.
Agents may choose to upload their MLS listings to Zillow and other portals, or maybe not. But what about Redfin and other brokerages who get their listings directly from the MLS? Once agents see the benefits of eliminating portals, why would they bother with the MLS at all?
Maybe agents with a hot new listing will just wait a few days or weeks to see if they can find their own buyer first. Or maybe another agent in the office might have someone? We already see this happening every day.
The MLS will be the marketplace of last resort.
We should embrace this change, and tell consumers that they have to go to each company’s website – or even each individual agent’s website – to find the hot new buys. At least they would know the honest truth!
I’m convinced that industry players don’t see this coming. They don’t see what happens (or they look the other way) when listing distribution is left in the hands of the listing agents themselves.
Yes, thank you for giving us the ability to choose which platforms to use to market our listings – I appreciate having choices. But when you take the automation away, and make it a manual choice for each listing, agents will find it hard to resist the temptation to limit with whom they share their listings.
More tip-toeing around the Coming Soon topic in Realtor Magazine yesterday:
The surge in off-market “pocket listings”—those held off the MLS in favor of secret channels and networks between agents or within a brokerage—is a growing issue in the real estate industry.
In markets starved for inventory, real estate professionals are struggling with being kept out of these secret dealings for homes that their buyers could potentially want.
In markets such as Los Angeles, for example, reports say that up to 30 percent of sales are being withheld from the MLS for the sake of more private channels, according to some brokerage estimates.
In response, some brokerages—and even MLSs—are looking for ways to expose these listings to a larger audience. One of many recent launches in the past month came from the brokerage Compass, which allows its real estate agents to post their listings to Compass’ website days before sharing them with the local MLS and third-party portals, like realtor.com®. “Compass Coming Soon” is available nationwide in markets where the brokerage operates.
“This will help our agents get a head start on marketing while still getting the property ready for market,” Compass CEO Robert Reffkin reportedly shared with Compass real estate professionals in an email. “By harnessing the power of pre-marketing, [the listing] actually shows up twice in everyone’s alerts: once when it hits Compass.com, and again when it hits the open market, doubling potential exposure.”
Pacific Union International, which Compass acquired in late August, had launched its own solution to handling the disruption from the growing prevalence of pocket listings in May with “Private View,” debuting $400 million worth of exclusive property offerings. But its portal of off-MLS listings can be viewed by any registered users—real estate professionals from other brokerages as well as the general public. Registered users can see exclusively signed listings before they’re publicized on the MLS. The portal is currently available in northern and southern California.
In September, Long & Foster launched its own exclusive Coming Soon Portal to promote upcoming listings to its agents before they are on the market. It’s a way to gauge interest and create early demand for a property before it hits the MLS.
“Our agent-to-agent portal allows our sales associates exclusive access to Long & Foster properties that are not yet in the MLS,” Barry Redler, chief marketing officer for The Long & Foster Companies, said in a statement announcing the portal. “Having this platform not only allows us to respond to certain seller requests but also gives our agents a leg up on the competition by helping their buyers more easily find a home in a tight inventory market.”
MLSs are searching for the answer to expose these homes listed for sale, which the seller may wish to keep secret. The Chicago area MLS, Midwest Real Estate Data, launched the Private Listing Network in 2016 as a separate feed to share information to registered brokers about “coming soon” listings. These are not displayed publicly. MRED officials cite it as a way for real estate professionals in their area to premarket listings that aren’t ready to show yet or that are in the process of being renovated, repaired, or staged prior to being marketed publicly. It’s also a way to test the price, as a range can be entered.
But some brokerages and MLSs are taking a firm stance against the practice of pocket listings or “coming soon” forms of premarketing. Since 2013, Northwest Multiple Listing Service—serving the Seattle area—has prohibited its members from promoting or advertising a property until it is listed in the MLS.
Off-MLS deals amplify concerns about limiting exposure of the property “to a select group of agents to the detriment of the seller and other MLS members,” Tom Hurdelbrink, president and CEO of NWMLS, told REALTOR® Magazine.
Nobody wants to project how this will play out, but it seems obvious. Every brokerage will operate a Coming Soon program, and the MLS will become the marketplace of last resort.
It’s one thing to talk about whether Prop 5 will make a difference, because it’s very speculative – we won’t really know unless it passes.
Will it pass?
The powers that be are pushing their agenda on either side, but I doubt there are voters sitting on the edge of their chair awaiting the outcome.
If voters just go off the voter guide for direction, this is what they will see:
The ‘con’ argument starts with two zingers and then fingers the ‘corporate real estate interests’ as the culprit. If voters go to their website, this is the first image they see, which will make an impression:
Because the C.A.R. is already gearing up for a revised initiative in 2020, this may just be a test run. But it would be helpful to have it pass, and see if there is any positive impact on the statewide market that could provide additional data for the 2020 initiative.
If it does pass, but the market doesn’t change much, then the C.A.R. will be able to say that we need the next round – which eliminates the inheritance tax break for vacation and rental properties, and clamp down on businesses that avoid higher property taxes when they buy commercial real estate.
