| 
Opponents of relationship-driven pocket listings say they often exclude people of color, immigrants and other “outsiders” to a neighborhood.
Good luck to the National Association of Realtors in its belated crackdown on pocket listings.
If the explosive growth of this pernicious trend in Greater Boston and around the country is any indication, NAR is going to need it.
In her latest market report, set to hit the streets Monday, Elaine Bannigan, broker–owner of Pinnacle Residential Properties, raises the alarm, noting a double-digit increase in brokers opting not to post new listings on MLS PIN.
Instead, a growing number of brokers are opting to handle the sales privately within their firms, keeping the deals – and commissions – in–house.
But that means more than just cutting out other brokers. It also means boxing out any number of potential buyers who might have made an offer had they seen the listing advertised.
“Most of the buying public won’t ever know of the availability of a home marketed that way – this, in a market where buyers are already hampered by low MLS inventory in most price ranges,” Bannigan writes.
A 20 Percent Jump?
Unfortunately, as we head into 2020, it’s a trend that looks to be accelerating, regardless of the warnings out of NAR’s Washington headquarters about its pending crackdown.
The number of homes offered for sale in Wellesley through the Multiple Listings Service fell 10 percent in 2019, according to Bannigan.
And a big culprit was a near–tripling of “off-market” sales of homes that brokers took the pocket listing route, keeping them off of the local MLS system.
A total of 51 homes in Wellesley were sold off-market in 2019, up from 21 in 2018 and representing 14 percent of all sales, the report notes.
“Buyers can’t possibly be in a position to learn about every property that might be listed soon or have their name in with each of the thousands of agents that serve the market areas that they are looking in.”
— Sam Schneiderman, principal broker, Greater Boston Home Team
Weston also saw a big increase in off-market sales as well, jumping from just three in 2018 to 14 in 2019.
The number of Weston homes for sale on an MLS in early February is also down markedly, with just 30 compared to 43 the same time last year.
It’s not just a problem in a few wealthy western suburbs, though.
Sam Schneiderman of the Massachusetts Association of Buyer Agents estimates that pocket listings jumped by as much as 10 to 20 percent in 2019.
Pocket Listings Have Racist Effects
It is a practice his organization is adamantly opposed to, said Schneiderman, principal broker of the Greater Boston Home Team.
Sellers can never truly know whether the offer they received reflects their home’s true market value, while buyers who are not in the know never have a chance.
“Buyers can’t possibly be in a position to learn about every property that might be listed soon or have their name in with each of the thousands of agents that serve the market areas that they are looking in,” Schneiderman said.
With big brokerages pushing “coming soon” listings and other marketing gimmicks, off-market home sales are becoming a larger part of the real estate landscape.
The trend has been gaining momentum around the country as well, with San Francisco seeing a massive 68 percent increase in pocket listings between 2010 and 2018, according to Redfin CEO Glenn Kelman.
“Who’s being excluded? Academic research shows that it’s would-be buyers who are disproportionately people of color, immigrants and outsiders,” Kelman noted in a recent blog post. “These are the ones who don’t belong to the club, who don’t know the secret handshake, or the obscure website, or the private Facebook group, or the right agent.”
Given the horse appears to have long since bolted from the barn, methinks NAR is going to struggle simply to make a dent in this trend, let alone stop it
It’s an open question why NAR didn’t try to lower the boom earlier, when the private listing trend was just taking off and could be doused easier.
No new phenomenon, pocket listings were believed to be as much as 10 percent of the market back in 2017, when a quartet of top Los Angeles brokers formed the Pocket Listing Service, a play off the MLS name.
And there are now all sorts of private sales networks as well in which brokers are trading information on pocket listings with sales that may never reach the wider market.
A Truck-Sized Problem
But now that NAR has finally taken action, its crackdown, if it can be called that, is seriously flawed, with at least one major loophole large enough to drive a tractor–trailer through.
Under the new rules, which various MLS systems controlled by NAR will have May to implement, brokers must put a listing in their local MLS system within 24 hours of publicly advertising it, whether it’s a for-sale sign or an ad.
Scott Van Voorhis
The new rules are aimed at the growing use and abuse of those “coming soon” ads by major real estate brokerage firms where homes are advertised for days or longer before they are posted on MLS, all the while attracting interest and potential offers from buyers.
Yet the new NAR rules make an exception for so-called “office exclusives,” listings shared in-house among brokers in a particular firm for a particular period of time before they are posted on the local listing service.
The Consumer Federation of America has panned the loophole, arguing these, like other forms of pocket sales, benefit brokers while artificially limiting opportunities for both buyers and sellers.
Moreover, while NAR can suggest rule changes, it has no direct power over broker-owned systems like MLS PIN, which covers Massachusetts.
All of which will clearly tempt the big real estate firms to pay lip service to the new NAR rules while privately pushing pocket listings.
But firms and brokers determined to go their merry way should consider this: Amid the worst housing shortage in more than half a century, pocket listings are a really miserable way to make a buck.
Scott Van Voorhis is Banker & Tradesman’s columnist; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.
