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Op/Ed

The dangers of pre-MLS, pocket listings, listing clubs, and off-MLS listings

Pre-MLS listings are used for a variety of reasons, but as they become more popular for their advantages, let us look at the disadvantages.

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off-market listings

There are some past real estate practices that are now explicitly illegal. Referral fees deemed harmful to consumers were explicitly banned by RESPA. Dual agency is likewise under scrutiny, with mandatory disclosures being created to discourage the practice and the practice is now illegal in several states, with more states likely to come. If a practice is bad for consumers, it’s not likely to stay legal for long, and those who engaged in the practice might find themselves in serious trouble.

Pre-MLS, listing clubs, pocket listings, and off-MLS listings all fall into this category. All of these involve an agent or broker keeping a property for sale off of the MLS, for sale to a buyer:

  • found by word of mouth
  • found by sharing the property with agents in the same office,
  • found by sharing the property with a larger group of agents over coffee, through email, or through Internet sites.

In all cases, the agent’s aim is to get the entirety of the commission, or at least to have it stay within his own brokerage or other group that provides the agent some advantage. Given everything we know about the dangers of these forms of non-listing for the client:

  • minimizing exposure to audiences, both local and on web, who might purchase the property,
  • minimizing the number of offers received, and
  • property fetching lower sales price,

the agent is clearly privileging his own interests over the client’s. Like referral fees and dual agency, this practice is bad for consumers.

Even the government has taken action

We’ve already seen those “in the know” enact rules requiring MLS listing. In August of 2013, Fannie Mae said that it wouldn’t approve short sales unless the property had had an active MLS listing for at least five straight days including a weekend. I think that’s just the start – the government is aware of the financial harm caused by not giving a listing proper exposure. Take heed.

Some might ask, “Is MLS entry really needed to get top dollar for a listing?” Where it has been studied so far, the answer has been, “Yes!” In one study (at MLSListings), for every $100,000 of home sold, not having an MLS listing cost the sellers an average of $15,000. Do agents really think that once a consumer realizes they may have taken a $150k haircut on that million-dollar home just so the agent can get an extra 2-3% on a transaction, they’re not going to take action?

Financial harm to the consumer isn’t the only issue at hand

Financial harm to the consumer isn’t the whole of the issue either. In a recently published article, attorney Grant Harpold made the following additional points:

  • If a consumer makes a claim against the broker, the insurance company carrying the liability insurance may “take the position that intentionally leaving a property off of the MLS is not covered, i.e., no REALTOR® should be that careless.”
  • Such listings may actually “deny certain people access to the purchase of property. If only certain buyers are allowed to bid on the property, then the REALTOR® runs the risk of being party to a discriminating act, even if unintentional.”
  • A broker or agent may also “be subject to antitrust laws that are in place to promote competition.”

Handling off-MLS listings when clients request them

While the practice may still be legal, Mr. Harpold recommends that agents engaging in the practice explain the risks to the property owner and have them formally sign off on all of the risks – in writing. There may be instances where a sophisticated client – a celebrity or other high-net-worth individual – wants to use an off-MLS listing to protect his/her privacy.

If so, s/he can sign a form explicitly acknowledging the dangers of such a listing. It is worth noting, though, that there are alternatives to off-MLS listing in such a case, such as restricting the listing’s Internet display in the MLS context.

The practice is increasingly popular

In desirable areas with a shortfall in housing inventory, such as the San Francisco Bay Area, this practice is increasingly popular. Fully 29.4% of listings in Contra Costa County, in the Bay Area, were off-MLS in 2012. This provides increasing occasion for bad outcomes and even abuse, all of which will filter back to regulators, trial lawyers, and legislators. Without some tangible incentive for agents to keep listings within the MLS, an unwanted, imposed solution is likely down the road.

If the practice of off-MLS listing continues, we may expect one or more of the following outcomes.

  • NAR will step up and require MLS entry as a standard of practice.
  • Attorneys will smell blood and start a class action lawsuit against brokerages, leading to the practice’s decline.
  • A law will be passed prohibiting the practice.

The real question I’m left pondering is whether this practice will worsen perceptions of the industry before the trend fades away due to market conditions or is stopped by legal means.

This editorial first published in May 2014.

Matt Cohen has been with Clareity Consulting for over 17 years, consulting for many of the real estate industry’s top Associations, MLSs, franchises, large brokerages and technology companies. Many clients look to Matt for help with system selection and negotiation. Technology providers look to Matt for assistance with product planning, software design, quality assurance, usability, and information security assessments. Matt has spoken at many industry events, has been published as an author in Stefan Swanepoel’s “Trends” report and many other publications, and has been honored by Inman News, being listed as one of the 100 Most Influential Real Estate Leaders.

Op/Ed

How to win every argument from now on

(EDITORIAL) If you have to start arguing then you need the right understanding of what is convincing and what can be dismissed out of hand.

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Freelancers and entrepreneurs working together in a meeting room, two men and two women, discussing over a laptop.

Take a look at your Facebook and Twitter feed or the comments on any news post. If there’s one thing it would seem nobody has any trouble with these days, it’s arguing.

There’s arguing for fun and frustration … OG/prequels! Cake/Pie! Over the roll/under the roll! Yelling, trolling, poking with a stick.

And then there’s ARGUING… reasoned, productive, and substantive discussions that get you somewhere in the real world.

No, wait, hear me out!

More than 10 years ago, tech entrepreneur Paul Graham laid out a “hierarchy of disagreement,” attempting to sort out the various levels of argument into a tool that could turn those arguments into something useful. Lately – just in time for 2020’s inevitable fracas, right? – the infographic makers at Adioma have laid that hierarchy out in a simple visualization that aims to make disagreement simpler to navigate and agreement easier to reach:

Essentially, the easiest arguments to toss out there are the ones you post without a pause. The inflammatory “YOU SUCK” (level 1) and “whaddaya expect from an over-the-roll bro?” (level 2). The reactionary “oh YEAH?” and “well WHAT ABOUT” (level 4). They add nothing to the discussion, change nobody’s mind, and pretty much keep the hostilities simmering.

Back in 2008 when he wrote the essay, Graham pointed out “a danger that the increase in disagreement will make people angrier. Particularly online, where it’s easy to say things you’d never say face to face.” Welcome to the Thunderdome. The most innocuous comment can be taken completely the wrong way (level 3), and this toxic shift in tone spills more and more often into offline interactions as well.

But here’s where the real-life benefits to this hierarchy come into play. Leaving Facebook and Twitter and the news comment sections aside – because let’s face it, all pretty much black holes where reasonable people can be sucked into nothingness – there is value to constructive argument.

Constructive argument – levels 5, 6, and 7 – deals with an issue at hand, not personality. It keeps civility on the table. It allows for back-and-forth, for discussion. Put it to work in the office, and it smooths the way in staff interactions and negotiations. Put it to work in the marketplace, and it creates stronger client and customer bonds. And yes, put it to work online in a company feed, and it strengthens customer service and can even help you build relationships based on respect for your open communication.

Coming at a disagreement with an eye towards understanding the other point of view and reaching agreement, rather than an eye towards scoring easy points, isn’t painless. The years since Graham pointed out the peril of online anger have not been kind to public discourse, and the person you’re arguing with may not be there right away for your empathy and bridge-building.

But as one of the great (country and) Western philosophers once asked, what would you be if you didn’t even try? You’d be stuck down on level 1 of Paul Graham’s pyramid with the trolls and the cranks, that’s what. Level up.

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Op/Ed

Inflation: Where you should invest your emergency fund to beat it

(EDITORIAL) Inflation is at an all-time high, so where can small business owners and entrepreneurs stash their emergency funds to come out ahead?

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Glass jar of coins labeled House Fund.

Inflation has been no mystery over the past year to those in the U.S., but many are questioning how long it’s here to stay and the impacts it will have on the economy.

According to The Consumer Price Index that measures the average change of prices over time estimated a year-over-year gain of 5.4% in September, an all-time high for several decades. Also, the core personal consumption expenditures price index, the preferred method of inflation measurement by the Federal Reserve’s reached a shocking 30-year high in August, when it was up 3.6% over the previous year.

Presumably, the hardest hit of all in the last year or two has been small business owners and entrepreneurs, where 67% feel that inflation will damage their ability to recover. If you’re still holding on to an emergency fund or in the process of building one and you’re looking to stay afloat the rising costs, you’ve come to the right place!

Don’t have a designated emergency fund but your interest is peaked? Let’s break it down: An emergency fund is a type of savings account, aside from checking, that you should set aside for well…an emergency! This could be for that rattling noise in your car you’ve been avoiding or to help bridge a gap between jobs while searching.

We suggest an emergency fund of at least $1,000, then building it up to 3-6 months of expenses. The purpose of the fun is to have a reasonable amount of cash set aside that is liquid, or in simpler terms, available immediately if necessary.

Magnifying glass and toy house representing searching for a home with a piggy bank in the back.

Our top picks for stashing an emergency fund are high-yield savings accounts, money market accounts, or CDs.

First, high-yield savings accounts (HYSAs) are similar to a regular savings account but with the perk of higher interest rates. The current average percent yield (APY) for these accounts is around .50% though the national average is a measly .07%.

Second, money market accounts (MMAs) are a hybrid of checking and savings, but sometimes with more restrictions such as transaction fees or a balance minimum. Due to these requirements, the APY tends to be on the higher side and you may also receive a debit card linked to the account for ease of access.

Third, certificates of deposits (CDs) generally offer the best interest rates of the 3 options, but are the least liquid, as your money is tied up for a set time period. The longer you don’t have access to the money, the more interest will be paid.

As you can see, interest rates aren’t that notable, at least for now. Don’t stress too much about maximizing ROI on an emergency fund as it’s meant to be a safety net if you need it. If you have an emergency fund, you’re already ahead.

Notes the Federal Reserve, 59% did not have emergency savings that could cover 3 months of expenses in late 2019, and nearly 4 out of 10 either could not pay all of their monthly expenses in full or did not expect to be able to do so if faced with a modest emergency expense.” A global pandemic didn’t help.

Stay in front of it now so inflation doesn’t cut your future funds short.

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Op/Ed

How can you prevent deepfake trickery?

(EDITORIAL) It’s hard enough to get a complete story about anything, but the use of deepfakes makes that process harder. How can you prevent from being tricked?

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facial recognition deepfakes

Deepfakes are some the latest content entering social media and digital news outlets. Deepfakes are false photos and videos created by artificial intelligence, that at first glance, can pass off as authentic imagery.

Deepfake content appears as a person in a real picture or video that is replaced by someone else’s appearance. The deepfake can then go on to pose as the real person doing or saying things that never happened. As one can imagine, it’s possible the Internet can take one joke too far and unleash a deepfake with insidious motives.

So what are some ways to spot one of these fake videos? One of the telltale signs is the mismatched lighting or discoloration on the person’s face. Another tip is to check for blurring edges around the lips, jawline, chin, and neck where the AI is trying to superimpose the fake image atop the real one. Lip-synching can be tricky, but it helps to watch and listen to how the audio is matching up.

To some, these tips may be pretty obvious, but not everyone is familiar with editing techniques and deepfakes can pop up many places online. As of now there are no reliable programs available to catch these inconsistencies so it’s up to us to pay attention to the media we consume (the zoom tool is a BFF). With AI and software development, this fake content will only become more convincing. Fortunately, companies and even states are taking action to ban deepfakes online.

Some companies are tiptoeing the line of normalizing this kind of technology, and many people seem to be fine with that, so long as it’s for a laugh. The problem with laughing at something that looks real, but is fake, is that that can conversely cause someone to minimize something that is real because the viewer thinks it’s fake. This mentality helps no one, and can only hurt our understanding of the events that happen around us.

Ultimately, and for now, viewers should keep our heads up while online to spot the seams in our reality.

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