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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

Top 5 reasons resilience is key in the workplace and the hiring room

(OPINION / EDITORIAL) While it matters all the time, 2020 has especially shown resilience is important as an employee or employer to hold their own in the workplace.

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Open workspace, where resilience will be key to success.

If there is ever a time that demonstrates the value of resilience in the workplace, that time is 2020. Challenges, complexities, and change in our personal and professional spheres are inevitable and required for growth.

Brent Gleeson, author of the book Embrace the Suck: The Navy SEAL Way to an Extraordinary Life breaks down the components of resilience into three dimensions: challenge, commitment, and control. Resilient people see difficulty as challenge and a learning opportunity. They are committed and take ownership over their lives and goals. They spend their energy on that which they have control.

In the context of the workplace, employees and leaders will inevitably face setbacks, critical feedback and change- positive or negative. Managing engagement through this while working remotely can add an additional layer to this. Gleeson highlights five important reasons organizations should understand and work to build resilience in their workforce as part of their culture strategy.

  1. The first is that resilience skills directly benefit the psychological wellbeing of employees. Happy, healthy employees are good for business and the bottom line as well.
  2. Change is bound to happen and adaptability is key. Organizations need leaders, managers, and employees that have the resilience to navigate whatever comes up, as it happens.
  3. Learning and innovation is required to make it in today’s business environment. Even capable and motivated employees need to constantly maintain and hone their skills in a culture where they are allowed to continue to grow and improve.
  4. Resilience can be put to the test in organizations when interpersonal relationships are strained. Teamwork, when lead by intentional leaders, can help employees to frame interactions in a way that reduces negative feeling and improves group dynamics.
  5. Managers who can lead with resilience can help employees with career development and coaching in a way that develops their skills.

Some of the key characteristics that drive heightened levels of mental fortitude as shared by Gleeson are optimism, giving back, values and morals, humor, mentors, support networks, embracing fear, purpose, and intentional training. These contribute to resilience in employees, and in an environment where the only constant is change, the ability to meet the challenges of 2020 and beyond.

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Op/Ed

Choice IQ: The self-guided career coach for busy professionals

(OPINION / EDITORIAL) Need help with your career but unsure where to start or struggle to find the time? Choice IQ could help you, even on the go.

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Choice IQ robots, designed to help identify strengths and stress in self-guided career coaching.

Although it’s not part of the job description, without a doubt, you’ll eventually develop some form of stress at work. In a way, stress is a good thing because it shows you’re pushing your boundaries and growing. But, too much stress is bad. It can lead to poor health and cause you to deliver sub-par performance at work. And, while not all of us may have a life coach we can easily call on, we could potentially have a digital one.

Meseekna, a computer software company that designs scientifically validated tools, has developed an on-the-go life coach tool for busy professionals. Choice IQ is a coaching platform supported by the learning and training system developed by Meseekna scientists. The app uses “interactive scenarios, storytelling, and art to help you build strategies for managing your stress.”

With a comic book art style, Choice IQ helps describe what stress is and explains how you can manage it. Through its step-by-step guided process, Choice IQ measures your metacognition, or ‘how’ you make your decisions. By looking at your focus, drive, curiosity, and resilience, it can uncover your strengths. The tool also assesses your stress and what aspects of it affect you the most. All these tests are done through a series of multiple-choice questions.

Once you’ve been able to determine your strengths and stress points, Choice IQ can help make a plan that will help you work on reducing the impact of stress in your life. The tool has training scenarios where you can immerse yourself in a different role to test your metacognitive skills. Through interactive storybook-like quests, you also can learn to navigate through stress.

To take your career coaching to the next level, you can sign up for Choice IQ’s Coaching Program. By signing up, you will have access to MONA. The on-the-go interactive coach is packed with six-decades of science and is available to support you 24/7. All you have to do is ask MONA! You will also have access to daily texts that have quick prompts and check-ins to make sure your metacognition training is consistent. And, all your progress is tracked in a digital journal.

By using Meseekna’s simulation technology, “Choice IQ can break down the processes into daily actionable steps and behaviors which enable optimal performance in a dynamically complex world.” For busy professionals, this sounds pretty good. Are you ready to give it a try?

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Op/Ed

Three ways to actually raise the bar instead of just talking about it

(OPINION / EDITORIAL) Talking about raising the bar is one of the industry’s favorite pastimes, but taking steps to promote change are often on the backburner – here’s how we can change that.

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raise bar

At any given time, there are roughly half a million full time real estate professionals (sales agents and brokers) in the United States. Yet, at the same time, there are over one million members of the National Association of Realtors®. Does anyone else take issue with the big gap here? Can it possibly be that almost 60% of the real estate professionals that I deal with day in and day out are actually dabblers in the field?

Industry changes are coming fast and furious – so quickly in fact that it is often hard for even the busiest of real estate professionals to keep up. While we tend to think that it’s the technology that’s always changing, it’s not just tech. It’s contract law, state and local policies and procedures, and risk management among other things. The truth is that with that production volume comes experience – lots and lots of it. Dabblers, hobbyists, or part-time real estate professionals have a tough time staying in the game.

I realize that I am not going to make any friends here when I say that part-time agents (those closing only one or two transactions per year) often lack the experience and know-how to get the job done. A part-time agent may not know about the latest contract forms release or the latest technological advance. In addition, a part-time agent may be dividing time between two jobs and thus compromise the quality of customer service that he or she can provide to a client. I’ve had buyers call our brokerage and request a showing of one of our office listings; they’d say that they are represented by another agent that is “too busy” to show the property or “at work.” And this hasn’t only happened once. It has happened over and over and over again.

What kind of message do phone calls like these send about what’s going on in the profession?

Three areas where we can forge change

When considering ways to address the challenges faced by working in an industry where 58% of the real estate professionals may not have the demonstrated expertise associated with full-time work, it’s curious to consider where change should begin – at the top or at the bottom. Here are some places to start to raise the bar:

  • At the state level. What would happen if licensing and renewal requirements were strengthened in each state? That is, if it were tougher or more expensive to get a license or if the renewal requirements were a little more challenging than passing a few $69 correspondence courses; this might actually enhance the quality of licensed professionals. Making it more expensive to obtain a license or to renew would also demonstrate that those who do renew are serious about practicing real estate. It’s pay to play, and those that pay (if it costs more) would be serious about the play.
  • At the local level. At the local level, real estate associations could increase their dues, offer more educational opportunities, and have stricter requirements for membership. Again this would force the hand a little bit. Kelley Skar, a Canadian Realtor® states “if the associations start increasing the cost, they might start to see a slight dip in their membership numbers which could be detrimental to their bottom line. I see this as being temporary as the associations and boards would make adjustments within their current business model to allow for decrease in membership.” If associations do see a dip in membership, they’d have to do something about it to keep the doors open, Namely, they’d have to demonstrate their relevance or increase the value that they provide to the current members.
  • At the brokerage level. In a perfect world, raising the bar in the real estate industry would begin at the brokerage level. If brokers were to have minimum guidelines for they type of contractors they would accept and offer trainings and guidance to keep their agents at the forefront of the industry, this could make things better. The reality is that this will never happen. Skar points out that there will always be discount brokerages and brokerages whose model depends not only on producers but non-producers that pay a monthly desk fee. As long as there will be brokerages where non-producers can hang their licenses, the industry is not going to change.

Theory of natural selection

The good news is that Charles Darwin’s theory of natural selection seems to apply pretty well to the field of real estate. If you are reading this article and actively working within the industry, you are likely one of the half million that is raising the bar in the industry by working full time, staying ahead of real estate trends, and developing personally and professionally.

Whether the change begins at the brokerage level or at the state level, it shouldn’t matter to you. You’ve paved your way to success among your industry peers. You’ll have no problem stepping over the bar even if it raised a little bit, because you are fairly flexible already.

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