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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

Security of client information is important, so change the process

(OPINION / EDITORIAL) Too many companies have had security breaches, which is bad enough, but is the process for insuring client information safety too old to secure?

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security too old to function

While it’s clear companies seem to get hacked regularly, the steps taken to keep users safe are a joke. Companies still rely on asking personal questions in an effort to make users feel safe, but those attempts are laughable.

I wasn’t laughing earlier this week as I was setting up a few new accounts.

As anyone knows, creating accounts can be a real pain in the buttocks. But, since I’m kind of a geek, I would sometimes find the humor in choosing and answering my three security questions. (Wondering if I’d remember the answers.)

What band was your first concert?
What was your favorite dog’s name?
Where were your parents married?
What model was your first car?
Who was your childhood bff?

Cool.

I never thought much about the security questions until the last few times when I encountered a few like this:

In which city were you married?

What is the name of your eldest child?

At what time of day was your oldest child born?

How old was your father when you were born?

What?

I felt I had taken a step back in time.

Sure, these questions might be ok, if there were a lot of options, but these were four of the seven provided.

I’m not a super touchy person who gets triggered easily or angered at the drop of a hat. But, these questions made me question this process and its security.

Whether you’re a man or a woman, in this day and age, it’s quite possible you’ve never been married or had a kid. It’s also possible for some folks, they didn’t know their dad. Or, if they do, maybe they don’t want their security question asking how old he was when they were born.

But, the bigger question: Why so very personal? And, from a woman’s perspective, why so presumptive. It made me wonder: are the questions the same for a man or a woman of any age?

I can’t imagine a 22-year-old being asked about the birth of their eldest child. Or, where they were married.

These questions had to be options based on my age and gender.

I chose the questions I could answer like, where was my elementary school located.

But, I didn’t feel safer for answering. Somehow I felt like the company asking them was 1) Prying to gather personal data 2) Not concerned about safety 3) Was sexist.

As many others have argued, it’s time to shut this process down, if only for the fact that it doesn’t make us safer online. This is a practice that should be relegated to the past, just like the presumptive questions being asked.

Seems no matter where you look online, banks, retailers and even medical providers are hacked. Our information is floating in space on the interwebs.

Obviously, security is a top concern. Who wants to sign up for a service only to find out later, “OOPS, our bad, your information was hacked. Here, we will give you free credit monitoring for a month.”

Doesn’t cut it.

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Op/Ed

How to keep your business partner on your same page during COVID-19

(EDITORIAL) COVID-19 has a lot of people worrying about themselves, their families, and their friends, but one that doesn’t get brought up much is business partner.

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Business partner

In the age of COVID – we are all having conversations about our personal wellness. Story after story, we are encouraged to be reflective about our self-care to ourselves, our families, and our employers.

Our business partners, while being in the same storm as us, are not always in our same boat.

They have unique situations, perspectives, and needs. To maintain that business relationship, you need to start thinking about how you can communicate your situation to them.

This is a critical piece of communication. You should be mindful of this beyond a simple “I’m at home and may be delayed in answering email” kind of message.

Honesty and openness are essential to good business partnership, but you want to craft the right message to assure your business partner and protect yourself. Here are some thoughts to keep in mind for the content of your message:

  • Identity your primary message. What are you trying to do? Why is it essential for them to know? What do they need to know to keep the business afloat, and manage their expectations. You may need to refresh yourself on any existing structural agreements or roles. We often pick business partners for their skills sets in relation to our own – if you’re doing all the numbers and purchasing, explain to them how the current situation will impact your ability to do that.
  • Say “why”. You do not need to dump all the things you have going on to your business partner – but rather explain things in a way that is relevant to them. This will keep your conversation brief and to the point. A good example of this is to say “We normally have morning meetings with clients, but since my kids are being homeschooled in the morning, I need to have them in the afternoon”. This gives a clear explanation of what you need, and why your business partner should care.

Before you get on the meeting:

  • Recognize differences and see where you can compromise and where you cannot compromise. Your health should be number one. This is not the time to endanger your health or radically disrupt the things you do to stay healthy. But also, if there are places where you can adjust or be flexible, be willing to do that. This is useful when you and your business partner are in different time zones or life situations. The situation around us is changing every day – and is different by region, state, or even city. Communicate changes or challenges promptly and with clarity.
  • Set up the conversation. When is the best time? Is it in evening with an informal “Zoom happy hour?” When does your partner prefer communication? Are they morning people? Are they better after a few hours and coffee? Timing is everything. Especially if the conversation is tough.

Number one? Keep communication open. Nothing makes people more anxious than a partner you can’t get in contact with. There are lots of tools and technology we can utilize. Have a regular check in – and communicate frequently. This will keep heads cool and ensure that the relationship you have is protected.

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Op/Ed

The music you’re listening to may dictate your productivity levels

(OPINION / EDITORIAL) Whether it’s a podcast, news, or music, most people are listening to *something* while at work – so what listening improves your productivity?

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music for productivity

For some, productivity requires a state of concentration that can only be achieved in silence. But workplaces are seldom so quiet, and truth be told, most of us prefer to have some background music playing while we work. Some people swear they can’t work or study without it.

Personally, I find music helpful for encouraging productivity and creativity. It distracts the part of my brain that would normally be chattering away – the voice in my head worrying, wondering, and daydreaming. I find that music neutralizes this inner voice, freeing up my brain to focus on the task at hand.

More and more research backs up what many of us experience – a state of enhanced calm, focus, and creativity when we listen to music while working. Deep Patel at Entrepreneur.com has a list of the best types of music to serve as the soundtrack to your workday.

Typically, music without lyrics is best for working or studying, since lyrics tend to catch our attention. Research has so consistently shown classical music to boost productivity that the phenomenon has it’s own name – the Mozart effect.

But other forms of wordless music can work as well. Patel recommends cinematic music for making the daily grind feel as “grandiose” as a Hollywood epic. Meanwhile, video game music has been specially designed to help gamers concentrate on game challenges; likewise, it can help keep your office atmosphere energized. Soothing nature sounds, such as flowing water or rainfall, can also help promote a calm but focused state.

Music with lyrics is okay too, as long as it doesn’t turn your office into a karaoke bar. Cognitive behavioral therapist Dr. Emma Gray worked with Spotify to identify the characteristics of music that can actually change our brain waves. She found that music between 50 and 80 beats per minute can trigger the brain an “alpha” state that is associated with relaxation and with being struck with inspiration.

Really, any music will do, as long as you like it. Research from the music therapy department at the University of Miami found that workers who listened to their preferred artists and genres had better ideas and finished their tasks more quickly.

What styles of music help you focus during your workday? I myself enjoy the collection of “lo-fi” or “chill-hop” playlists on YouTube. This music has a consistent beat that is engaging without being distracting, and the accompanying video generally features an adorable cartoon character to keep you company.

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