MiamiRealEstateKing

Archive for July, 2013|Monthly archive page

Q&A: The Pros and Cons of Off-MLS, “Pocket Listings”: What Consumers and Real Estate Agents Should Know

In real estate on July 2, 2013 at 6:19 am

While not a new concept for veteran real estate agents, the terms “off-MLS” or “pocket” listings may be an unfamiliar phrase to many consumers and some newer agents. 

 

Property sellers and agents should nevertheless be aware that the practice can adversely affect their goal of getting the best price reasonably possible for their property.  As many as 10-15 percent of properties offered for sale today are “off-MLS” or “pocket” listings, according to one Multiple Listing Service (MLS).

 

If you’re considering selling your property, think about the advantages and disadvantages of pocket listings.

 

What is an “off-MLS” listing? 

Simply stated, an off-MLS or pocket listing is a property that is marketed without the benefit of being listed for sale on the MLS (i.e., “hidden” in an agent’s pocket). A property that is listed on the MLS has the advantage of being actively marketed to every real estate agent who belongs to that MLS and through those agents, to their vast network of potential buyers looking to make an offer to purchase the property. Active marketing on the MLS usually includes open houses, broker tours and inclusion of seller’s property in the MLS’s download to various real estate Internet sites commonly used to search for properties such as Realtor.com, Move.com and many, many others.

 

On the other hand, as the term implies, an off-MLS listing generally is marketed by a single agent to one or a select few potential buyers. The marketing pool can be so small that in some cases, other agents within the same brokerage or brokerage office may not even be aware that a fellow agent has an off-MLS listing.

 

Are off-MLS listings illegal?

It depends. They are not illegal if the listing agent fully discloses the pros and cons to the property seller and follows rules that are designed to protect consumers. Nevertheless, many real estate professionals believe that off-MLS listings may not be in the best interest of the property owner – particularly if a client does not know about the benefits of marketing his or her property through the MLS. To keep a listing off the MLS, a listing agent who is a participant of an MLS is required, under the rules of many MLSs, to obtain a signed certification from the seller that he or she does not wish to sell the property via the MLS.

 

Why would a property seller agree to an off-MLS listing?

Off-MLS listings sometimes are requested by celebrities, judges, prosecutors, or others who wish to maintain their privacy and/or limit viewing of their property to a select individual or individuals with the financial wherewithal to purchase.

 

Other reasons include owners who wish to limit the ability of tenants or competitors to find out that the property is for sale.

Are there reasons a property seller should avoid an off-MLS listing?

Yes. Most importantly, an off-MLS listing generally does not get the broad market exposure that a property listed on the MLS gains. That can significantly reduce the number of potential offers to purchase that a property seller may receive – an important consideration at a time when multiple offers above the asking price are commonplace in many areas. A recent survey of San Francisco Bay Area real estate agents conducted by MLS Listings, Inc. revealed that 74 percent of respondents believe an off-MLS listing decreases the chance a seller will obtain the highest and best price for his or her property.

 

Off-MLS listings also may impact real estate values on a larger scale. Property price evaluations completed on behalf of mortgage lenders – more commonly known as “appraisals” and a vital precursor to a property buyer obtaining a mortgage loan – may be affected in communities where there are a significant number of properties being offered as off-MLS listings. That’s because not all off-MLS listings are entered into the MLS database once a property is sold. Without this critical information, it is more difficult for real estate agents and their sellers to determine a listing price, for agents and their buyers to decide how much to offer for a property, and for appraisers to determine the current market value of a property.

 

It also limits the ability of these professionals to properly determine and justify value of an owner’s property for pricing and marketing purposes. With a high number of off-MLS listings, it becomes more difficult to also justify value to a potential buyer since finding qualified comparables may be limited.

 

What should I do if an agent approaches me with an offer to sell my property as an off-MLS listing?

Ask your agent about the pros and cons of selling your property off-MLS. One advantage is that your listing remains private if you wish to maintain privacy. However, there are other ways to give you the exposure you want while maintaining privacy when listing in the MLS. Just ask your agent.

 

Another and even bigger disadvantage is that your property may not be exposed to the full population of available buyers, which means there may be less competition among fewer buyers, resulting in a lower selling price.

 

If you decide to list your property off-MLS, your agent may ask you to sign an exclusion document.  Be sure you fully understand what you are signing and the adverse consequences outlined in the form of not listing your property on the MLS.

 

And you may want to tell your agent that even if your property is not on the MLS, you want your agent to show and present all offers from both inside and outside his or her network.

 

Below is an article published by the Florida Association of Realtors’ legal department on the subject:

 

Fla. ‘pocket listings’ legal, but avoid problems

ORLANDO, Fla. – July 1, 2013 – Non-MLS listings are legal in Florida; but if not handled correctly, they can create legal and fair housing problems for a listing broker.

“Pocket listing” is not a legal term. It generally refers to any listing held back from the local MLS and sold independently.

Since an MLS exposes a home to areas far and wide, it creates competition and can maximize profit for the seller. However, some sellers don’t want that kind of exposure, and they see a bigger advantage in keeping their home out of the MLS. Celebrities may be the best example. They don’t want any army of fans touring their home – fans that can’t afford the home in the first place. Non-famous sellers may opt for a pocket listing because they fear vandals or they want to keep the details confidential.

“There are legitimate reasons to withhold a listing from the MLS,” says Florida Realtors’ Vice President and General Counsel Margy Grant. “But while the sale is legal in Florida, it can sometimes indicate a bigger problem. For that reason, it’s important for sellers to fully understand the ramifications of a non-MLS listing, authorize it and – most importantly – for a Realtor or broker to have some kind of documentation showing that the seller made an informed choice.”

Legal

Non-MLS listings can sometimes lead to disgruntled sellers who decide, after the fact, that they could have received more money for their property. A broker could face allegations that their failure to put the property in the MLS deprived the seller the ability to attract the highest and best price for their property.
 
“We can’t predict the future,” says Grant. “Florida brokers should make sure the seller chose to withhold their property from the MLS. Sellers should be told the pros and cons upfront. But even proving that the seller willingly chose to withhold the property from the MLS may not be enough. A broker should also show that the seller understood the marketing advantages of an MLS before he made a decision.”

Disparate impact – fair housing

“In some cases, a non-MLS listing could lead to allegations of discrimination,” says Grant. “Realtors would turn down a seller who wants to withhold a listing from MLS in order to keep a specific race or other protected class out of his neighborhood. However, the fair housing laws go a step further, and these listings could break the law even if discrimination isn’t intended.”

“Disparate impact” under the Fair Housing Act considers it discrimination if a practice “actually or predictably results in a disparate impact on a group of persons or creates, increases, reinforces or perpetuates segregated housing patterns because of race, color, religion, sex, handicap, familial status or national origin.”

Since a non-MLS listing is marketed to a private and usually small group, the makeup of that group becomes important. If the makeup of the listing group tends to mirror the makeup of the neighborhood, it could appear to perpetuate discrimination without meaning to do so. Multiple pocket listings in a single neighborhood could be seen as a way to discriminate without being obvious.

“The disparate impact appearance can be challenging,” says Grant. “If there’s any concern about a fair housing impact, a broker should be able to justify the reason it was withheld from the MLS and illustrate that the property was marketed in a fair and equitable manner.

© 2013 Florida Realtors®

# # #

 

Wenceslao Fernandez Jr is a REALTOR® with Fausto Commercial Realty Consultants

1101 Brickell Avenue, South Tower, 8th Floor, Miami, Fl  33131 | WF@FaustoCommercial.com | Google: 786-693-2269

%d bloggers like this: