July 8, 2020

The more buyers know about a house’s availability, the better for sellers looking to capture the best possible sales price.

That’s the rationale behind national changes to how homes are marketed, including changes to how far in advance homes can be promoted before they appear on the Multiple Listing Service and the use of so-called “pocket listings,” a behind-the-scenes process to buy and sell homes without them ever appearing on the MLS.

In theory, it could create even more competition in a housing market already faced with a level of multiple offers that real estate agents characterize as “crazy,” according to Jeff Merrill, part of the Allen Edge team at Keller Williams Real Estate Sioux Falls.

He’s seeing multiple offer situations this year in all price ranges, “anywhere from six to eight offers, and homes are selling over list price just because of the high demand out there.”

The changes are part of a “clear cooperation policy” passed by the National Association of Realtors last fall and implemented in Sioux Falls in May.

Brokers must submit listings to the MLS within one business day of publicly marketing the property. In the past, some listings were promoted as “coming soon.” Before they officially went on the market, some buyers were allowed to see the property and were given an opportunity to purchase.

“These types of issues have restricted the number of choices for buyers, raised questions about fair and equal opportunity leading to fair housing concerns, have skewed MLS data and have resulted in breach of fiduciary duties lawsuits,” the association’s associate counsel Charlie Lee said in a video explaining the change.

Public marketing now is defined to include putting up a sign, distributing fliers, posting information on a publicly available website or social network, or doing an email blast.

“It has hindered us,” said Amy Stockberger of Amy Stockberger Real Estate, who used to regularly advertise homes coming up later in the week during a Monday Facebook live appearance.

“My past marketing strategy was to try and create as much excitement about that property as possible. What makes people write offers is built-up excitement and other people who want it. Now, we’re going to a 24-hour marketing platform, which limits the amount of reach we get.”

She’s working on alternative strategies to address what she calls the tightest inventory for homes priced at $350,000 or less that she has seen in her 20 years in the industry.

“Consumers were feeling they weren’t being given an equal chance to know everything on the market,” she said. “That’s why you need a Realtor who is living and breathing in the market every day and has the reach to attract sellers.”

Locally, the Realtor Association of the Sioux Empire further adjusted the approach to “coming soon” listings to allow them to be placed on the MLS as a “coming soon” up to two weeks before the full listing goes live. That information is accessible only to Realtors and allows them to notify clients what is coming, though they aren’t allowed to show the home until the listing is public.

“It’s a teaser to show the market what’s coming,” said Larry Luetke, an agent with Keller Williams who is the board president for RASE.

“The big thing is people were putting out signs and trying to capture people to show it before they put it on the MLS. In the market we’re in, you have a lot of people who drive neighborhoods they want to be in, so they see a sign pop up, and they call the agent, and the agent would show it, and other agents would want to show it, and they would say it’s not coming out until this date.”

Gregg Gohl of Hegg Realtors calls the changes a win for buyers and sellers.

“Everyone is kind of on a level playing field, maybe more than in the past, so I think overall that’s a good thing,” he said. “I don’t think it’s going to affect greatly how any of our agents do business. Most of them know the best way for a seller to get maximum value on the purchase price is to get it out to as many agents as possible, and that’s done by getting it on the MLS.”

The changes to “pocket listings” involve how they can be marketed. Those listings don’t appear on the MLS, generally for privacy and because sellers want to avoid a public sales process and potentially many showings. Now, they can be marketed only within a brokerage as an exclusive listing.

Sellers also must sign a disclosure acknowledging the limitations of keeping their home off the MLS.

“As long as the seller is OK with it, to me it’s fine,” Luetke said. “It’s just that a lot of times consumers aren’t being told the best thing to do is put it on the market and expose it.”

On a percentage basis, the majority of pocket listings exist in the upper market – maybe as many as 10 percent of that market, Stockberger said.

“Every seller honestly would prefer not to have the house on the market and would prefer an easy match,” she said.

“My theory and strategy is that if a seller is accepting an offer and they are getting exactly what they wanted, except maybe an opportunity on price, a lot of times … not having the house open to the public, people coming through, having to keep it going with work and life and kids … I have a lot more sellers who would prefer it that way.”

The fear is that agents could have been telling sellers “let me try and sell this privately first for a couple weeks, and if we can’t get it sold, we’ll put it on the MLS,” Hegg’s Gohl added.

“I think there were agents trying to hog both sides of the deal. That has happened since the beginning of time, and this is another step in saying let’s make sure the clients are fully aware of what that means. If you’re not putting it on the MLS, you might not be getting full value, and now they have to sign that disclosure.”

Agents are still able to talk privately about potential opportunities with their clients and can show homes without them being on the MLS, assuming there’s an exclusive listing agreement in place.

“They’re not considering private conversations between agents as public marketing,” Gohl said. “So if I knew there was a Realtor at Re/Max who really specialized in selling houses in McKennan Park, I could still call that Realtor and have a conversation and see if they have anything coming up in that area.”

Agents who violate the public marketing prohibitions, though, are subject to penalties, including fines and potential suspensions. Locally, RASE would not publicly disclose the specific penalties.

The organization has taken a lot of questions about the local and national changes, Luetke said.

There also are legal issues being raised. The National Association of Realtors has been sued over the clear cooperation policy, with backlash alleging its limitations around pocket listings stifle competition and create a monopoly for the MLS.

“So I don’t know how things will change,” Luetke said. “We duked it out for a long time, but when it came down to it, we had to have it implemented by a certain date.”