It’s All About the Money

competitive advantage

 It’s all about the dum dum duh dee dum dum

And I think we got it all wrong anyway

Pocket listings  are still generating a lot of conversation and activity in the marketplace as inventory shortages seem to be appearing all over the country. Even in areas where the entire inventory is not shrinking, the concept of pocket listings is a topic of interest for real estate professionals.

One of the newer entries to the space is a brain child of my friend Frank Llosa – a Website which calls itself “An Agent-Only Facebook Forum For Coming Soon Home Listings“. The group garnered national attention through a post on Agent Genius which had a graphic captioned; “Pre-MLS, the MLS before it happens” which to me is like saying “Pre- Pregnancy, Pregnancy before it happens”  – there is no such thing as “the MLS before it happens” – before it happens is the NON-MLS, and that’s not a place where anything good happens for the consumer or the industry.

In a post on Frank’s blog, when he talks about pocket listings he says “that phrase has 10 definitions depending on who you talk to” – I don’t agree that there are 10 different definitions, but the term does seem to be bandied about loosely, so for the purpose of our conversation let us agree that pocket listings are either pre-MLS listings or off-MLS listings.  But in either case, except for very limited situations where the seller, with full knowledge of the potential detriment to their marketing caused by limited exposure, has chosen to not have their property listed in the MLS, pocket listings are far more about the agent and the listing firms than they are about any benefit to the consumer. Like Meja says in the quote above, It’s all about the money, and I think we they all got it wrong anyway.

Frank’s efforts seem to be aimed at creating a place for agents and smaller brokerages to have an equivalent to the large brokers in-house exposure of Pre-MLS listings – a phenomenon that exists between the listing acquisition and the required submission to the MLS. In markets where the submission time is 72 hours  many larger brokerages around the country will announce the listing to their agents, taking advantage of the submission time to , legitimately allow their agents the first opportunity to show the property to their buyer clients or customers. Though the practice is not a violation of MLS or the Code of Ethics, it is a business decision made to benefit the brokerage. The argument that the announcement is to benefit the buyers working with the listing firm, or to give them the first opportunity to see the listed property, is a weak one at best since that advantage has to be borne at the expense of the seller, who loses the larger opportunities that may find in a more open market exposure.

Personally I don’t like the practice, or Frank’s new group, because it gnaws at the roots of what makes the marketplace work for buyers and sellers – the cooperation and offers of compensation made between the real estate professionals in their region, which gives the buyers the largest pool of properties to choose from and the sellers the largest pool of buyers to work with. I understand them both, and as I said earlier, there is nothing in the rules of the MLS or the Code of Ethics currently which forbids them, but I think that the posture created by this kind of “small club” marketing  does not do anything to improve our industry or serve the consumer. The argument that its OK to set up this group because larger brokers are taking advantage of the weakness in the MLS rules is a bad argument – sort of like smoking cigarettes because the other kids are doing it. Your Mom would have slapped you for that kind of logic, and we know Mom was never wrong. Further, the publicity generated by such groups tells the consumer that the real estate market is far more fractionalized than it actually is, gives them the impression that trying to find a smaller group of “special” properties is of some benefit to them, and actually makes the job of finding the right house even more difficult.

Logic tells us that consumers  are best served by entering property in the MLS as rapidly as possible. That allows sellers the greatest exposure during the term of our listing agreement and that way the larger pool of buyers have access to the greatest number of properties – everyone wins. The idea that buyers want to get a jump on their competition, or that sellers benefit when the buyer has a fear of competition from other buyers are at best opinions without statistical data to back them up and at worst bad guesses, but in either case are Pre=MLS marketing is not a tool  that actually benefits the buyer or seller – its just another shiny object to distract the consumer.

The other item of concern is the “coming soon” listing – a concept I have great difficulty with. Now there seems to be some conversation about marketing or promoting property that is not yet listed. Again, it seems that short sighted agents, chasing dollars, are acting ion a manner that potentially damages their long term business and the industry as well. The argument that has been put forward here is that it somehow increases the buyer’s interest in a property when they think of it as “coming soon” so the seller benefits from the additional attention. In fact, since these groups are of greatest interest in markets where there are inventory shortages, buyers are already highly interested and moving quickly to find property. By participating in such a group you are projecting a falase sense of security since the buyer thinks they are somehow in front of everyone else and have time to consider the property in a less competitive environment, reducing the seller’s marketing position.

Frank explains his purpose in his post stating, ” I know some don’t get it or appreciate this, but this was done to initially help our Frankly clients. Help them not settle for that wrong house when the perfect house might be hitting in 2 weeks”  Sadly, Frank’s intentions are foiled by logic. No matter what home a buyer buys, with or without pre-MLS marketing, there is no assurance that another property may not come along a week  or 2 weeks, or 3 weeks later. But we all know that there is no single perfect house, and if a buyer is ever to buy a home, they have to make a choice to buy the best home available at the time they are ready to buy, or be a perpetual buyer who never owns a home, continually shopping and waiting.

Though I discuss Frank’s group here, and the logic of its creation, I don’t mean to pick on him. His situation is not unique. He has just spent time articulating his position, making it easier for me to talk about here.  Frank is the type of guy who tries new things all the time. Some of them work and some of them don’t, but he is pretty courageous about moving rapidly into uncharted territory and taking very visible positions on his actions. Please don’t think that the opinions I express here are limited to his group, they are about any similar group of pre-MLS and “Coming Soon” marketing. As an industry, and as individuals, we need to think of the larger picture and not about the gimmick that might generate the single short term gain. Frank’s group had, at this writing, claimed to have created 1 off MLS transaction. I won;t even discuss the issue of price and terms and whether the seller might have lost far greater opportunities. But in that same time frame, my guess is that there were lots and lots and lots of MLS transactions.

So why are we trying to create organizations that create a lot of conversation and effort for minimal returns instead of utilizing to the maximum the organization that provides the greatest amount of benefit for buyers, sellers, and the industry participants?

 

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1 comment for “It’s All About the Money

  1. franklyrealty
    July 7, 2013 at 3:27 pm

    Hello Bill, I don’t mind a discussion challenging my
    thoughts directly. I always enjoy a discussion. I actually agree with most of what you said, IF I was wearing the hat that you are wearing. More on that in a moment.

    First a couple of questions, just to get you on record.

    1) In your firm, as the CEO, do you allow in office meetings for agents to announce Coming Soon listings? I assume not based on your passionate words above, but wanted to be 100% clear. If you did, then I would find much of what you said hypocritical. But I will await that answer before going down those lines. And if you do ban it (congrats), do you also mandate that no in-firm agent share with another in-firm agent info on a home hitting the market (ala NWMLS rules).

    2) If you had a buyer that was dying to live in XYZ subdivision. But nothing was available. Yet you heard that a PreMLS group existed that had two homes in it. Would you a) wait for them to hit the MLS and hope you or your client aren’t out of town or b) join the group to find out what was being offered. In this instance your duty is to you client, not to the future of the mls.

    3) Are you still opposed to a listing agent that uses a PreMLS group to announce that a home is coming in 7 days. No showings, no offers, just to give a heads up so 1,000 agents and buyers can prepare? How does that hurt the seller? It could double the number of visitors once it hits the MLS, thus helping them get an even better offer (I didn’t say higher, I said better since higher is not always better)

    with Questions.

    Clarification:

    The “small group” is not the intent. The intent is to make free, and as big as possible, yet agent only. Other groups limit the group according to production levels or charge fees to join.

    Response:

    To this comment: “Again, it seems that short sighted agents, chasing dollars, are acting in a manner that potentially damages their long term business and the industry as well.”

    That is the “hat” issue. You are wearing the 10,000 feet viewpoint, the “best for the industry” or even perhaps “best for consumers in the future” hat. Try on the “best for Karen the buyer consumer today” hat. Is your duty to the “long term business and industry” or is your fiduciary duty to that one buyer? I argue is it to that one buyer, NOT to the industry, As long as what you do is legal and ethical (yes you can debate the ethical part).

    Another example. Your statement about protecting the industry. That is very delicate. If done incorrectly can land people in jail. The firms that tried to price fix, they all wanted to protect the industry. Telling people to align themselves with industry over client is dangerous. For example a new listing agent might read this and be dissuaded from offering a lower coop. If that agent and the seller feel that offering a 50% lower than norm coop is in the best interest of this exact seller, so be it. Your approach might argue that it is “potentially damaging” to the industry.

    Or as you put it “As an industry, and as individuals, we need to think of the larger picture and not about the gimmick that might generate the single short term gain.” which I translate/understand to mean “Pledge allegiance to the industry and not to your client if there is conflict.”

    If my gimmick lands my buyer client into a home… that is great. Yes I am short sighted and hyper focused on my client.

    Is a lawyer that represents somebody on death row going to take a step back and say “well it might be better for the system or society for them to not have representation.” No. They will be laser focused on their client.

    Love you Bill, thanks for the discussion.

    Frank

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