Now It’s Getting Serious: Realtor’s Group Creates Task Force to Manage Proliferation of Hip Pocket, Non-MLS Sales

Coming soon (1)That Realtors group would be the North Texas MLS, or NTREIS as we call it. We know our market is hot. Buying a house in some parts of Dallas has never been like this before. There is only about a 3.5 month supply of real estate inventory in the North Texas market as of April. In some neighborhoods, there is even less. (Normal is more like 6 months.) Buyers are in competition against other buyers to snag a home. And so, things are getting gritty.

Veteran agents tell me they have never seen anything quite like it. Pretty soon they may even make a reality show about it: real estate hoarders.

“Agents are constantly calling each other to ask, what do you have coming up,” Dallas Realtor David Griffin told Steve Brown (paywall). “The idea is to build up a frenzy, so Day One when you begin showing it, you have a stampede of activity. In a blink, the house has a “sale pending” sign out front.”

Then there are buyers (with their agents) who tie up properties immediately with the option clause — consideration $$$ for the number of days a buyer is keeping a home off the market while they do due diligence. As some agents tell me, million dollar homes are being kept off the market for a few hundred dollars. Granted, the sellers keep the option funds if the buyer walks, considered chump change in this market, but it can choke out other buyers.

“Our earnest money is a joke in Dallas,” Lakewood agent Scott Carlson told Steve Brown (ditto). “You shouldn’t be able to put up a few hundred dollars and tie up a house. We’ve never had this in Dallas. We’ve just read about it in California.”

So now you get the picture. This competitive market, the polar opposite of what we saw about three years ago, has led to complaints and even worse, threats of lawsuits about the way agents may not be working for their clients’, THE SELLER’s, best interests. The biggest bulls eye is the hip pocket: off-market property transactions that are sold before ever making it onto the MLS.

I’ve always said the urge to nest is fierce! But on some highly desirable streets, “more than half of the houses are being sold by word-of-mouth or after “coming soon” signs (are) posted in the front yards. (Steve Brown, paywall) Real estate agents are quick to say that none of these questionable practices is illegal. But they say that anything that limits the marketing of a property or misleads a buyer or seller should always be avoided.”

I have heard that 10 to almost 20 percent of Dallas-area home sales, are now hip pocket transactions that never made it into MLS.

Cathy Faulkner, RCE, is Director of Multiple Listing Services for MetroTex Association of REALTORS® in Dallas. I spoke with her Monday — she talked to the North Dallas MLS on this very topic Tuesday morning. I suspect Cathy will be hitting every MLS in North Texas with her message: this hip pocket stuff is getting serious. Are we at critical level in North Texas, I asked Cathy?

“Not critical yet,” she told me, “but it could get there.”

Let’s look at the San Francisco Bay area for a minute to see the impact of pocket sales. Cathy was at an NAR meeting there in May, and the Bay area MLS reports that nearly 30% of their listings are being sold out of MLS. That’s almost one-third of the market!

The Bay area can track these stats because under California state law, all home sales must be publicly recorded. Thus they have tools to log home sales better than we can in Texas, a non-disclosure state.  If we were to lose one-third of all sales stats in North Texas, appraising properties would be a nightmare!

“We don’t know the effect this is having on our market,” says Cathy, “but we don’t think the agents and brokers participating in this process truly understand the ramifications.”

If they with hold the listing from the MLS, Cathy explains, agents are reducing the home’s exposure of presenting the listing to the highest number of potential buyers. Which means, they could possibly be missing out on highest price. There is no law that says agents MUST put their listing in MLS. Usually, it’s the seller’s call. MLS Rules and  Regulations require that listings taken within the boundaries covered by the MLS must be filed with the MLS unless the seller restricts the filing in writing.

“I have been trying to raise Realtor and broker awareness,” says Cathy. “We ask agents, what is your motivation for not putting this listing in MLS?”

Some sellers specifically want their homes left out of MLS for privacy issues (like a few sports stars I know) or for more control of the sales process.

“We don’t know what is going on in the listing presentation,” says Cathy.

During the presentation, the agent should go over all the advantages of listing the home in the MLS with the seller. There are a lot.

The MLS system was created by Realtors to cooperate and communicate the availability of properties. Put your listing in the NTREIS, 25,000 Realtors are paying attention to that home (or should be). Then picks it up, as well as all the aggregators out there — Trulia, Zillow, Redfin, any national websites the broker may participate in. That’s millions of eyeballs looking at your property. And if you have read this blog enough, you know it’s all about eyeballs. Maybe some California millionaire sees your home and falls in love? Keep the home out of MLS, and you have a limited networking group of say 25 to 100 agents who learn about the listing. This is why the limited exposure, if purposeful, could lead to potential lawsuits. Have there been any?

“I’ve heard the rumors,” says Cathy, “but have not yet confirmed. But there have been lawsuits in other cities. Any real estate market that has a pulse is fighting these same issues.”

Another thing for Realtors to consider: when you are dealing with a listing outside of the MLS, you may have no avenue to collect a commission if a dispute arises.

“The avenue may be through court,” says Cathy, “Which is one reason why this system was created.”

Then there is Fair Housing and potential Anti Trust violations. A Realtor’s networking group may be of one ethnicity. By not putting the home in MLS, you may not be exposing the listing to all ethnic groups, religions, all classes and statuses of people who might be qualified to purchase the property.

“Fair Housing complaints have been filed in other markets,” says Cathy.

The task force, which is composed of Realtors, has met once, is developing tools to help agents, brokers and the public deal with this issue fairly. TAR (Texas Association of Realtors) standard forms have a place for Seller to opt-out of filing the listing with the MLS, but the form does not have a place for Realtors to explain why a seller wants to opt out of listing his/her home in the MLS

Maybe it should.







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