Zillow Launches “Coming Soon” to Capture the Hip Pocket Market — Good, Bad? What Do You Think?
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Call it another by-product of our hot, inventory-deprived real estate market that was created out of the wreckage of the worst recession since the Great Depression.Last week while the nation’s top real estate editors were gathered in Houston, Zillow launched a new on line real estate search to help consumers find pre-market listings.
Call them Hip Pockets, call them Whisper Listings, whatever you call them, they are properties that are NOT yet in MLS, but are available for sale. An agent may or may not be involved.
These are the listings that everyone has been having a real estate cow over. About this time last year, NTREIS announced plans for a task-force to investigate hip pocket listings. Most Realtors think hip pocket listings are dangerous because they rob the MLS of valuable data we need, comparative values, to set home pricing. If five homes in a neighborhood sell within 6 months in MLS, the next home listed has a pretty clear idea of value. If those same five homes all sell as pre-market listing hip pockets, there is no obligation to record the financial data of the transaction. Hence, listing #6 has no comparatives. Value becomes a head-scratcher.
I am dying to know what the real estate community thinks about this, dying even more to see where it will go. Will Zillow enthrall consumers and pull in even more visitors? Will Trulia follow suit? Will this lead to even more non MLS action? How will local MLS associations keep up or, as some agents say, shape up?
Realtors who currently advertise with Zillow, and brokerages who provide Zillow with listings in a feed, will be able to advertise pre-market listings on the “Coming Soon” feature, for up to 30 days on Zillow.com.
Experts think this may give Zillow even more eyeballs than ever. Currently, Zillow seems to be marching the the head of the line in the on-line portal race, taking full advantage of it’s 45 million unique visitors per month, a figure they claim is low.
The truth is, hip pocket sales are growing. If you are buying a house, chances are you know this. In a hot market with less than three months of inventory in some price ranges, buyers are parched for new product. They will jump on fresh listings at a moments’ notice. I know agents who tell clients not to talk about hip pockets at parties lest someone hear and snatch the lead. In many inventory-deprived markets, sales are being made even before homes hit the MLS as listings in as much as 30 to 50% of the transactions. Facebook Friends here in Dallas is one of the most popular network groups of agents trading listings. Austin has Broker Underground, where Houston Association of Real Estate president Bob Hale says Austin agents boast that they are selling real estate free from the constraints of their MLS.
What are those constraints? Recording sales price is one.
There is no law that says every listing must be in MLS. NTREIS does require some sort of informed consent from it’s members, asking them to inform clients that their best possible chance for selling a home in North Texas is to list their home in NTREIS where 25,000 members will see it.
25,000 versus 45 million in Zillow. Of course, I would say those 25,000 North Texas agents are way more likely to have a client interested in a North Texas home than most of Zillow’s clients. Still, studies have shown some interesting things about listing homes in MLS.
30 to 50 Percent of Homes Sold Are NOT Sold Through the MLS in Some Areas
A California real estate research firm called CoreLogic studied California MLS listings and found that hip pocket listings comprised 26% of home sales in some northern Cali markets during the first quarter of 2013. How did they get that number? They compared public record transaction data with MLS’s in a four-county area.
While public records show 266,804 homes changed hands in those counties in 2013, MLSs reported only 174,762 transactions, or 66 percent of the total.
They also found that 9 percent of homes in those four counties during the study period were already under contract when submitted to the MLS or went under contract within three days – so likely because those homes sold quickly, they were pre-marketed before hitting the MLS. A whopping 7 percent of the listings were under contract in zero to two days, just after making it onto the MLS.
Bob Hale, president and CEO of the Houston Association of Realtors, calls those eye-opening numbers.
If you cannot beat them, join them.
Houston is Creating It’s Own Zillow-like Site, But With Accuracy
Turns out Houston is the only city in the U.S. where Zillow is NOT the most highly trafficked (or visited) real estate portal. Why? Because the HAR offers consumers more information and accuracy in pricing numbers, unlike Zillow which often has stale data — homes that are no longer listed, wacko pricing “zestimates”. So the Houston Association of Realtors has created it’s own Zillow, a beta site offering listings, sale prices, comps, property tax, school and neighborhood information for consumers. I saw the site last week at NAREE, it was impressive. The HAR.com beta site also offers a home value finder that provides property tax data, including assessed values, for off-market properties. HAR is opening this to every broker in Texas to participate in. Back in March, HAR announced it would expand coverage to the entire state by partnering with listing syndicator ListHub, a subsidiary of realtor.com operator Move Inc. This allows all ListHub participating Texas brokers and MLSs to publicize their listings on the site. In other words, one big site for the whole state of Texas. Locally, Virginia Cook Realtors will be sending listings to the HAR site.
I asked Hale if this meant HAR would no longer be sending listings to Zillow and Trulia, in effect cutting off the portals. The Austin Board of realtors stopped sending Austin listings to Zillow. Is this a way to knock out Zillow, I asked?
“Oh no,” said Bob Hale. “I want my listings on Zillow and Trulia and our HAR site, I want them everywhere. That’s how listings get sold!”
HAR is the very first MLS Realtor association to take advantage of this situation.
The pre-MLS Market has Real Financial Teeth, Especially for Brokers
Jonathan Green of CoreLogic tells us that with each 1 percent increase in transactions involving pre-MLS marketing, brokers stand to gain $250 million in (2014) gross commission income nationally from in-house sales. That’s because many of these sales are done within the same brokerage house, water cooler talk.
Off-MLS marketing of homes yields even more: each 1 percent change represents an estimated $8.7 billion in 2014 transaction volume.
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Thank you for the info on Zillow. Do you have any thoughts or comments you care to share on creekviewreality.com?Thank you. Judy
Comments on Zillow’s Coming Soon?
This discussion fascinated me because, as Bob Hale put it, MLS only works one way, and if Zillow markets hip pocket listings, that’s taking away the marketing capability of local MLS systems. Still, Zillow takes advantage of that licensed information, too.
Can they have it both ways? I think that’s the real issue …
I am not in favor of this. It defeats the entire purpose of “hip pockets.”
Zillow is upset because this is a segment, apparently up to 1/4 of the market in some areas they do not have access to. Zillow’s information is NOT accurate anyway and the information they provide the public is often woefully out of date. As a Realtor, I have to explain to the public that the information on there is not accurate and that property is no longer available, etc. etc.
Looks like another attempt by Zillow to create it’s on MLS system. Any Realtor that does not put their clients listing on MLS is not giving the property adequate market exposure. There by missing out on potentially higher offers.. Hasn’t NAR already said it is unethical to not properly market a listing?
Great write up. In general, anything that can be done to lower the cost of buying or selling a house should be done. Much of this can be done through technology. MLS is one distribution channel for listing a product (the house) for sale, Zillow is another. There should be more. If these channels compete with each other, it does two things:
1) Benefits the consumer
2) Drives down sales costs, as there is less need for a “sales person”.
The consumer can do their own research, review properties in person, discuss issues with seller (homeowner), draw up contracts, etc. Driving down the flat commission, because the buyer is self sufficient, is great. It might cause realtors to base their fees on work done – based on an hourly rate. A rate of $50 – 150 dollars/hour (or whatever the market will bear, would benefit consumers. Consumers would be able to compare agents, check their references, etc, before actually engaging them.
It’s all about disintermediation to drive our costs. You saw it in in enterprise technology (exchanges with Oracle, Ariba, SAP, etc), and you saw it consumer durables(think ebay), now it’s taking hold in real estate, taxis, etc.
Great stuff, looking forward to see how it evolves.
Taking place in medicine too, or should be. The intermediaries are what drive up costs. But will this work at all price ranges? I still think a buyer will want a pro to hold their hand. For agents who are order takers, that day is gone. But for agents who work hard and wear out shoe leather (or tires), I think they will still have a place!
MetroTex prohibits its members from developing a competing MLS. If Zillow is “listing” properties in what is essentially another MLS before they list it in the MetroTex MLS, I’m not sure what implications this has to that rule. I would be curious of their opinion of this. That said, given Zillow’s track record of doing nothing but mucking up the real estate market with bad data, there is no good end to this regardless of MetroTex’s position.
For the life of me, I can’t make sense out of the concept of “pre-listing” a home. A “listing” is simply a contract between a Texas-licensed Broker and a property owner who wants the Broker’s help in finding a buyer for his (the owner’s) property. A listing agreement can say “I’m going to help sell your home, but I’m not going to upload it into the local MLS.” That’s legal. But it is still a listing agreement. Therefore the house is not “pre-listed”—it is simply one more house offered for sale. The only difference is this: it is offered for sale in a manner that keeps it secret from most other real estate brokers. I can’t see a benefit to the seller in deliberately keeping his house out of the best system every devised for matching up buyers and sellers.
This effort by Zillow to promote itself as the primary information source for “pre-listings” raises a lot of practical problems for the average Realtor®. Here’s an example: As a Realtor® I use the same TAR listing contract that is used by all other Realtors® affiliated with NTREIS. That contract has been vetted by attorneys hired by the Texas Association of Realtors. I’m given training to understand what it means. But that contract says nothing about “coming soon” or “hip pocket” or “pre-listing” services. Is TAR going to give us a different contract form to use when we do a “pre-listing” listing agreement? Am I going to get training in the meaning and proper use of that contract? Am I supposed to draw up an Addendum myself, explaining what services I am actually offering to the Seller? It doesn’t take a crystal ball to predict a new wave of lawsuits will be coming from disgruntled sellers who sign up for “pre-listing” without knowing what they are getting—and, more importantly, what they are not getting.
Excellent points, Ken. Dare I say that a hip pocket or pre-listed property is simply a FISBO with a Realtor involved?
Candy, I don’t think there is much agreement within the circle of Realtors® about the meaning of the term “Coming Soon.” There’s evening less agreement among home buyers, home sellers, and the public in general. I see only one ethical and legitimate way to promote a listing as “coming soon.” That would be the situation where there is a written agreement between Broker and Seller to upload the listing to the MLS database at a later date. But there is a mutual agreement that the upload will be delayed (for one week? two weeks? longer?) while the agent conducts some alternative form of marketing. In many cases the Broker might not even allow showings during the “Coming Soon” period. The aim would be to insure that a long line of curious buyers would show up on the first day the home is entered into the MLS database. This is, to my mind, a useful and legitimate marketing strategy when the subject property needs so much make-ready work that the painting, cleaning, and staging will take two or three weeks. It might be beneficial to both Seller and Broker for such a listing to be entered into a database on Zillow. Please note this kind of strategy requires a legitimate written contract between Broker and Seller before the Broker begins the marketing program.
This is all very interesting. Several questions come to my mind as I read this article and some of the comments. First, are pocket listings just a sign of the times we are in because the market is up right now which means it is a fad? Over the next year or two will this still be an issue or will things settle a bit and we will want everything on the MLS. Of course there will always be pocket areas of any town or city that will be hot and in demand which means opportunity to sell before hitting MLS.
Second, is it another sign of the times that we should be giving consumers what they are seeking and we “NAR” create our own but accurate “Zillow” site. I think over the years (speaking of when Realtors feared that the internet would make us obsolete) consumers by using our services have proven we have value, we should be leading the trend rather than allow an entity like Zillow to do it for us.
Are we getting away from the true definition of pocket listing? Is there a formal or legal “TREC” definition? As explained to me it was a listing that the seller did not want to put in the MLS. This is covered in our listing agreement where seller’s give us permission to list. That’s different from “coming soon or pre-listing” which Ken Lampton spoke to.
To stay in compliance you could you not sign a listing agreement with the seller checking “do not list in the MLS” and also an amendment to the listing for a later date indicating that the seller wants it to be placed in the MLS? (With all the terms pre-listing, pocket listing, coming soon I sure hope that the agent actually has a signed listing agreement.)
But the biggest issue I see to all this is that we are going to face or should I say appraisers will face is accuracy of finding value. If it is not in the MLS does that mean it’s not a legitimate comp? Can/should it be used to determine value?
I could rant on with questions but won’t.
I do not see why the NAR has not created their own Zillow. Realtor.com is supposed to be just that, but it needs work!
Just saw your comment that the NAR should “create their own Zillow.” They can’t do it. Not because they are too stupid—but because they are required to follow all the regulations that are promulgated by the various State Real Estate Commissions. Real estate brokers and agents are licensed by the state. They are tightly regulated. But Zillow is not subject to these regulations. As a mere unlicensed advertiser of real estate they can brazenly implement all kinds of schemes that would bring down the wrath of the regulators on licensed brokers who tried to do the same thing on the web. The playing field is way out of level.
Surely there is a way to level it?