As if the market wasn’t challenging enough, especially for first-time homebuyers, Redfin
reported earlier this year that an estimated +400,000 homes will be sold by an agent this year without the public knowing about it. This number is up 67% since the National Association of Realtors created a policy to prevent hidden home sales (also known as pocket listings).
Here is how it’s happening and who really benefits from these hidden homes.
First, let’s go over the definition of a hidden home (known as a “pocket listing”). A pocket listing is a home that is sold by an agent but NOT listed on the MLS.
I know what you are thinking….
”Wow! 400,0000 homes that I don't know about as a homebuyer seems unfair! Why doesn’t someone do something about this?”
In 2020, the National Association of Realtors began enforcing their new policy to ensure hidden homes would diminish. So how is it possible that pocket listings have increased by 67% since then? In our opinion, it is due to two loopholes that NAR put into their policy.
Loophole 1: Internal Sharing
From what we can see in this policy, an agent is allowed to share information about upcoming home sales within their brokerage (where they work) but not with the public. Oddly enough, once NAR's policy was put in place, we noticed the launch of new programs like Coldwell Bankers "Exclusive Listings", Howard Hanna's "Find It First," and Lamacchia "Links" which all encourage you to work with their buyers and not list on the MLS. As a homebuyer, you typically have to give them your info and work with them to get access to these homes since these brokerages do not share their "exclusive" listings with other brokerages.
While some brokerages are finding ways to make more money off of consumers, Redfin has been the only big brokerage to speak about the negative impact of pocket listings, especially on minorities.
Loophole 2: Privacy
This was meant for sellers that requested their home not be on the MLS. If you are Kim Kardashian and need privacy, then sure, we can understand that.
But for your average American home, you will want as many eyeballs on your home as possible. Also, as much as we try, we don't live in a private world. Most of your info is already accessible online, and that data is typically sold within the industry. How else do you think agents end up sending you mailers, cold calls, etc.?
So who benefits the most from these pocket listings?
In our opinion, the brokerage is the big winner. Remember that a brokerage (where your agent works) will take 5% - 60% of what your agent makes in commission.
If they can sell your home to someone represented by the same brokerage, they would then get part of the buy and sell sides of the commission you paid out as a seller.
Whose data is it to control and do they have a right to hide listings from the public?
Two Big Questions To Think About:
Housing is a basic human right, yet many home buyers are battling it out in the trenches just to find a home to buy right now. It should anger you that in these situations, some companies are controlling what home sales you get to see, and which you do not see.
What benefits do I really have of not listing my home on the MLS?
Your home will not be viewed by as many people when not listing on the MLS. You also do not typically save money on commissions when using an agent and selling as a pocket listing. If you have concerns about privacy, you can control when people can view your home and you do not have to host an open house. In our opinion, open houses are used more for agents to find new clients than to sell your home, especially in seller's markets where homes are getting multiple offers within the first day of listing.
We live in a world where we can research anyone and anything, yet future home sales and future homebuyers are under lock and key? Why is that?
Our opinion is that the industry makes way too much money off lead generation, selling services (and now gaining perks of pocket listings). They stand to lose a lot if that information was accessible to every consumer.
Selling Later doesn’t work within the industry and is a group of frustrated consumers on a mission to add more time, transparency, and fairness to real estate. This is why every post on Selling Later is accesible to everyone. It's also why we refuse to sell or share member information.
: A multiple listing service (MLS) is a database established by cooperating real estate brokers to provide data about properties for sale.
: a home sold by an agent that was not listed on the MLS
400,000 Hidden Homes
: Redfin reported 4%-10% of all listings were pocket listings. The average (7%) of last years existing home sales (5,640,000) is 394,800. Redfin estimates the % of pocket listings will increase by the end of the year.