Houses Getting Scooped Up Before They’re Listed, It’s Shutting People Out of Homeownership
Date Posted: August 12, 2021
Posted In: Discussion, News,
From PBS News Hour: When a couple looking to buy their first home approached real estate agent Annette Dedios at the beginning of the year, she knew it would be tricky to find something that fit their needs. They were looking to buy in Fresno, California – dubbed “the nation’s hottest housing market” by the Los Angeles Times back in March – and most of the homes listed in their desired neighborhood were above their price point.
Dedios had previously found the couple a condo in 2019, so when they approached her to get pre-approved to buy a house, she got to work. But, as she was doing so, her clients were poached by another agent – one who gave them an attractive offer: go with him to sell their condo and he would show them a home that was not yet on the market.
So-called “pocket listings” like the one that caused Dedios to lose a sale are not a new phenomenon. Brokerages have used them for years to corner the market by way of having the opportunity to represent both buyer and seller, keeping these sales within their network. They grew so prevalent in some parts of the country that the National Association of Realtors (NAR) passed a policy against the practice in 2019, requiring brokers to list any property that they are marketing to potential buyers on the multiple listing service, or MLS, a publicly available online database.
Still, real estate professionals say there are loopholes in the policy that allow the practice to persist, and in some cases worsen, because of the pandemic. The NAR policy does not ban “office exclusives,” which allows brokerages to market listings privately within their networks rather than listing it on the MLS. Advocacy groups such as the Consumer Federation of America have argued this loophole allows discriminatory housing practices to persist. Nor does it ban “coming soon” listings, which allow buyers to get a jump-start on a property and potentially close on it as soon as it hits the market.
The number of homes that have likely sold without being marketed to the public has grown by 67 percent since November 2019, when the NAR adopted its stricter rules, according to a Redfin analysis tracking MLS listings that were marked “sold” or “pending” the same day they were put on the database. Over the past year and half, demand for housing skyrocketed while supply has shrunk to historic lows. Nationwide, 32 percent of homes sold in March of this year went for above list price, compared to 14 percent in 2020, according to real estate marketplace Zillow.
“There have always been pocket listings, but not like it is now,” said Liz Hogan, a luxury real estate agent with the brokerage firm Compass in South Florida. “We have so many people relocating to Florida, and there are literally not enough properties for all the people who are moving here.”
Hogan said she and other agents are part of WhatsApp chats where they share information on homeowners who are looking to sell their properties. In these chats, she said, “you say you know of an owner who is willing to sell in [a certain] neighborhood, and you’ll get like 10 responses. It’s almost like [these offline conversations have] become a secondary market.”
While pocket listings can be lucrative for real estate agents, some realtors expressed concerns to the PBS NewsHour that sellers do not get the best deal when they keep their properties from being marketed to the wider public, because there’s no chance for multiple offers to compete against one another. And with home prices already at historic highs, housing advocates worry that the practice could worsen already-existing racial and socioeconomic disparities in homeownership, as well as shut some buyers out of the market.
“It kind of feels one step removed from those racial covenants of the 1960s, which would explicitly say, ‘do not sell this home to anybody who was not white,’” said Daryl Fairweather, a chief economist with Redfin, which has come out against pocket listings. “Now, it’s not so explicit. But you know, it might serve the same purpose … who are you excluding?” Fairweather asked in reference to the practice.