Pocket listings and new rules for Realtors!

Realtors have to list a property on the MLS within 24h of any marketing effort!

Pocket listings limit the marketability of a property and may fetch the seller a lower price. Sellers should think twice about allowing the practice and do due diligence to find out if that’s in the cards for their listing. Alternatively, look elsewhere to sell!

 

The National Association of Realtors’ new rules about private listings

 

Mandatory listing on MLS

Homes are not always listed on the open market as often and quickly as they should, especially in a low inventory situations like in these days.

Very interesting news from the NAR (National Association of Realtors). Realtors will no longer be allowed to market a property privately for an extended period of time.
Within just 24h (one business day to be precise) of the start of any marketing efforts, they have to list the properties under contract on the MLS. Flyers, email blasts, phone calls, any online or offline marketing effort triggers the countdown to the requirement to open market the property.

Private listings/Pocket listings

These listings are called private listings (or even exclusive listings) because properties are marketed only to a limited number of buyers, generally controlled by the listing agent. They are also known as “pocket listings” to describe how the listing is hidden from the general public (kept in their pocket), and listed publicly only if no private buyers are found.

Opening up to the market

It’s pretty big news because it aims at opening some properties to a broader pool of buyers (and their agents) much to the benefit of many in the market, professionals and homeowners selling. Private listings have been used and abused by some realtors, despite having committed to the NAR code of ethics.

Why do pocket listings

There are multiple reasons for this practice; the one that stands out is the attempt of listing agents at collecting a full commission, instead of having to split with another agent representing a buyer who found the listing on the MLS. Thanks to buyers’ lists that agents build in many ways, including by setting up open houses for that primary purpose, listing agents can find a buyer quickly, which is sometimes one of the sellers’ goals.

Listing agents are incentivized to these practices by handsome and easy monetary rewards.

More importantly, if they have the listing (representing the seller) AND find the buyer, they net the whole commission. The downside for agents is minimal, as the full commission easily exceeds the loss due to a likely lower price. However, that violates the fiduciary relationship between agent and their seller. It’s a poorly kept secret in the industry, but most sellers are completely unaware. It’s sellers who lose the most as for every dollar they lose in the sale due to the restricted number of buyers competing for the purchase of the property, the loss is split in 94% for the seller and only 6% for the agent, but there is no commission split with a buyers’ agent.

Example: Agents rather sell a property for $90 and get 6% by selling it to a buyer from their private list only and pocket $5.40 (6% of $90), than market on the MLS for $100 and sell to a buyer who is represented  and is owed half the commission, therefore pocketing only $3 (6%/2=3% of $100). If the price is $900,000/$1,000,000 which is not that uncommon in states like Massachusetts.

We will have to wait and see if and how this is enforced because it breaks a fairly common practice.
It would also affect some showings that genuinely require private marketing, as in the case of celebrities.
For those realtors who complain by saying that it’s their clients who require such type of listing, they should be reminded that they advise their clients and if they informed them that they could be underselling the

Sellers need to be made aware of all the best options available in a professional and ethical way and timing.

property, many would probably prefer an open listing.
Sellers now have more and better opportunities to sell faster and for more.
Buyers have more listings to choose from, especially if they have a buyers’ agent representing them.
Listing Agents miss out on the opportunity to get paid the whole commission without having to split.
Buyers’ agents have more opportunities for their clients.
So to summarize, this is bad news for listing agents, who emerge as the losers, but only those who regularly used this technique. Everyone else wins, but only if the rule is effectively enforced.

This sounds like one of many attempts at disciplining industry practices like others in the past, often largely ineffective as workarounds are always found when the monetary incentive is often so high in real estate.

Winners and Losers:

Listing agents LOSE, because they lose control over the marketing for that listing and potentially the full commission.

Buyers agents WIN because they have more opportunities on the market to find their clients a home to purchase and therefore to earn a share of the commission.

Listing sellers WIN because their property opens up to a much larger pool of potentially bidding buyers.

Other sellers LOSE because more properties are released on the open market to compete with theirs.

Buyers WIN with more homes available to choose from and possibly lower prices thanks to the more competitive environment.

Buyers on listing agents lists LOSE because they may have to compete with more buyers.

For more and a point of view more focused on Sellers, read here!

Proxima Investors are not Realtors nor Real Estate Agents and do not charge listing fees to their Sellers providing the best return for their important asset, their home.

Fall in New England Real Estate

Real estate properties in New England in the FAll
Rural New England, USA autumn foliage: The beautiful Fall season, great for the colors, not for the conventional real estate market.

We are based in the middle of Massachusetts, so pretty close to the heart of New England and Fall is a special season for us.
September has been pretty gorgeous with finally pleasurable temperatures that swing between chilly and warm, and great dry days of sunshine.

Pumpkin season in New England, when home sales slow down, sellers have to scramble and buyers hope to get a great deal!
Halloween soon! Pumpkin season is almost here! As they fill homes and yards, homes also are left unsold.

 However, a beautiful September in Massachusetts this year, 2019, doesn’t mean that the Fall isn’t coming. Leaves are changing colors and are gracefully falling in chain spirals on our green lawns
It’s possibly the best season in New England; the Foliage draws people from all over the globe, Halloween is one of the kids’ favorite times of the year (and of some adults’ too!), apple picking, cinnamon donuts and all that goes on in this beautiful period.
Labor Day marks a change in the real estate market, and it’s not always as pretty as the colors of the season. While it definitely makes many homes look so beautiful, cozy and welcoming by painting them with the warm colors of the New England Fall, it’s also the last chance for sellers and buyers to make a deal and move on.

Home Sellers and Home Buyers may have closed deals and moved during the more favorable Spring season, usually in the last part of it as it tends to start a little late up here, in the North-East of the country. Many others may have closed during the second part of the year favorable for residential sales and purchases, the Summer. All others either drop out of the market, waiting to restart fresh in the Spring or show their motivation and take drastic measures.

The warm colors of the New England Fall are attractive for foliage enthusiasts, not so much for home owners who want to sell, but haven't been successful until now, and it could be late on the conventional market.
Sunny days, warm weather, chilly at night and early morning, and in the real estate market it’s getting cold as well!


For Buyers that means increasing efforts and starting to reduce their expectations, like the towns and neighborhoods that they would like to move to, physical conditions of the property, type of home, features and amenities.
It’s also the time that Sellers really use the only effective option they may have, to finally sell, especially if they went through the whole Spring and Summer without success, a price cut.
We could think that the Sellers’ and Buyers’ actions should finally meet on common ground and real estate sales pick up, but that doesn’t always happen, not to the degree that one could expect and certainly not in all local real estate markets.
The reality is that there are obstacles to a marked pickup in buying and selling activity.
Schools start mostly at the end of August, so families with school-age children, which are approx 1/3 of all potential buyers, tend to postpone a move. Mostly Millennials and Empty-Nesters can take control of the market, but may not be the most motivated buyers to power the marketplace.

The feeling of home is what first time buyers want, but if they have young kids they may postpone their purchase until the end of the school year, unless they are lease-purchasers; then, they just want to buy ASAP!
Bowl of fallen leaves on a tablewhile home prices start tumbling in the Fall season in New England.

Millennials typically struggle to qualify for finance thanks to the heavy burden of student loans that haven’t lead to very high salaries to start out at. They also tend to overlook homes which require any amount of work, even minor. Amenities nearby are considered indispensable, not to mention that they accept the idea of being renters more than other generations, so they don’t pressure themselves into purchasing. There certainly are many other reasons, they just don’t rush into buying as much as other generations.
Empty-Nesters tend to be savvy and have probably been the the process of acquiring a home, possibly more than once, and therefore emotions don’t push them into buying so easily. Their experience also allows them to go through all the steps to buying and selling very cautiously. So they often prefer to wait the market out to sell, in the end, they know that property values tend to rise over time which is great if you’re downsizing as they usually do. Many are also financially more stable and can make thought through decisions, which doesn’t help the number of sales.
Of course there are many other reasons why the real estate market usually slows down during the Fall, especially towards the end, with weather related issues and more, but that’s what often happens in the conventional real estate market of homes sold traditionally, whether through a real estate agent or directly by the owner in a FSBO.

Kids love this time of year and they don’t want to switch schools now, so buyers with school-age kids pull out of the market.


Despite factors influencing both Buyers and Sellers, markets often tip into temperatures that tend to look replicate the weather, so it chills into a “cold market” and is generally perceived as the best time to snap up deals from very motivates Sellers. Many don’t want to go through another Winter in the home they have decided to sell. A cut in price may be the last hurdle before being able to move to a warmer climate down South and may now become acceptable. Psychologically Sellers could be satisfied that they at least tried during the favorable months, but if a 5% cut is what it takes it could still be a tough pill to swallow. Buyers know this, especially in this age of information easily accessible information. The problem is that all unsuccessful Sellers who don’t want to lower their financial expectations enough, as a price reduction of less than 5% is not always very effective, will continue being unsuccessful, the listing go stale and the house unsold.

Other markets are very different and may even accelerate in the Fall and go strong in the Winter, as they are much less sensitive to the classic real estate cycles, like the market we, Proxima Investors specialize in, which is the market of Sales on Terms.
This allows us to position the properties that we purchase in a much less competitive market, offering a deal to a very motivated category of Buyers who are also typically very

Father with Daughters Drawing Face On Halloween Pumpkin and probably not thinking about moving now unless they get a great deal!

Our busiest months are the cold ones here in New England, because Sellers run out of options and start looking around for alternatives and that’s how many of our Sellers find us: looking for a Home Selling solution that works for them. And that’s what we’re about.

At Proxima Investors we sell most of our properties through our program of Lease-Purchase or Lease-Option, in all variants, as we have designed it specifically for our model and unlike any other investor. On the other side of the deals, we purchase the properties we sell in any of the many ways to acquire real estate ranging from Straight Options to Lease-Purchase, from Wholesaling to Delayed Purchase , from Seller Finance or simply CASH depending on the goals of the Sellers and the best method of achieving them. A conventional sale is only cash minus all the closing costs that occur, often as a surprise, in an ordinary Purchase & Sale transaction and the Seller has to take care of everything with that set amount of money and make the most of what’s left after all the costs of a pricey conventional sale.
Almost all homes and many Sellers qualify for at least one of our programs and they all provide a fast selling option for the most financial return. If you’re a Seller or a Buyer, ask to see if you’re a fit for success through our programs, test us and you will probably be blown away by finding out how many options you have outside the box of a conventional sale.

Lease Purchase specialists of Northborough MA
Proxima Investors of New England

More info for our Sellers and our Buyers is available on our websites, by sending a quick email (proximainvestors@gmail.com), easy WhatsApp 617-921-9265, just calling 617-999-0269 or why not message us right here!?

We can’t wait to hear your questions, but in the meantime don’t forget to embrace and enjoy the Fall, so beautiful in New England, it’s really worth it!