Zillow’s new “coming soon” feature, which allows certain agents, multiple listing services and brokerages to market homes on its website before listing them for sale, has kicked up a host of questions for the real estate industry.
Will it undermine the MLS? What regulatory or legal implications might it have for brokers, agents and consumers? Is it a good or bad thing for the industry?
One thing is clear. Zillow is leveraging a practice that was already taking place in the industry within brokerages, Facebook groups, and on its own site and those of some of its rivals. Premarketing of listings has become a fairly common practice as tight inventories in many markets spur intense interest in any hint of a “coming soon” property.
Zillow’s “coming soon” feature, which allows the premarketing of homes for up to 30 days on Zillow.com, is restricted to agents who advertise with the portal and the brokerages and MLSs who provide Zillow their listings in a direct feed.
Some MLSs have been toying with the idea of adding “coming soon” fields to their databases for the last two years.
“I believe ‘coming soon’ will become another status in the MLS, just another form of advertising,” said David Charron, president and CEO of Metropolitan Regional Information Services (MRIS), an MLS serving over 40,000 members in Washington, D.C., and four nearby states.
“I see (Zillow’s new feature) as an opportunity to engage a group of people to do it within the MLS,” Charron said.
MLSs will have to embrace more of the creativity exhibited by Zillow as they evolve, he said.
“If we stand still and hope it will pass, we’re going to be left in the dust,” Charron said.
Zillow as consumer laboratory
Zillow, with its massive consumer reach of more than 45 million unique visitors per month, is a good laboratory for the industry to see how consumers take to seeing premarketed homes, Charron said.
The new feature might spur the industry forward, which can get stuck in a mire of its own rules and regulations, he said.
“MLSs have had a corner on the market,” Charron said.
With Zillow innovating, “we simply have to work harder to convince people that we’re the best place to list properties for sale,” Charron said.
Zillow’s new feature brings premarketing into the light of day and “I tip my hat to them,” he added.
Howard “Hoby” Hanna, president of Howard Hanna Real Estate Services’ Midwest region, said he doesn’t see Zillow as an intermediary trying to dislodge the value proposition of brokers and agents, but a marketing partner “that isn’t handcuffed by our industry and its traditional practices.”
Hanna pointed out that brokerages have been doing a version of coming soons for themselves for years. For instance, large Chicago-based brokerage @properties released an app last year that facilitates communication among its agents about coming-soon properties.
At Howard Hanna, agents enter “coming soon” listings into Hanna’s back end before they must hit the MLS, typically 24 to 72 hours after a listing agreement is signed. The brokerage calls them “Hot Leads.”
That inventory is not just available to Howard Hanna agents and brokers, Hanna said. It’s also open to consumers who sign up and have an account through Howard Hanna’s website, he said.
By monitoring the Zillow “coming soon” feature and how consumers respond, the industry has a window into how consumers respond to them and what they want, Hanna said. “We win in the end,” he said.
Howard Hanna, the fourth-largest brokerage in the U.S. by transaction sides in 2013, sends all of its listings to Zillow in a direct feed. Zillow approached Howard Hanna to participate in a beta version of its “coming soon” feature and the firm declined because it’s concerned about possible industry pushback, Hanna said.
But the brokerage is watching, Hanna said. “We’re curious to see how the customer responds.”
“Someday we may look to participate,” he added.
Challenge to the MLS
Hanna said he could see that premarketing on portals like Zillow that get soon-to-be listings out in front of consumers could be a challenge to the value brokers and agents see in an MLS. They might question why they’re paying MLS dues, Hanna said.
Some, including Galen Ward, CEO of brokerage and referral site Estately, think Zillow’s move will undermine the MLS system.
“I can see that MLSs would see this as an attack at the front gate,” said Gregg Larson, CEO of the real estate consulting firm Clareity Consulting.
The new Zillow feature opens up a way for homes to more easily be sold outside of the MLS, potentially eroding the MLS’s decadeslong central place in the industry.
For instance, Larson said he could envision listing agents telling their sellers they’ll knock a point or two off of their commission if they sell the home through a premarketing platform like Zillow’s and capture both sides of the deal.
Zillow’s new feature could also draw more serious homebuyer eyeballs to Zillow, Larson said. “This is a way of getting traffic that actually matters.”
“As a buyer, if I’m really in the market for a home, all I can think about is the new ones coming on the market,” Larson said. This product will drive serious buyers to pore over the latest listings hitting Zillow’s premarket inventory, he said.
“Hats off to Zillow,” Larson said. “This is clever.”
In some ways, Zillow has stolen the thunder of big brokerage network The Realty Alliance by moving upstream of the MLS, Larson added.
The Realty Alliance, which counts Howard Hanna as one of its 60 or so members, is said to be working on a secretive plan to pool its members’ listings into a central database in order to give its members some leverage with MLSs.
Most effective marketing tool?
“I see the new ‘coming soon’ feature by Zillow to be directly competitive with MLSs,” said Jim Harrison, president and CEO of MLSListings Inc., the third-largest MLS in California with about 16,000 members.
“Despite the enormous traffic to Zillow, MLS participants and subscribers have qualified buyers,” Harrison said. In addition, through reciprocal agreements between a number of MLSs in California, listings posted to MLSListings get exposure to real estate pros and their active buyers across a wide region, he said.
“The MLS remains the most effective marketing tool our industry has to offer its participants and their clients,” Harrison said.
Like a number of MLSs across the U.S., Harrison said MLSListings has been looking at ways to address the prevalence of “pocket listings” that have cropped in the wake of low inventory. Pocket listings are listings that brokers and agents market, and sometimes sell, without first placing them in the MLS.
In the fourth quarter, MLSListings will be releasing its own “coming soon” feature that will allow members to premarket listings within the MLS for up to 30 days, Harrison said. At any time, they’ll be able to switch the listing to active, which will trigger the days-on-market clock, he said.
However, unlike Zillow’s new premarketing feature, consumers will not have access to the MLS’s premarketed listings because MLSListings’ “coming soon” listings will never be syndicated, Harrison said.
MLSListings will soon be sending for-sale listings directly to Zillow on its agents’ behalf on an opt-in basis just as it does for Trulia, Homes.com and a number of other portals, Harrison said. “Coming soon” listings will not be a part of that feed.
Zillow’s premarketing feature may increase the prevalence of deals done off the MLS, which Harrison said does a disservice to the seller because research shows that the seller gets a better price when a home is listed in the MLS.
In 2013, the median price of homes listed in MLSListings fetched $650,000 compared with $545,000 for homes not listed in the MLS, according to a study conducted by MLSListings.
“Maybe that’s not what they intended, but they are soliciting listings which are not included in the MLS, moving themselves into a category of a private listing club, much like other private listing clubs we are aware of that encourage their subscribers to exclude from the MLS and list with them,” Harrison said.
Errol Samuelson, Zillow’s chief industry development officer, has said that the goal of the new feature is to “change the notion of ‘pocket listing’ to something that’s more transparent and egalitarian in the sense that the listing is available for everyone to see,” and not just a “closed club where only a privileged few agents get to see the listing.”
Advertising a property on Zillow is a great advertising option, Harrison said. But “advertising your property just on Zillow and excluding it from the MLS makes no sense at all to those sellers who want maximum exposure to their listings so they can obtain the best price possible for their properties.”
Compliance with rules and regulations
There’s also a question of policing the laws and regulations of state real estate licensing boards, MLSs, brokerages and other entities involved in ensuring the legitimacy of a transaction, Harrison said.
Zillow requires agents to check a box that certifies that by uploading the ‘coming soon’ listing they are complying with the rules and regulations of their local MLS, local association of Realtors, their brokerage and their state’s licensing laws. Agents also certify that they have their seller’s permission to market the home before putting it in the MLS.
But Harrison is concerned about Zillow’s ability to police the activity of those agents and organizations who premarket their listings on the site.
“Zillow doesn’t have a compliance team like we do,” Harrison said. His team ensures that its members’ listing activity follows MLS rules and regulations are enforced.
Greg Schwartz, Zillow’s chief revenue officer, said Zillow does indeed have a compliance system.
Any listing on Zillow, including “coming soon” listings, can be flagged by a consumer, Schwartz said. For every listing that gets flagged, Zillow’s compliance team, made up of more than 10 full-time employees who work out of Zillow’s Seattle headquarters, evaluate the flagged listing.
If the compliance team discovers an issue where an agent may be violating MLS, broker or state law, they’ll first discuss it with the agent and then reach out to the agent’s broker or MLS, Schwartz said.
Zillow also has data on a listing’s full lifecycle, Schwartz said. The firm can monitor which agents are affiliated with which “coming soon” listings and monitor to see if they’re the same ones who associated with a for-sale listing and with the transaction after it sells, he said.
Zillow’s compliance team will investigate any discrepancies with agents in that listing lifecycle flow, Schwartz said.
Legal issues not clear
Most MLSs require listings be entered in their database within 24 to 72 hours of an agent obtaining a listing agreement.
However, sellers in many markets can waive that requirement and allow their agents to test-drive, and sometimes sell, the home on Zillow before entering it in the MLS.
The legal implications surrounding “coming soon” listings are not clear. The National Association of Realtors’ lawyers are looking into the issue of off-MLS deals so the trade group can give accurate advice to members about staying compliant with MLS rules and state law, according to NAR spokeswoman Sara Wiskerchen.
“NAR isn’t looking into the new site feature; we have no response about it and don’t plan to make one,” Wiskerchen said.
Brian Larson, an attorney and consultant for MLSs and brokerages at Larson Skinner PLLC, said that his understanding is that, in at least a few states, a signed listing agreement is required by state law in order to market a property for sale.
But Brian Boero, partner at real estate design and consulting firm 1000watt, thinks it’s “a fool’s errand” for the industry to try to define when a listing actually becomes a legitimate listing.
“Because, while the argument rages inside the industry, the world moves on,” he wrote in a blog post today.
“Do we believe that at a time when Twitter topples governments and our deepest secrets end up in someone’s jeans pocket that we can control the manner in which homes are marketed?”
A Zillow premier agent’s perspective
Tad Kirkpatrick, who runs a team of seven agents in the Dallas metro area and spends between on $40,000 and $50,000 on Zillow marketing each year, will premarket his listings on Zillow, but he’s not happy about it.
He said he gets business from the advertising he does on Zillow, but also feels that Zillow is slowly cutting agents out of the real estate transaction.
“Zillow makes it really easy for consumers not to call us,” Kirkpatrick said.
Kirkpatrick says that he puts “coming soon” signs in a yard before it’s ready to sell and that helps get a dialogue going with buyers. On a large platform like Zillow, that doesn’t make sense, he said.
He likes that only the listing agent will be shown on the property detail pages of “coming soon” listings on Zillow, but he doesn’t trust that the feature will remain free from advertising of competing agents.
“I don’t trust (Zillow),” he said, noting that in recent months the portal had raised prices significantly for its ZIP code-level ads.
Zillow’s chief competitors, Trulia and realtor.com operator Move Inc., declined to comment for this story.
Editor’s note: This story been updated with a clarification from NAR on its response to Zillow’s coming soon feature. Its legal department is not looking into the feature, but is looking into off-MLS deals and how best to educate members about the legal issues associated with the practice.