This is the third in Inman’s five-part series on pocket listings in today’s market. Check back in the coming days for additional features and click here for the first installment and here for the second. Thursday: How real estate pros are finding off-markets listings via encrypted apps.
The number of listings that sell with zero days on market has soared since a national pocket listing policy went into effect, according to a controversial new study from Broker Resource Network obtained exclusively by Inman.
The study, “The Quiet Threat of Zero Days on Market,” aimed to measure the impact of the National Association of Realtors’ Clear Cooperation Policy, which requires listing brokers to submit a listing to their MLS within one business day of marketing a property to the public. The policy was designed to curb pocket listings, in part due to fair housing concerns, and had an implementation deadline of May 1, 2020.
Broker Resource Network, a spinoff of brokerage network The Realty Alliance, has 84 brokerages with between 200,000 and 400,000 agents combined as members. For the study, BRN members pulled data from a total of 24 multiple listing services comparing the number of properties sold in the MLS within 24 hours of being listed during two periods: 12 months before the May 1, 2020 Clear Cooperation Policy deadline and 12 months after.
According to the report, BRN members “immediately recognized a shift” after the deadline that was unexpected.
“In every market reviewed across the United States, brokerages recognized double and triple digit increases in Zero Days On Market listings across firms of all sizes and business models,” the report said. In one market, the increase was a whopping 844 percent.
As a result, BRN’s report calls for a re-evaluation of the Clear Cooperation Policy.
“If this trend continues, we fear that it may erode the importance of the MLS, have devastating impact on fair housing, and create other business issues that would impair cooperation across our great industry,” said Kent Hanley, president of the Broker Resource Network, in a statement.
“It’s time for us all to engage in this conversation across networks, interest groups, and news sources for brokers in the industry today. Whether you are a franchisee, an independent, a traditional broker, an alternative model, a single or multi-office, local, regional, or even a national firm, this is a topic you should care about.”
The real estate industry should collaborate to understand the cause of the increase, according to BRN. “When policy has the opposite outcome of what is expected, the policy and the problem need to be readdressed,” the report said.
“Broker Resource Network would love to work with MLSs” to create a policy, BRN spokesperson Victor Lund of WAV Group told Inman via email, noting that a broker has come up with an alternative policy, but has not yet submitted an official policy statement to NAR for consideration.
BRN’s report recognizes that there are legitimate reasons why some listings sell with zero days on market (DOM), including properties recorded in the MLS by homebuilders, listings where sellers represent themselves but homebuyers are represented by an agent, and listings that are entered into the MLS as “coming soon” listings — and therefore exposed to buyer agents — but that don’t accumulate days on market until they switch to “active” and may then receive offers immediately.
Still, “the enormous increase in the number of homes selling for zero days on market indicates that there is a growth in the number of properties that are not being widely disseminated through the MLS,” the report said. “This not only indicates the potential for fair housing violations, but it also is indicative of less cooperation in sharing listings through the MLS.”
Office exclusives, where a listing is only marketed within a brokerage and not in the MLS, are also often recorded as having sold with zero days on market. Office exclusives are a controversial exception to the Clear Cooperation Policy. In May, Redfin released a study finding that, since the CCP went into effect, the number of homes sold without being marketed to the public increased 67 percent, from 2.4 percent to 4.0 percent, and may still get worse; at the time, the rate had risen every month in 2021. Redfin CEO Glenn Kelman called for NAR to end the office exclusives exception.
“NAR has already banned agents at different brokerages from sharing pocket listings with one another via Facebook groups or email lists,” Kelman wrote. “But this well-intentioned policy had the unintended consequence of creating a monopoly on a monopolistic practice, favoring the big brokerages who can still pocket listings within their own brokerage, in what are known as ‘office exclusives.’
“The big brokerages could end pocket listings today, just by looking for the offices selling a large number of listings that are never marketed to the public. At its November conference, the NAR could support these brokers by closing the office-exclusive loophole industry-wide.”
BRN’s study found that in MLSs without a “coming soon” status, many brokerages listed homes as office exclusives in order to conduct repairs, inspections or staging before later converting them to a standard “active” listing. The report suggested the hope for an “industry conversation around the need for a national Coming Soon policy.”
What the study didn’t look at
The report compared the number of zero DOM listings before and after the CCP and then derived a percentage increase from that at the brokerage level. It did not calculate that percentage at the MLS level, so the report does not include figures for how much zero DOM listings increased for each of the 24 MLSs in the study.
The report also does not look at the percentage of zero DOM listings compared to overall listings in an MLS, therefore it is impossible to know whether and how much the rate of zero DOM listings rose. For instance, if 5 listings out of 100 listings were zero DOM before the policy was enacted and after CCP there were 10 zero DOM listings out of 200 listings, then the actual rate of zero DOM listings would have remained the same.
Real estate consulting firm WAV Group created the report for BRN. Asked about the rate of zero DOM listings, co-founder Victor Lund said BRN was more focused on the policy’s failure to curb pocket listing behavior.
“We are talking about hundreds or thousands of homes that were listed and sold in the same day — meaning that MLS participants and subscribers did not even have the benefit of a single day to share with their buyers,” Lund said.
The study also did not look at how many of the zero DOM listings were office exclusives or how many were double-ended. The study also did not compute an overall increase in zero DOM listings across the 24 MLSs.
“The goal of the study was to invite the industry to a conversation with brokers on how we can revise policy to curb this radical increase,” Lund said. “All of the MLSs we spoke to are interested in that.”
MLSs push back
The report included data from only 12 of the 24 MLSs and comments from only nine of them, most of which disputed the study’s findings in some way.
Lund said via email that WAV Group reached out to all 24 MLSs, sending them each a statistical report a broker in their market had pulled from a back office feed and requesting that the MLS verify the statistics.
“Many MLSs were not able to replicate the same data,” the report said. “We believe that this is because the data in the MLS is not exactly the same as the data that the MLS makes available through their distribution servers to broker back-office feeds.
“In a few cases, the MLS could not verify the data provided, and some MLSs requested that the BRN withhold publishing data from their market, indicating that it would be a violation of their rules. They did not dispute the findings, but rather the use of data for these statistical purposes. The BRN firms disagree with this determination.”
If an MLS did not specifically approve of their data being included in the report, WAV Group did not include it, Lund said.
Of the nine MLS executives that commented for the report, many suggested the study’s results were due to hot market conditions rather than to any effect from the Clear Cooperation Policy.
“It doesn’t look like much of an issue,” John Mosey, CEO of Minnesota’s NorthstarMLS, said.
“Out of 130 companies, a grand total of 529 more properties in May 2021 than in May 2020 were sold ‘in-house.’ Or, +13.5%. In this market, I don’t find it surprising that sellers might look at avoiding showings while still attracting a price that would ‘make them move.'”
The Houston Association of Realtors analyzed double-ending — often seen as a motivation for pocket listings — in order to assess the study’s results.
“It seems clear to me the increase in listings with 0 DOM is more of a reflection of a hot market,” Shawn Dauphine, HAR’s director of MLS, said.
“I analyzed all 0 DOM sales for the 2 periods you provided (before CCP and after CCP) to see what % of those deals were double ended by the same broker. This is a better indication of office exclusive than simply assuming all 0 DOM listings are office exclusive. Although the number of listings with 0 DOM went up 66% because of the market, the % of double ended deals actually dropped from 28% to 21%.”
Stuart White, CEO of Tennessee’s RealTracs, pointed out that one unnamed brokerage in his market is “new” and “huge” since the CCP was enacted and had an outsized effect on the study’s numbers.
“So, while it appears that a 213% increase in listings with zero DOM is significant, the fact is that his growth in the company’s number of total listings is WAY more than that,” White said.
“Having checked several companies I know follow the rules, I would venture to say that the majority of these are market driven and not CCP driven,” he added.
“We internally track listing to contract and contract to closed days, and DOM excludes every status except when it is actually ‘Active.’ The internal numbers reflect that the market is incredibly tight. Many of the listings with zero DOM have a ‘listing to under contract days’ of 1.”
White decried DOM as a “meaningless vanity number” that reflects how hot a market it is.
“I do not think it reflects whether agents are circumventing CCP,” White said.
“We have a coming soon status, and that status is not included in DOM calculations. Coming soon simply means it’s not being shown. When we implemented the coming soon status (well before CCP), the majority of agents did not want it included in DOM – for their marketing. In this market, though, most properties in coming soon status are under multiple offers before being shown.
“Between new construction, the market conditions and COVID, I don’t think there is a conclusion that could be drawn related to the Clear Cooperation Policy.”
He suggested a different methodology similar to what HAR did: tracking properties that were doubled-ended.
“If they track within these same time frames, the number of properties that were co-oped (different selling agent and office) and compare that with the number sold in-house with the same agent and with a different agent in the same firm, I think you could draw some valid conclusions about 1) the number of pocket listings being held by the agent and 2) the number of sales within a firm not being shared outside that firm,” White said.
Teresa King Kinney, CEO of Miami Realtors, also pushed back against the study’s conclusions and suggested looking at the rate of double-ended deals to gauge cooperation between brokers.
“Correlation of this change in Days on Market solely to Clear Cooperation and not considering the numerous other factors affecting the market seems imprudent,”King Kinney said.
“The first portion of this study included the uncertainty of the beginning of COVID when we were in a slower market, and the second portion is during a time of extremely low inventory, heightened demand in our market, and historically low interest rates. Additionally, while there has been an increase on properties that closed with zero days on market, this study only showed this change for a fraction of our brokerages and their closed listings.
“The time a property becomes available to the time it takes to get under contract, ‘Days on Market’ (DOM), fell significantly across the board during the second section of this study.”
Miami Realtors also looked at double-ended deals and found no significant difference between the period before CCP and the period after.
“For both periods, we see that listings sold with 0 DOM have an 8% lower rate of cooperation,” she said.
“There are many factors that impact how fast a listed home sells. Based on the numbers above, we cannot conclude that the implementation of the Clear Cooperation Policy had any impact on the number of listings selling with 0 DOM.”
Asked about the comments from MLS execs on the study’s conclusions, Lund said, “WAV Group was surprised by the skepticism from the MLS. Brokers were not very surprised. I think that there is a significant amount of abrasion between brokers and MLSs as it relates to things like this. The perspectives are very different.”
Bill Fowler, senior director of industry relations for Compass (which is a BRN member), pointed to the need for more discussion around the policy.
“I was personally interested in joining BRN for studies such as this — comparing market trends among competitors, particularly related to blanket national (and market-level) MLS policies,” he said via email. “Brokers are clearly paying more attention and are looking to MLSs to help understand how best to facilitate a larger conversation around the effects of data policy on a wide scale.”
He added that “the data and MLS responses indicate a need for further investigation.”
Inman reached out to several of the dozen MLSs who were named as part of the study but whose data was not included in the report. A spokesperson for Bright MLS told Inman that the MLS told WAV Group not to use its data.
“Our initial review revealed their interpretation of the data (and therefore the findings) was flawed,” the spokesperson said. “If the data was used, that was without our permission.”
“The Brokers’ data was pulled from our system. When we checked, we found what they pulled (not the data itself) was incorrect,” the spokesperson added.
Jeremy Crawford, CEO for FMLS in Georgia, told Inman that the MLS told WAV Group not to use data from FMLS’s brokers because they did not provide authorization.
“We always consider the listings owned by the broker, and when we inquired to the brokers regarding the study they indicated they didn’t want their listings used in the study,” Crawford said.
Crawford added that he didn’t have an opinion on the study’s conclusions and couldn’t validate or invalidate its results, but, like other MLS execs, pointed to other factors that such a study could consider.
“[A] study that is done year after year in a standard manner to establish a baseline and a ‘constant’ and then can factor in all variables against that constant will provide the best results,” he said via email.
“This is a study that was done once, and focused on a singular item, CCP, what I don’t see in the study are the other market variables included in the study over a long timeframe.
“As an example, Days on Market in general are at an all-time low, nothing to do with the singular conversation on CCP, but instead because the housing industry is at an all-time low on inventory, both resale and new construction, that’s a supply and demand problem just like many other industries with supply and demand issues, and then factor in COVID factors, lack of labor in new construction, COVID relief packages, rent and mortgage forbearance, the lowest interest rates of all time, etc. are all factors and variables that should be included in a study of this nature to lead down into the conclusion section. I’m not sure if all of those factors were included in this research effort.”
A spokesperson for MLS PIN in Massachusetts said the MLS “opted to not comment because we did not run the data ourselves. We do not know who ran it or what parameters they used for it. We were asked to comment and declined for that reason.”
MLS PIN did not respond to follow-up requests for comment on the study’s conclusions.
California Regional MLS, REcolorado, RMLS and The MLS did not respond to requests for comment.
Editor’s note: This story has been updated with additional comments from FMLS CEO Jeremy Crawford.