Zillow’s “Coming Soon” program raises important questions about potential role of  ”pre-listings” in MLS marketplaces and whether economists should use them to track prices and inventories.

Zillow now is posting properties that are “not yet on the market, but expect to be listed for sale within 30 days” so that buyers can “identify homes that will be listed for sale within 30 days.  Buyers interested in a Coming Soon property are able to line up their agent and get pre-approved in order to move quickly to place an offer once the home is listed for sale.  Additionally, buyers now have an even more comprehensive view of regional housing inventory, and are able to make a more informed evaluation of current for-sale properties against what will soon be available,” said Zillow’s news release.

Coming Sooner or Later

“Coming Soon” is not a new idea.  Real estate agents have been sticking “coming soon” signs in the front yards of their clients for decades, especially during sellers’ markets.  The practice became so prevalent and caused so much confusion in Seattle last summer that the North West Multiple Listing Service slapped practitioners with a “No Promotion/Advertising When Listing Not Published” policy that forbids its members from promoting or advertising any property unless a listing for that property has been delivered to NWMLS.

Pre-listing online is also not new.  The San Francisco Association of Realtors started a “coming soon” section in the MLS in 2013.  “We saw the need in the market and provided a service the members desired while still exposing the listings to the entire membership,” says SFAR’s EVP Walt Baczkowski.  Last January SFAR started to promote the service.   Patticipation has risen steadily and through May, some 138 properties were pre-listed, equal to more than a quarter of the MLSs total current invventory of 503 listings.

Pocket Listing Puzzles

At the National Association of Real Estate Editors’ conference in Houston last week, Zillow’s Errol Samuelson positioned the new service as a way to bring pocket listings—off-MLS listings—into MLSs.  If so, Coming Soon could benefit housing economists as well as consumers by adding these uncounted properties to tallies of MLS prices and inventories.  Bob Hale, president & CEO of the Houston Association of Realtors, congratulated Samuelson on the program, noting that pocket listings account for as much as 20 percent of sales in some markets today.

Many pocket listing sellers use the tactic to test the waters for their homes before listing on MLSs.  Will they pre-list in the same way, raising or lowering their prices in response to the reception they received in the pre-listing phase?  If so, then pre-listings may not be an accurate forward-looking precursor of prices. Or will sellers initially price their homes even farther into the future since they could be adding time to their time on market?

Most pocket listers are mostly concerned with privacy and security. It’s doubtful they will go the MLS route to make more money.  Moreover, its already well-known that they would do better on the MLS from the get go.  For example, a study of MLS-marketed single-family home sales by the JacksonFuller real estate team in San Francisco two months ago averaged a 17 percent higher sales price for MLS listings than off-MLS sales. The average sales price for a single-family home sold without MLS marketing was $1,069,456, about 17 percent less than the average MLS-marketed sales price of $1,290,112, according to the report.

Pre-listing Mysteries

MLS data is used by at least eight national price reports, NAR’s existing home sales and pending sales reports, four state Realtor market reports, dozens of local market reports from local boards and MLSs and, most importantlly, by thousands of Realtors as they counsel sellers and buyers on buying and selling decisions.

Should the Zillow program take hold, MLSs, competitors among the national aggregators are sure to follow suit.  Widespread adoption of online pre-listings provide sellers’ agents another tool in their marketing arsenal, but they also present economists significant challenges that may or may not be beneficial and they may change forever the way MLS inventories are calculated.

Are pre-listings simply listings that temporary lack some data details?  Should they be included in  MLS inventory counts and calculations of median prices?  Could they be considered a forward-looking indicator of asking prices?  Will they reverse the trend towards pocket listings in some markets, improving the utility of MLS marketplaces for consumers and the accuracy of  local market reports? Can they extend our view of the real estate marketplace to include the price-setting process as it takes place around hundreds of kitchen tables?

Or are pre-listings too far removed from the real estate transaction to be taken seriously?  How can a home that cannot yet be sold be considered for sale inventory?  How can pre-list prices be useful measures of prices when many are marketing ploys that will change if and when they are officially listed?  Since pre-listings cannot be purchased, how can they be considered for sale properties?  By creating a pre-listing buyers’ buzz in sellers’ markets, will they foster multiple bids and force up prices artificially?

The answers to these questions could brubg about a fundamental change in the way homes are marketed and transactions are measured.

 

Steve Cook