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Using Pocket Listings to Shift the Balance of Power Away from the MLS

Yes, there are dangers to pre-MLS listings. But a large chunk of houses are bought and sold that way anyway. When it comes to consumer internet opportunities, those that give consumers what they want — which in this case, is access to listings the general public can’t find — are generally the ones that win long term.

Here is a strategy that Zillow, Trulia, or Move could take, as the 1st step in shifting the balance of power away from the MLS (this more geared at Trulia and Zillow, given Move/Realtor.com has less incentive to shift power away from MLS’).

All three portals have millions of consumers who have subscribed to email alerts for specific regions, and price ranges. I think it’s safe to assume those subscribers would be interested in hearing about pre-MLS (aka “pocket”) listings ahead of the general public. So, here is what any of the portals could do to leverage those subscribers in a new way….

Put all existing email subscription results into a Twitter-like stream, inside an app. Auto subscribe everyone in the app, so they download it, sign in with their user account, and instantly get value by being able to consume their existing email alerts via an app. That pool of buyer subscribers then becomes an early audience to test the market with pocket listings. Make it so buyers have to have the app, and be pre-qualified, to receive notifications of pocket listings. Only allow Zillow Premiere or Trulia Pro agents to use it as agents to push properties out, and charge consumers in order to post a “pocket” listing as a FSBO. For agents, maybe there is an option to make a listing only visible to other agents — this could be a way for them to test their pricing. Or let anyone post pre-MLS listings within the agent pool, and only Premiere / Pro agents have access to the consumer base subscribed to alerts.

Everyone trying the pocket listings strategy now, such as @Properties, is doing it between agents. I think a massive home run opportunity, is to build a marketplace for pocket listings with a consumer base rather than just agents. There are lots of details to sort out, of course. The end game, which is buyers checking app X first because of unique inventory — as opposed to any source driven from the MLS, is worth a lot of money to the portals.

Anyone else agree? Or disagree?

About Drew Meyers

Founder of Geek Estate Blog / Geek Estate Labs. Zillow Alum. Travel addict & co-founder of Horizon. Social entrepreneurship & microfinance advocate. Fan of Red Hot Chili Peppers and Kiva.

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  • Hmmm…a “marketplace for pocket listings with a consumer base rather than agents”…sounds a lot like we’re working on over at Keyzio!

    • Well, I think someone will figure this out eventually…best of luck!

  • Drew, pocket listings benefit everyone but the seller. In my market most sellers continue to price low and sell for over asking. Luckily, they put it on the MLS, had multiple people bidding on it, and that drove up the price.

    Had they done it as a pocket listing they would have lost a considerable amount of profit.

    So for buyer’s it is awesome, for agents it is great too, but for the seller not so good.

    It is really simple supply and demand at work. if you keep it as a pocket listing the demand is lower, hence you end up selling for less most of the time.

    So the reason pocket listings are very rare is it does not benefit the seller and that is the person making the decision on how to list it.

    As big as the big 3 websites you mentioned are, if you put it on the MLS at no charge to the seller you still get the big 3, plus 1,000 other Websites, including mine, which gets more traffic for my local listings than Zillow.

    • Yes, demand is lower. but maybe quality of the buyers is better, more targeted? What if every buyer ended up using the app? or a big, big percentage of the pre-qualified ones?

      • If you had “every buyer” using it, or even a large percentage, then it could work.

        It would put me out of business. I rely on the MLS for my Website listings, if the MLS is no longer the one major source of listings, people will stop using my website and I will be thinking about a new career.

        Realtors that do not count on their Website for business would be fine.

        • “It would put me out of business.”

          I think that’s a stretch. But that fear is part of why it’s so valuable to the portals – if they figure out how to centralize buyer demand…then you have to pay them for those leads rather than invest in your website

    • There is no way to know if they would have done better financially had they remained off-MLS. Often a buyer will pay up knowing that a home is coming on MLS soon. And, if the seller can save on some fees in the process, they very well can net more than if they had used a traditional listing strategy. But again, this is pretty much impossible to prove or disprove either way. I think there is a time and a place for both listing strategies — it has to be evaluated on a case by case basis.

      • Parker, good point, it is impossible to know for sure, so we have to go with our best guess.

        My best guess is simply following the age old model of supply and demand. Pocket listings have much less demand, as there are very few that know about them, so with less demand prices tend to have less upward pressure.

        Buyers like pocket listings because they feel like they can get a deal before it goes on the MLS, as very few buyers if any other know about it.

        I am a big fan of them, and I bought my home through a pocket listing too, and was very happy with the price, however I don’t recommend that method for my sellers.

  • I like how you fleshed out this idea Drew Meyers . Whether or not Move, Trulia or Zillow is interested in “shifting the balance of power away from the MLS” I think is extremely questionable. Especially as MLS are making individual policy on pocket listings and negotiating individual deals with varied terms with the portals.

    I wonder if pocket listings as a listing type add confusion more than they add value, but I do agree that consumer facing aggregated pocket listing inventory would have value to consumer users.

    I made a few comments on the realuoso post too http://realuoso.com/editorials/dangers-pre-mls-pocket-listings-listing-clubs-mls-listings/

    • I have to imagine that anything that would generate buyer demand on their platform…is something move/z/t would be interested in

  • So this is one of those contrarian posts? You qualify the whole position in the first line linking to everything wrong with the concept then go on to suggest that private enterprises could use them to steal business. Great. Just great. First I have to say I don’t like anything that further fragments the marketplace of information. Second, it does no service for the seller whatsoever. Third… no the first two say it all.

    • Here is another read on the subject: http://www.tahoecubed.com/off-market-listings-the-pocket-listing-phenomenon/

      “The most common reason I hear is that sellers don’t want to deal with the hassles of having their home publicly listed. They are willing to sacrifice some money in the final sales price if they can find a buyer without keeping their house clean 24/7, being inconvenienced with showings, fixing all the little things that need to be fixed, staging their home, etc. Convenience is worth big bucks to some sellers.”

      • That’s ridiculous. So then cut that amount off the price and list it on MLS. Who knows? You may even spark a bidding war!

      • Agents tell sellers that they can get them “virtually the same price” with a pocket listing and the convenience of no showings. Fairly often, they’re lying. If they put the five-figure check on the table that they’d lose in a pocket listing, the sellers would change their minds the vast majority of the time.

    • I’d argue the marketplace is pretty damn fragmented as it is…hundreds/thousands of brokers and agents control the access to the MLS in each market.

  • Good for fragmentation, good for a portal, bad for sellers, bad for consumers in general–but great article. I hate the idea because it’s all about creating better market capture for a worse consumer product, but you can believe a for-profit company will try it.

    All support for pocket listings is built on fluffy platitudes without any specificity. I don’t blame people for trying to profit from pocket listings, as long as they don’t try to feed us their flimsy sales pitches. It’s merely a tactic for the salesperson to generate more clients and close more sides.

  • Jason Brown

    You should ask the guy who owns http://www.leadark.com about monetizing pocket listings. They are building an empire finding Buyers and Sellers and then giving the leads to Agents with no commission splits.

  • Jason Brown

    The only question becomes who is in charge or regulation in an industry that is not using a standard broker/business model?

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  • There would be some niche interest for that, but I don’t really see it gaining traction in my local market. Perhaps when the market gets hot again that sort of thing could take off for awhile….wouldn’t attract so much interest in a down market.

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