You probably have seen the rider located on top of the real estate sign in big letters advising Coming Soon. As you walk or drive by you may be excited as you have had your eye on the home for a while or you pull out your phone, plug in the address in search of a listing price and low and behold, nothing comes up.
While many listing real estate brokers will suggest the Coming Soon sign is in their sellers’ best interest, I am one of the few that disagree. Full disclosure I too have used Coming Soon riders with the explicit permission of my selling client memorializing the tactic in our Listing Agreement and explaining the pros and cons (For one client who was more concerned about privacy and security we decided to present in MLS however no sign was placed in the yard per seller’s directive).
Let me first outline what I believe are the arguments against Coming Soon:
Limited Exposure: The Coming Soon rider advises the home is coming to market HOWEVER until the residence is listed in the Multilist Service exposure is quite limited. Once within the MLS the Coming Soon sign is moot. Thus, while a broker may suggest Coming Soon will increase awareness and excitement there may be an ulterior motive. See Benefits Your Listing Broker
Fewer Offers: While it can be fast and convenient to sell to the first person who inquiries about a listing, most sellers are hoping for the best offer more than anything else. But when a listing does not go into the MLS, the number of people seeing it is significantly reduced.
Instead of encouraging multiple offers for various parties, a “Coming Soon” listing ensures that only a limited number of potential buyers will even be aware of the listing.
This is in fact why For Sale By Owners (FSBO) listings usually do not sell, sell for below potential and/or are placed eventually with a broker, see the following blog post: When the For Sale By Owner does Not Work Out.
Your Business Relationship May be Revised: Concerning 99.9% of my listings I am an agent of the seller; thus, my fiduciary duty is to my seller. While there is the slight chance I may have the opportunity to represent a prospective buyer for the listing in which case I become a Transaction Broker (of note in such a situation I would refer my prospective buyer to peer broker who will provide their fiduciary duty to their buyer). If I were to become a Transaction Broker, I then become a neutral party. Yes, I believe in the Chinese Wall concept HOWEVER we are human beings and our knowledge no matter how neutral we desire to be will influence our practices.
Benefits Your Listing Broker: The main benefit of a ‘coming soon’ listing is for the listing agent. By limiting the exposure of the listing, the agent almost guarantees he or she will be the one to sell the property. Few other agents will learn about the property, so it dramatically decreases the competition faced by the listing agent. The potential for the Listing broker is the potential to collect a double commission i.e. seller-side and buyer-side.
Now my personal thoughts and experiences:
When I list a property, I always place text in the Listing Agreement advising if the situation arises where I am both the Listing and Selling i.e. Buyer Broker my commission is lower. I feel this is fair as I am not comfortable double-dipping or receiving commission as the Listing Agent and Selling/Buyer Agent also known as the co-op commission.
Pocket/Whisper Listing: Somewhat related is when a broker receives a listing and does not promote in the MLS. The broker may be advising a few cronies or similar with the blessing of their client i.e. I wish to retain privacy, I do not want strangers in my house, a full marketing program may be detrimental to my lifestyle and so forth.
My concern with the above is 1) is the Broker truly securing the highest and best price for the listing and 2) Is the broker engaging in what we call in the equity markets Insider Trading i.e. working off information that is not public.
I know a peer broker who has a reputation for engaging in pocket/whisper listings and then boasts about the sales to secure other listing clients. While the sale prices this broker is securing may be impressive is that broker truly securing the highest and best price for the listing? Who knows as the listing was never on the open market?
What formed my views concerning Coming Soon and Whisper Listings that goes against the majority of real estate brokers? The Art Market!
Seriously, I collect art. Up until a generation ago in New York City it was common for galleries to present a show for an artist they exclusively represent. When one would inquire concerning the price for a particular piece the gallerist would either advise “It’s not for sale”, It’s been sold” or some other variation of the theme. The point is the gallerist was 1) Controlling and manipulating prices for their client i.e. the artist and 2) most likely was selling to preferred clients at pricing that may or may not be market and/or with the intention of turning art into a commodity.
Knowing this was a problem in March of 1998 The New York City Department of Consumer Affairs announced it would enforce a city law requiring the price of paintings and sculptures in art galleries to be ”conspicuously displayed” within sight of customers. This was a follow-up concerning what is known as the Truth in Pricing law, which New York City enacted in 1971 stating all retail stores must ”conspicuously display” prices ”by means of a stamp, tag or label attached to the item or by a sign at the point of display, which indicates the item to which the price refers.”
Has the situation resolved? Questionable i.e. retail prices may be displayed however for in-demand works the gallerist has probably already sold the work prior to one of their preferred clients. Not so different than Coming Soon and Whisper/Pocket Listings.
Thus, where do I acquire art? Auction Houses. Seriously the Auction Houses are truly connecting buyer and seller in a transparent market-driven situation i.e. willing seller and willing buyer in an open and transparent market.
This is how I view a listing in the MLS; it is available for everyone to view. Subsequently the market or lack thereof will advise the true value of the residence. If under-valued a bidding-war may happen. If over-priced there will be a lack of offers and subsequently a potential price reduction.
OK cynics I know where this is going; Auction Houses have had their own issues concerning price-fixing on commissions, undisclosed financial positions and so forth. These issues continue and consumer protection laws continue to evolve to regulate and disclose such practices.
I see the same with the banning of the Coming Soon practice. I completely understand how many brokers are in opposition of the ban and arguing it is not in the best interest of their clients.
However, I beg to differ; I believe the ban is actually in the best interest of all clients i.e. evening the playing field and subsequently for Listing Brokers insuring we are securing the Highest and Best Price for our client’s listings. While we can argue the Coming Soon is a service for our clients the reality is it benefits the Listing Broker and I would argue may infringe on our ethical obligations to not only our Listing Client but also to the general populace that regardless of our fiduciary duty we are duty-bound to treat fairly and ethically.