Some real estate leaders in Northeast Ohio say a rising trend of listings sold outside of the MLS is hurting homebuyers and sellers, though the president of the largest brokerage company in the area disagrees, the Cleveland Plain Dealer reports.
Members of the Realtor-owned Northern Ohio Regional Multiple Listing Service (NORMLS) must add their listings to the MLS within 72 hours or face penalties and fines -- unless the seller signs off on selling the property as an "off-market" or "pocket" listing. NORMLS is considering whether it needs to change its rules to encourage fewer off-market deals, the Plain Dealer said.
Critics say such listings receive less visibility, harming sellers who want to fetch the highest possible price for their home, and buyers, who don't get a complete picture of the market. Listings not in the MLS also cannot be used as comparable properties for appraisals and other mortgage financing purposes.
MLSs evolved as a way for brokers to cooperate and make offers of compensation. Typically, seller's agents will offer buyer's agents a commission split to bring buyers to the table.
Opponents of pocket listings note that brokerages that encourage such listings are more likely to complete the entire transaction in-house, thereby collecting both sides of the commission. Brokerages with affiliated businesses also stand to pick up the mortgage and title work for the deal.
Howard "Hoby" Hanna, president of Howard Hanna Ohio and a member of the NORMLS board, said it's important that agents enter information about off-market sales into the MLS once they've closed, so that other agents will be able to use them as comparable sales.
But Hanna disagreed with the idea that pocket listings might be harmful to the industry in other ways, saying agents use a listing's off-market status, with its air of exclusivity, as a marketing tool. Hanna told the Plain Dealer that he hasn't actively encouraged agents to keep their listings in-house.
The brokerage company is by far the biggest player in the Cleveland area with the highest number of closed transaction sides and highest sales volume in the area last year, according to Real Trends. The company also offers mortgage, title, escrow and insurance services.
Sellers may wish to keep their listings off the MLS for several reasons, including privacy concerns. If an agent holds a listing off the MLS without the informed consent of the homeowner, however, that could be a violation of real estate license law, Ann Petit, superintendent of the division of real estate and professional licensing at the Ohio Department of Commerce told the Plain Dealer.
Petit encouraged those who believe they have seen harm to homeowners as a result of pocket listings to get in touch with the department.
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