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In tight market, pre-listing sites becoming popular

(Jonathan Ernst/REUTERS)

Jill Chodorov, a real estate agent with Long & Foster, writes an occasional column about local market trends and housing issues.

Like many house hunters in the District’s hot real estate market, several of my clients have found themselves on the losing end of a bidding war or priced out of the home of their dreams. The combination of low inventory and high demand has pushed homeownership out of reach for them.

Now many agents, like me, are trying another tack: houses that have yet to go on sale or houses that are on the market but not listed on the multiple-listing service (MLS).

This desperation has been the catalyst for a number of new private Web sites utilized by real estate agents — which are serving as alternatives to the MLS. Many of the sites allow only select agents to collaborate to match buyers with sellers.

These alternative methods have spurred debate among real estate experts. Some question whether such exclusive listings are unfair to other buyers in the market who would miss out on seeing them and whether sellers would get a better price in the multiple-listing service where their homes would get maximum exposure.

“Agents are desperate to find houses for their buyers,” said Frank LLosa, founder of Frankly Real Estate based in Falls Church. “If they are not finding it on MRIS, they will go elsewhere.”

Dina Paxenos, an agent with Evers & Co. Real Estate, said she recently found a pre-MLS listing on Top Agent Network (TAN) that turned out to be an ideal home for her client. TAN is a Web site that allows top-producing agents to communicate and collaborate.

“It was exactly what my buyer was looking for,” Paxenos said. “Plus, the seller wanted a long rent back [to stay in the property and rent from the new owner after settlement] and my buyer was willing to do that. We ratified a contract and the property never went on the market.”

“Agents talk to each other about all sorts of things,” said David Faudman, founder of TAN who has worked for many years as a real estate agent in Marin County, Calif. “I have always called other agents to collaborate. “Real estate is the only business where fierce competitors must collaborate in order to get paid.”

Faudman says he started TAN in “my own back yard” to automate his collaborative efforts. “There is no MLS for promoting a buyer seeking a house to buy. There is no MLS for sharing information about a pre-MLS property or for asking advice from other agents,” Faudman said. “TAN helps agents do that much more efficiently, transparent, and with greater exposure.”

LLosa of Frankly Real Estate launched in 2013 as a gateway to multiple location-specific Facebook pages, in which agents can communicate about properties before listing them on the MLS.

“I own a small brokerage firm with only seven or eight agents,” LLosa added. “I know that the big boys have their usual Tuesday morning meetings where agents announce upcoming listings. This has been a 20-, 30-year tradition. As a small broker, I don’t have access to that level of communication. With the Facebook pages, that communication opened up to thousands of agents. I currently have 2,000 agents on my Northern Virginia Facebook page alone,” LLosa said.

Andrew Strauch, vice president of product innovation and  marketing at Rockville-based multiple-listing service MRIS, said it’s  “fine that there are other marketing structures out there. Off MLS marketing is a method and there are many different methods to selling a house. Brokers are responsible for marketing to the best of their ability their listings. In the end, it is up to the consumer how their asset gets marketed.”

“The analytics show a consistent rate of use of the MRIS in the last 15 years,” Strauch added. “We believe that the vast majority of agents still feel that the MRIS is the best way to market a property.”

Faudman of TAN said he is not against using the MLS. “The focus is that there are various aspects of marketing a property from the day the seller says go to the day that you go to settlement,” Faudman said. “Rather than keeping it a hush hush thing until it is listed on the MLS, we believe you should expose it to agents that might have a buyer for it even before it is listed on the MLS.”

LLosa attempted to use TAN prior to launching “TAN only allows top-producing agents to join. Even though I own a real estate brokerage firm, all of our transactions go through the individual agents’ names, so I did not personally show enough production to qualify.”

Some of these methods, though, are generating controversy. Some real estate experts wonder whether excluding most agents and their buyers from the process can be equated to discrimination.

“We call them the old boy or old girls networks, where the small group of people that belong get the first opportunity,” said Tony Duncanson, chairman of the D.C. Real Estate Commission. “When we get into tight markets, like in the last two to three years, you start hearing about these type of networks more and more,” Duncanson said.

The close-knit networks Duncanson was referring to include brokers that only market properties to agents affiliated within the same brokerage firm. Some refer to this as a pocket listing.

“The main concern in these situations is that those properties were not given the maximum exposure to the marketplace, particularly in the good market that we have now where the seller may be able to get a better price,” Duncanson said.

“There may also be a fair housing issue,” Duncanson added. “It doesn’t seem to be fair because many people are totally excluded. There are those in the fair housing arena that consider it discriminatory because the listing is not marketed to every licensed agent.”

LLosa said he opposes pocket listings. “How is that best for the seller?” LLosa said. “I am against brokers trying to snag both sides of the deal at their clients’ expense.”

Roger Carp, managing broker of the Long & Foster office in Georgetown, agreed. “Who does it benefit not to put the house on the MLS?” he asked. “ It doesn’t benefit a seller. The MLS was created to give homes the maximum exposure possible. Anyone that is buying real estate searches the MLS. With all these different types of exclusive clubs, many Realtors are not hearing about properties that could be beneficial for their clients. In the end, the seller could be missing out.”

Some agents believe that as members of MRIS they are required to list properties on the service. The issue has spurred heated discussions at local brokers offices in the region. 

“If there is permission from the consumer, then the agent does not have to list the property on MRIS,” Strauch of MRIS said.

Agents agree that the buyers and sellers have to know the advantages and disadvantages of off MLS listings and make the final decision based on what’s best for them.

“At the moment, I have two deals under contract that were not listed on the MLS,” Anna Masica of Long & Foster Real Estate said. “One transaction was a result of an agent calling my business partner searching for a townhouse for her buyer in New Mark Commons in Rockville. The other was through information we learned from the homeowners association manager of a townhouse development. In both cases, it worked out well for both the seller and buyer.”

While pre-MLS sites may work for buyers, Paxenos of Evers & Co. said, “I don’t think I would recommend it to my sellers.”

“But it depends on what the seller wants in the end,” Paxenos added. “I think some sellers are into it because they don’t want to bother painting or clearing out clutter to get ready for open houses. If they can get a certain price, they are willing to sell without listing on the MLS.”

I  support these off MLS sites to a certain extent. If the seller knows the pros and cons of these sites and agrees to their use, then I believe they are good. The MLS is a very useful tool, but should not be the end all. There are plenty of situations in which listing a property on the MLS does not work well for a seller.

However, I do not support these sites when they are limited to a select few agents. When listings are not uploaded to the MLS, it does create a problem with assembling stats of the market. The MLS is a repository of knowledge for our market. If we dilute that knowledge, we dilute the value of any knowledge we can collect from the MLS. We as real estate agents could be shooting ourselves in the foot by diluting our reason for being — our source of knowledge of the marketplace.

Previous Jill Chodorov columns:

High radon levels may be downside to having a tight, energy-efficient house

Logan Circle condos to use feng shui

How to find affordable housing for an elderly parent

Jill Chodorov can be reached at