A Ridiculous Rule That Destroys Home Prices

If you are a home seller in the U.S., selling with a traditional 6% agent, you’re most likely losing money. An old-fashioned MLS (Multiple Listing Service) rule prohibits agents from generating buzz for a home using the strategy of pre-marketing.

Why does this matter? Because if you create buzz around a new house, buyer anticipation can leverage a 3-8% increase in sale price. Apple and Ferrari do this by generating excitement before they even start advertising.

Various MLS systems dig their heels in and refuse to evolve for today’s market. There’s an unwavering rule requiring homes that are newly listed to be instantly submitted to MLS. This rules out all pre-marketing, excitement generation, and strategy. Essentially, you list it on MLS and hope it sells.

This outdated rule exists to prevent “pocket listing,” which is when an agent doesn’t list a home and hides it from others so they can sell it secretively, thereby earning a higher commission. However, this deceiving practice rarely happens today in a more competitive, regulated world of real estate. Seller’s knowledge has progressed to where they’ve done their research and want to know the extent to which their home will be marketed. Luckily, for the seller, “pocket listing” no longer exists because an agent would be exposed and most likely lose their license before they were even able to list another home.

One example of how this antiquated MLS restriction is making home sellers lose thousands in potential sales each year is in Washington State in areas where realtors use North West MLS, which includes Seattle and other surrounding areas. That system forbids real estate agents from pre-marketing. It also does not allow you to exclude a home from the MLS even if you, the seller, request no MLS. The prohibition is so strict, that they can’t even inform other agents they work with about your home and could be expelled for violating it.

There’s no doubt about it; pre-marketing your home has a significant advantages. Here are some:

  • Buyers get excited and have built up their enthusiasm before they walk in the door. By allowing them private access, a higher price is more likely to be offered.
  • Social proof. If an agent intelligently pre-markets to build interest and subsequently books showing on the first day of listing, buyers notice other buyers and it generates interest.
  • It causes fear of loss; raising the price for any product. Multiple showings as soon as it’s listed sparks an urgency in potential buyers to make them act more quickly and offer a larger price for the fear of missing out on the home of their dreams.
  • It gives buyers a higher list price mentality. Imagine you’re a buyer and your agent calls saying that a fellow realtor has just listed your perfect home in an ideal neighborhood and price point. Since the agents are friends, you’re among one of the first buyers to see the home. Most likely, you’d subconsciously be enticed by the home.
  • By allowing home sellers to experiment with their price, they do so with little to no risk. If buyers react well, the home will sell promptly and at a higher price. If not, the seller is still able to modify the price before placing it in MLS.  
  • It permits homes to be advertised without penalizing them for days on the market. By disclosing a home’s number of days on the market, once it is not newly listed, buyers assume that it must be flawed thus resulting in it being overpriced.

MLS is flawed because instead of increasing the potential for sales of homes like its intended purpose, instead it diminishes it. Pre-MLS marketing is the ideal marketing strategy, while MLS should be used as a backup option if the home doesn’t sell. Therefore, you need to be sure your agent is equipped to leverage pre-marketing to sell your home at the optimal price point. The future of home selling lies in this strategy.

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