Coming Soon? Consumers, Agents Risk Fair Housing, Anti-Trust Violations
It’s no secret that North Texas is experiencing a tremendous housing shortage. In most areas in North Texas, available housing stock is estimated to be between 1-3 months – well below the 6 month inventory experts like to see for a balanced market. In such an unbalanced market, hopeful buyers are willing to do just about anything to get into a house before a bidding war starts. Because of this, we are seeing an increase in whisper sales or hip pocket listings and other off-market sales techniques. And that’s not necessarily what’s best for consumers.
Whisper Sales, also known as Hip-Pocket Listings are sales that occur when the seller hires a listing broker to sell their house without putting it on the MLS. The broker may use advertising or other marketing methods to sell the home, but may not list it for sale to the general public through the MLS. Generally speaking, this means the broker will use a personal network to find a buyer. Sometimes sellers will choose this method if they want to strictly limit the number of showings. There are times when the sellers will want minimal exposure, and feel it is necessary for their circumstances.
The biggest downside to hip pocket listings is money. Without widespread exposure of the available property to the public, chances are pretty good that the seller won’t get as many offers or the best possible price for the home. But sellers also risk running afoul of Fair Housing laws if it can be demonstrated that the sellers specifically excluded certain groups from seeing the property. Selling homes this way also makes it difficult for lenders to determine fair market value for the property and others around it, because the house hasn’t been exposed to the marketplace. Because of this, hip pocket purchases can mean borrowers might run into trouble securing financing.
One thing a hip pocket listing doesn’t impact is taxes. The state of Texas considers the sale of personal property a private matter, and as such is called a non-disclosure state. Sellers and buyers are not obligated to inform the government of the sale price of their property. In most cases, property appraisal value is based on the tax record description of the property, a multiplier of the mortgage used to buy the home and general market data. Property taxes are not based on the current market value, and lender appraisals are not released to the government. Some sellers fear federal capital gains taxes based on their sales, which can be substantial. However, most homeowners are exempt from paying capital gains taxes. These taxes only apply to homeowners who have not lived in the property for at least 2 of the past 5 years, and who make more than $250,000 above their purchase price of the home ($500,000 for married couples).
Realtors are also finding that off-market sales are complicating their businesses as well. Similar to consumers, brokers run the risk of violating the Fair Housing Act if they do not treat all potential buyers fairly. And without an MLS record of recent sales in the area, Realtors may find it difficult to price homes according to market value. Your neighbors may have gotten an amazing price for their house, but if the numbers are kept from Realtors and appraisers, then it doesn’t really help you when you want to sell your home. Another complication for Realtors arises when they offer listings exclusively to a particular set of agents or brokers. This practice may bring up questions about Anti-Trust violations, and most agents would prefer to avoid that.
So what about that Coming Soon sign out front? The proper use for a Coming Soon sign is to indicate that the house is going to be listed on the MLS within a couple of weeks and that the house is not currently available for showings. Unfortunately, in this busy market there are times when anxious buyers or their agents try to see the house prior to market, or the selling agent uses the Coming Soon sign as a way to sell the house as a hip pocket listing. The sellers may love the quick sale, but they might not be getting the best deal possible, as noted above. It’s best to limit the use of a Coming Soon sign to just a few days while homeowners finish getting the house ready for market, and then to let the full marketplace have a chance to put in their best offers.
The MetroTex Association of Realtors urges consumers and Realtors alike to take advantage of the cooperative nature of the MLS and to give full market exposure to their properties for sale. Sellers benefit by getting the best possible price for their home. Buyers benefit when they have a chance to see all of the available homes for sale. And Realtors benefit because their transactions are more likely to get to the closing table when the lenders are happy. Using the MLS is a winning solution for all involved.