There has been some very questionable commentary in certain media about the percentage of home sales that take place outside the MLS. It appears that some consultants are suggesting that almost half of transactions occur independently of the MLS or sell within a few days of listing. The phrase “pocket listing” is being banded about as if it is some new phenomenon that is rocking the market and causing the MLS to lose market share.
None of these things is true here in Greater Phoenix. Pocket listings blossomed during the hot market of 2012 and early 2013 but never reached epidemic proportions and are quite rare now.
If we examine all the residential transactions in Maricopa County during March 2014 for single family and condo/townhouse homes, we find that 76.4% of arms length transactions went through the MLS. For the 24.6% which did not touch the MLS, very few were “pocket listings”.
Here are the percentages of transaction types that occurred outside the MLS in March:
- new homes – 73% of new homes did not get listed on the MLS – there were 555 unlisted new home sales
- trustee sales – 100% of trustee sales did not get listed on the MLS – there were 184 of those (excluding those that reverted to the beneficiary)
- bank sales – 12% of bank REOs did not get listed on the MLS – there were 25 of those sold without a listing
- GSE REOs – less than 0.5% of Fannie Mae and Freddie Mac sales are sold outside the MLS – just 1 in March
- investor flips – 28% of investor flips were sold outside the MLS – there were 130 of these unlisted – often sold to other investors without any fixing (wholesale)
- pre-foreclosures – 17% of these were sold outside the MLS – there were 14 of these unlisted, often because it was the buyer who initiated the conversation
- short sales – none of these were sold outside the MLS (unless already counted among the pre foreclosures) – lenders like to see homes marketed before agreeing to a short sale offer
- sheriff’s sales – 100% of these took place outside the MLS – 16 in all
- HUD sales – 3% of these take place outside the MLS – amounting to just 1 home
- normal sales – 15% of these took place outside the MLS accounting for 837 sales
Among the 837 normal sales which took place outside of MLS, they break down as follows:
- 43% involved an investor buying from an owner-occupier – the seller rarely initiates these transactions, so the question of a listing doesn’t come up.
- 17% involved a private sale from investor to investor – these are usually negotiated outside MLS with no agents involved. Indeed the investors often hold real estate licenses themselves.
- 17% involved an investor selling to an owner-occupier – sometimes with seller financing or a sale agreement, sometimes a sale to an existing tenant, requiring no marketing
- 24% were owner occupiers selling to owner occupiers. These are either FSBOs or “pocket listings”. We cannot distinguish between the two because the agent does not get a mention on the deed and there is no MLS data
If we focus on owner occupiers who wanted to sell and didn’t go through the MLS, they either tried to sell their home themselves (FSBO) or used an agent who did not use the MLS (pocket listing).
A remarkably small number of sales could classified as FSBOs or pocket listings. In March the total was 202, or just 2.6% of all sales.
Of the sales that took place through the MLS, 290 or less than 5% had cumulative days on market of 3 days or less. The remaining 95% took at least 4 days to go under contract.
There is no sign of the MLS losing market share. In fact it has gained significant market share over the last 12 months.
In 2005 at the height of the bubble, pocket listings were rampant, as well as FSBOs. But we are not at all like 2005 in 2014.