For this episode, we sit down with Minnesota Realtor® Dan Sibinski to talk about the ins and outs of pocket listings. Tessa also shares a frustrating personal story related to pocket listings.
The following is a transcription from an audio recording. Although the transcription is largely accurate, in some cases it may be slightly incomplete or contain minor inaccuracies due to inaudible passages or transcription errors.
Dan Sibinski: So a pocket listing would be if you are a listing agent, you list the property, keep it off the MLS, and you do your own advertising on it to try to pick up a buyer.
Bill Oelrich: Welcome everybody. You’re listening to Structure Talk, a Structure Tech presentation. My name is Bill Oelrich alongside as always, Tessa Murray, she’s waving. You can’t see that right now. And Reuben Saltzman. Yeah, he waved too, congratulations. Nobody knew what was going on there. On today’s episode, we have an in-studio guest, Dan Sibinski with Keller Williams Classic Realty Northwest, not a Blaine, Minnesota.
DS: Minus the Northwest.
BO: Minus the Northwest.
BO: Okay, awesome.
Tessa Murray: You should’ve let him say it, Bill.
BO: All right.
Reuben Saltzman: That’s right.
BO: We’re gonna let Dan say who he works for. And I’m really excited, Dan, to have you in here today, because we’re gonna be talking about some new things that are popping up in the real estate industry and it’s always good to see what happens in your world, eventually happens in our world. And one of the things that we know in the inspection business is that turning around homes, like contingency periods are a big challenge for real estate agents, right? So a house gets sold, and inspection companies are busy in the summer time and you have 10 days to get all your Ts and Is and everything cross then dotted. And I wanted to talk to you today about pocket listings, but before we get into all that stuff, let’s back up and why don’t you take a minute and tell us about you?
DS: Sure, first off, thanks for having me here. I’ve been using Structure Tech, if I can say that on…
RS: No, you can say anything.
BO: You can say it as much as you want.
RS: This is ours.
DS: All right, perfect. Yeah, no, I appreciate you having me here. I’m happy to give back with some of the information on my side of the fence. I’ve been learning from you guys for a long, long time. It’s made me a better agent, much more sharper eyes when I’m out in the field with my clients. So I was really looking forward to this opportunity.
TM: Did we pay you to say that, Dan?
DS: No, it’s true.
BO: Not yet, not yet. The check’s in the mail.
BO: As we say.
DS: So I just have to say Structure Tech 29 more times, right? And then my parking’s validated.
DS: Right. Yeah, so I’ve been a realtor now going on 15 years in May, now getting into my fifth year in the Professional Standards Committee. So out of the 23 plus thousand agents in the state of Minnesota, there’s a select number of us, about 200 agents, that serve on ethics hearings, arbitration hearings. So we’re going into my fifth year on that, to where after my fifth year, I should be able to, at some point, get to be a chair of the committee as well and also grow in that.
BO: Is that an elected position or is that a volunteer position or how did you get into that role?
DS: Well, I got into it by getting to an argument with my old broker on my first day meeting him.
BO: Oh, gosh.
BO: Sounds like a… “Hey, nice to meet you.”
DS: It was actually about… I got into a discussion with him about withheld listings. The topic that we’re gonna spend a good amount of time on today. So, in transferring my license to my old brokerage, which was Keller Williams Classic Realty Northwest, I was told that I could do withhelds going into it, but that broker was not a fan of it. And after I did all my paper work transfer and I went to go meet him, he told me that I was not allowed to do any withhelds and I had a couple that I was planning to bring on as new listings for preparation and everything. So we got to talking about it, and at the end, I feel like I won the conversation because he said, “I think you should join the Professional Standards Committee.”
BO: Gotcha, and you stayed on obviously with him.
DS: I did, yeah. I mean, great office, great broker. I live in Blaine and my new office is in Blaine so it was a logistics thing for me to transfer.
BO: Sure, and for anybody who’s not in Minnesota, Blaine’s kind of a northern suburb, not too far from the core of the Twin Cities, but, I mean, 20 minutes north.
DS: Yeah. It was a great discussion. Opened some eyes, opened my ears a little bit about the problem and it got me digging into it, which I’ll share some of those numbers with you today and why things are changing like they are.
TM: Can you define pocket listing for those of us that may not know?
DS: So, a pocket listing would be, if you’re a listing agent, you list the property, keep it off the MLS, and you do your own advertising on it to try to pick up a buyer. That buyer can come from an outside broker. It could come from the internet, it could come from the sign, but again some of it’s perceptional based. Is that buyer more likely to buy through that listing agent to where that listing agent now is not sharing the broker compensation agreement that they had on board with the seller.
BO: Can you, wait, expand on that, ’cause I’m having a tough time wrapping my brain around what you’re saying there, and I think I know what you’re saying, but what do you mean buying with that agent?
DS: In Minnesota, traditionally, at least all of my listing agreements are set up to where if I’m listing a home with a seller, they pay a listing fee. Out of that listing fee, we offer a percentage of that to whoever brings in the buyer. So it’s called a buyer brokerage compensation.
BO: And what’s the typical fee?
DS: So we can’t say there’s a typical, because there’s rules with price fixing.
BO: What’s a common rule, can we say that? Or a common fee?
DS: I will tell you that if I were to pull up a hundred listings and in Twin Cities area, I pull up 100 listings, probably 80 to 90 percent of those are gonna be 2.7%.
DS: And then the range…
BO: For each side?
DS: No, no, nope. For the buyer’s side.
DS: So whatever is agreed upon for the listing agreement, a percentage of that goes out to the buyer brokerage. Or if they take that in-house and sell that property on their own, which is a whole another conversation in itself, because now you go from a listing agent that has a strict fiduciary set of duties to the seller to potentially a dual agent…
TM: Dual agent.
DS: Which is a whole ‘nother form of agency.
TM: That’s Podcast 2.
DS: Yeah, so that whole law thing… As a person who does have a real estate license in the state of Minnesota, and since the early 90s when agency was just like a thing that we talked about very broadly, and nobody understood, it’s kind of complicated, but in essence, we’ve defined it really well, now. It’s grown quite a bit, the whole push behind being a realtor, because when we get licensed for a real estate agent, then you pledge an oath to be a realtor, or you buy into the MLS, and you buy into the National Association of Realtors in which you’re supposed to abide by the code. And there’s 17 articles and there’s sub-articles within each one. And the duties to the public, duties to other agents, and how we are supposed to handle that, it’s all self-policing, which makes all of this more interesting.
RS: Yeah. Absolutely. So, Reuben, just getting back to this commission stuff. Just think of it as the old commission stack. So the house gets listed, there’s a commission that’s being paid and then it just gets devied up. Some goes to the buyers, some goes to the sellers.
BO: No. Some goes to the buyers, some goes to the seller. You said, 2.7 for the buyer, you didn’t say standard, but you said a common number we’d see come up frequently. What about to the seller? Are there any numbers that are commonly used?
DS: It’s all negotiable. So depending on what you’re getting for a service. And define service, right? Every agent is gonna be a little bit different. As an example, if you did a listing agreement at 7%, then 2.7 of that would go out, right? And then the remaining would be held by listing broker and then there are splits that come out of that.
BO: Okay, got it. It sounds good, thank you. We were talking about the MLS, and briefly talked about pocket listings, and then we got into some of the MLS stuff kinda more details of that, but I did wanna ask you real briefly, can you explain the MLS generally speaking? Give me a high-level view. I know it’s where brokers put real estate listings, and then there’s this cooperation that goes on, but are there MLSs all over the country?
DS: Yeah, and one that is also changing every year. In Minnesota, there used to be multiple MLSs to where if you started getting too far north or too far south, now you might not be able to do business there and get compensated. So there would have to be agreements going into those transactions. Now, the MLSs have been merging in Minnesota. I’m not sure about other states, but I can search properties up to [08:44] ____ down to the south border of Minnesota. So that part’s great. The MLS itself, it’s kind of like all those start-up websites that are out there right now and some of the more established ones where they’re trying to get all the housing information so they can get different users there for the realtors that pay for the service. It’s where we get and look at every property that’s available. So if we’re serving our client on the buy side, that gives us the ability to see everything.
DS: Same from the seller side and this is where we start drifting into the pocket listing conversation. When you list a home from a sell-side, that means you want the most amount of marketing possible for your property. So putting it on the MLS where you are working and broadcasting directly to every agent out there that is paying for this service, who has represented buyers, ones that are qualified, and not just ones that are looking at Pinterest ideas or wondering what’s going on in a certain neighborhood. These are ones that have been through with a loan officer, typically. They’ve got criteria set and they know what they want. They’re ready to buy within six months, most of the time.
RS: They’re teed up. They’re hot. These people are gonna move the market, right?
BO: In a hot market, is a pocket listing something that’s more talked about or is it a slow market or is it all markets?
DS: It should be in all markets for the most part, and that’s where the numbers come in. So when I started digging into this in 2014 or 15, let me go back a little bit of further. Some of the numbers that I received were back from 2005. In 2005, in Minnesota, we probably had 50000 plus listings. In the Twin Cities, 13, the County metro area, we had 30 plus thousand.
RS: There’s 13 counties in the Twin Cities metro area?
DS: Well, according to my paperwork, it does.
RS: I’ll believe you.
DS: I printed it. So it’s gotta be true.
RS: Okay. We’re growing.
DS: Yeah, it used to be the 7-County Metro, right?
RS: Yeah, well…
DS: The 7-County Twin Cities region.
TM: It is a sustainable urban core. I might have to expand outside of two counties though.
DS: Got you. Wow. Right.
RS: Yeah, and Minnesota’s getting varied. I like it.
DS: So the numbers that I ran from back then, we averaged about 400 and something withhelds per month. It was under a half percent. So you look at 2012, when we reached the bottom of the market. Inventory started to finally drop. Rates were also starting to get a little bit more affordable, so buyers started coming out. This is also when all the really big homes started getting built too, when money was almost free, and people were sitting on it. The numbers in 2016-17, we saw the biggest jump in withheld properties. We jumped 50% in withhelds.
DS: Now, I’m looking at the percentage here. We’re gonna talk about the actual numbers and what that means in a second. From ’17 to ’18, it grew 23%. From ’18 to ’19, it grew another 16%, and this is when they finally started going, “You know what, we have to put the plug in this.”
BO: Sure. So people were gaming the system.
DS: Big time.
BO: Of those pocket listings, what percentage of those sold as, a “hogger deal” where the listing agent repped both sides of it, a dual agency, a true dual agency?
DS: Good question. Those numbers, I don’t know.
DS: So my microphone was essentially turned off in 2017. I was asking for very specific numbers and then emails just stopped getting responded to, until May of 2019. I was responded to by the MLS with some pointed information and some curiosity in the direction I was going with my questions. They were probably already in the works of doing these things at a national level as it was, but at some point, the light was turned on. And I know the light wasn’t on in 2014 or 15, at least not with the people that I was speaking with ’cause I have it in screenshots that this really isn’t a problem. Maybe not at that point, but it was. It was enough for me to go, “What’s going on here?” From a true fiduciary and our obligation to a seller, it just wasn’t making sense.
BO: So, I’m gonna quiz you here. What’s your fiduciary responsibility?
DS: Well, for both sides, you have confidentiality, reasonable care, obedience, right? Those are just a couple. There’s like seven of them. I see your fingers moving.
BO: He is counting. Excellent.
DS: Can we round up?
BO: Yeah. So we love acronyms here. So what is LCDORA mean for anybody who went to ProSource back in the mid ’90s. You know what that means.
DS: I’ve got a daughter who’s now 13 and when I hear Dora, I get a whole ‘nother reaction.
BO: The explorer?
BO: Right, yeah.
DS: So looking at the numbers, so in January 2019, just to give you some perspective, we’re at super low inventory and we can talk about what that means too if we have time, but in January 2019, we entered the market with 8924 listings that were active, that’s it. Now, these are also active plus active contingent upon inspection.
BO: All 13 counties, 8000 plus…
DS: Almost 9000. In 2020, January, we entered with 7595. So the average number of listings that were withheld at that time were 2200, 2300. So from a percentage aspect, we had 30% of the market that was being withheld at any given time.
BO: So the plain field is not level and your clients aren’t seeing 30% of the houses they should be seeing, which is kind of sad. How do you find the perfect house in the perfect location when 30% of them are kinda held back?
DS: Not just that, but you think about the motive behind the decision to withhold in the first place. Because there’s a value for it, right? Let’s say domestic abuse. And somebody who absolutely doesn’t wanna show up on the radar that their home is for sale. It could be a private investigator, it could be a celebrity. There’s people out there that absolutely don’t want a sign in the yard, but does that mean you shouldn’t not put it on [14:05] ____ per se, realtor, Facebook, anything like that. These all that are platforms, ’cause you are broadcasting to a mass public at that point. It’s just more like a shotgun versus a pistol, whatever is gonna be more accurate. If you don’t have a very distinct audience when you’re doing your own advertising outside of the MLS.
BO: Got you. Now, I’m very… I’m piqued here.
TM: Yeah. Is there a financial benefit if you’re a listing agent to not advertise this on MLS, advertise it to your co-workers at your brokerage, and then make a sale internally, and pocket a higher percentage?
DS: That’s one of the catalysts for the decisions. What you’ll hear for the people who are really more pro-withhelds is they’re gonna say that this helps in all the advertising run up. They get to do all of this advertising to their couple hundred people on their Facebook page or to the people looking in other states at what’s going on in Minnesota, whatever. In my opinion, the big push is that they try to get somebody under contract. It could be for good reasons. Maybe they’re trying to get the house prepped and everything. But why start advertising in a mass, not necessarily mass, in a more minute way at all if you’re going to not intend on showing the property? If you’re really wanting to get it out to everybody at the same time to get the most amount of money for your seller, why would you be doing any advertising other than for the potential to sell it on your own or to pick up buyers, which buyers are struggling based on these numbers? We can talk about absorption rates here too in a minute, but buyers were out there struggling to find a property, and they see all this off-market stuff and they hear certain agents talking about they have all this pre-MLS inventory. It’s like a siren singing in the middle of the ocean, right? They wanna gravitate towards that. The angles, the thought processes, and the reasoning behind it, in my opinion, doesn’t support what our goals are from the National Association of Realtors standpoint and fiduciary duties.
BO: We should take a break for a minute here and just catch our breath ’cause… And now I have more questions, I’m giddy right now with questions, but you’re listening to Structure Talk, a structure tech presentation.
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BO: Welcome back, everybody. You’re listening to Structure Talk, a structure tech presentation. My name is Bill Oelrich, alongside Tessa Murray and Ruben Saltsman, and today, we’re having a conversation with Dan Sibinski from Keller Williams Classic Realty, out of Blaine, Minnesota. Okay, so we were talking a little bit about these things called pocket listings, but I’m sitting here thinking to myself, I thought there were rules around how listings were taken and how quickly they needed to be put on the MLS. And are these listings that you don’t actually have signed up so you don’t really have to put them on the MLS, or they’re actually signed up and they’re gonna go live, in say, two weeks, and you’re marketing… You’re shaking your head. No, that’s not it.
DS: Yeah. No.
BO: So how is this happening? What does it look like from a forms and reporting to the MLS perspective?
DS: Awesome, all good questions. So there’s a stand-alone form for the withheld. And this is the beauty of perception, ’cause most people sell a home every 11 years. So their experiences could be a little bit outdated, and even if they are not outdated, the chances of them remembering the process are slim to none. So when somebody enters into the equation of adding a withheld, it’s all about how that form is presented. We’re able to get you listed, we can start getting your house ready, and I can start all of my marketing, which they might have a ton of marketing lead up, but then they’ll say, “We won’t show up on the MLS. But by the way, if I find you’re a buyer that’s willing to pay the price that you want for your home, would you be okay if we show it? I’ll get you the top dollar for the least amount of inconvenience, etcetera.” So depending on how that conversation is displayed and depending on how that person hears it, that’s where the magic happens. Now, you can be withheld indefinitely. You have to have a listing agreement to be able to have a withheld form signed. You cannot advertise a property at all, technically you’re not supposed to, if you do not have a listing agreement signed at all.
BO: Gotcha. Now, Reuben, you recently sold a house or bought a house, didn’t you?
BO: Did you do any withheld [18:46] ____?
RS: We selected both. No, I didn’t do anything funky or crazy like that.
BO: All right, so does… Tessa, have you bought or sold any real state lately?
TM: Technically, yes, but I stay out of that. I let Jay handle that piece of it. He’s a licensed real estate agent.
BO: Okay. All right.
TM: But my parents… Actually as Dan was talking about pocket listings, I was thinking about my parents ’cause they recently sold their townhouse. They live in a city in Iowa. And they had an agent recommended to them through some friends, and she was an agent who was pretty well known in that city and apparently had a good reputation, and so they went with her. And their house was, I would say, above average, for the housing stock in that city. It was new, it was a quality build, and my parents kept it super well maintained.
BO: Undoubtedly air sealed.
TM: Oh, man. It was a very nice house.
BO: Properly insulated.
TM: Yeah. And I’ve been keeping an eye on the market just to kinda see what else was coming up for listings and comparable prices. And they had a… Their house was very nice. And the agent did exactly what Dan just said. She basically lined up… There was a buyer that made an offer on their property before it was listed and she told my parents she was gonna do that. And she said, “We’re gonna wait and put this on the market after… ” It was like two months or two weeks at least, maybe a month. She said, “We’re gonna wait and put it on the market.” So she advertised their property to her brokerage and all the agents she knew, then they had a buyer come forward and make an offer. And basically, they ended up accepting that offer. And I was so confused by that ’cause I thought… I’m like, “How is that keeping my parent’s best interest first, if you’re not advertising this property in the seller’s market right now to all the buyers?” Who’s to say that they couldn’t have gotten multiple offers or a better offer if she would have done that? And she kind of spun it, saying, “Well, we got you an offer real fast. We didn’t even have to put it on the market. You didn’t have to show it. Aren’t I good at my job? I sold it really quickly.” And they were like, “Yeah.” They didn’t even see the other side of that. Which is really frustrating to me.
DS: And there have been multiple cases that I’ve seen first hand where people will be a under withheld and the seller will say, “No, I’m not gonna accept any offers beforehand, before I go on the market fully.” And I have seen offers come at list price and the sellers say, “No.” And then they end up getting more from that same buyer, once they go on the market, because they get into multiples. We’re in a supply and demand industry, plus affordability, right? There’s all these things that can change the game, and Minnesota has a heartbeat to it in terms of best times to sell, maybe not the best times to sell, but stuff still happens, right? So what are those conversations like? How are people being addressed by their agent? How are they being educated so that they can well-time their decision to the best leverage? You look at a price range right now from $150000 to $350000, and in this area that we’re talking about, there’s a 0.8 months worth of supply.
BO: 0.8 months.
DS: 0.8 months.
DS: This is using January metrics. 0.8 months. The numbers for this to be a balanced market between buyers and sellers, five to six months. Most people are gonna tell you six.
DS: It’s insane why you don’t put your home on the market to show it to all the realtors. To get into that multiple offer situation.
BO: Now, can I just ask, what is the argument? There’s gotta be some type of argument that an agent is gonna make for doing the pocket listing. What do they say is the benefit?
DS: That’s a good question. ‘Cause every time that I talk to somebody new about this, it’s that same run-up. Like, why would anybody do this? What’s being said? Apparently, it’s something magical, right? We’re doing all this marketing. And the way, if you turn your ears into the radio now on how marketing in general is happening in real estate, all about convenience, right? All of a sudden, showing your home is a nightmare. Having people in your home in a world that we have more surveillance, we have more technology, we have more security, it is now more frustrating to let people in your home to paint a wall. It’s like, “Do they sell 20 pound paint brushes now at Home Depot? Is it that taxing on our shoulders?” Yeah, we all have limitations on what we do to our homes to get them ready for market, but at the same time, the demand is so high as the supply is so low. If you get good marketing behind you, good photos, good staging, you can leverage yourself and get top dollar with little inconvenience.
BO: What’s interesting is listening to the words Tessa used. And this is second-hand knowledge so I don’t wanna say anything about this agent. But it sounds like she said, “Oh, we’re gonna do this.” So it feels like she guided the conversation to this. “Oh, so if I have to do this, I need you to sign this form.” Boom. And it’s not even like it was explained, and it’s like, “This is my strategy and it’s just what I do.” And maybe that’s fine, I don’t have a problem with it, but it didn’t feel like it was fully explained to your parents what was really going on. ‘Cause I feel like we’re sort of almost in an auction period here right now for 150 to 350. If your house is clean, you throw it up on the market and you price it aggressively. And when I say aggressively, I’m thinking like you’re gonna have 15 people competing over that home right off the bat, and let them auction that price up. Is that a good strategy, Dan, in this market?
DS: Yeah, I’ve seen some homes where they’re not clean, they almost look like they’ve been thrown up in, and then put on the market.
TM: And they still sell.
DS: And they’ll still sell.
DS: Yeah. But again, you can always be over-priced, right? No one’s gonna pay 500000 for a 300000 home. But again, how do home prices go up, right? Money is made in the spring, and it depends on supply, demand, and affordability.
BO: Wow. Interesting stuff. We’re almost out of time. I feel like this 25 to 27 minutes just flew by. I’ve got about 47000 more questions to ask, Dan.
RS: We gotta do a part two.
BO: We’ll do a part two.
RS: We are doing a two-part deal here.
DS: Okay. I look forward to it.
BO: Reuben will actually get to talk. We’ll let him talk. He was quiet over here today.
RS: Oh, I don’t know. I don’t have much to say. I’m just learning.
BO: You’ve been listening to Structure Talk, a structure tech presentation. My name is Bill Oelrich, alongside Tessa Murray, Reuben Saltzman, and special guest, Dan Sibinski. Thank you very much, Dan. We appreciate your time. We’ll catch you all next time.