Given the recent trend of limited inventory in resale homes, I have noticed a big increase in the number of properties with for sale signs marked with a "Coming Soon" rider attached to the sign. These signs have sparked controversy in other markets, and I would like to explore the issue further here.
When a coming soon sign is in front of a home, the property isn't listed in the MLS® system for the public or other Realtors to see. In most cases, the sign is a typical Real Estate Salesperson's for sale sign, with their contact information on the sign, along with the name and phone number of their brokerage. If a prospective buyer is interested in getting information about the property, they have no choice but to contact the person on the sign.
I won't refer to this person or brokerage as the listing brokerage, because the assumption here is that there isn't a signed MLS listing agreement. If there were, there would be no need for the coming soon designation. According to the Toronto Real Estate Board, the rules for adding an MLS listing are as follows:
MLS® Rule R-365 states that you must enter the Listing into the MLS® System within two (2) TREB business days following the commencement date. (A TREB business day is Monday to Friday and does not include statutory days.)
Note that homes listed for sale on the MLS in Durham Region are included in the Toronto Real Estate Board's MLS system. Durham does not have its own system, and are subject to the same MLS rules.
Benefit for the seller?
Why would a home seller want to advertise their home as coming soon, rather than wait until it is ready to sell? There are several reasons that a seller may want to advertise the property in advance of it being ready to sell.
They may be doing some minor repairs, and want to drum up interest in the property as they get them finished, before showing the property. They may also do it as a way to motivate themselves to speed up the process of getting things ready.
It's also possible that the seller and their agent agree to a reduced commission if the home is sold during the time the home is in "coming soon" status. This is also called an exclusive listing agreement. This would only typically apply if the buyer were unrepresented by a buyer agent/brokerage. This is a legitimate way for both parties to benefit, although the seller should realize that without having the listing on the MLS system, there is a much smaller audience that the property would be exposed to.
Benefit for the Realtor®?
In many cases, however, this arrangement can work against the home seller. The whole purpose of the MLS system is to make the property visible to the widest possible market of potential buyers and Realtors looking on behalf of their clients. If the property is shown during this period, any prospective offers would only reflect the limited group of potential buyers that had actually toured the home.
There is potential for ethical issues here, as well. While the overwhelming majority of Realtors are honest, there is the possibility of abuse here in more than one way.
The salesperson/brokerage who put up the sign would be in a potential position to not have to share any commission on the sale with a co-operating brokerage that typically represents the buyer. If they could negotiate a sale before the listing hits the MLS system, the property may not sell at a price truly reflecting it's market value, but if they are not having to share that commission, they would certainly benefit.
Of course, if they had arranged a reduced commission during the exclusive time frame, the seller would have less overall commission to pay. That's assuming that the home sells for it's maximum potential, and there's really no way to know if that is the case if it never hit the MLS system.
It is possible that they could also control who sees the property. If they are selective in who they allow to view the property, they could potentially allow someone they know to get the property for less than it could have sold for with more visibility on the market.
Clearly, there are legitimate reasons for a seller to want to take the coming soon strategy. If they do, it is very important for them to understand the potential downsides, and for their Realtor to clearly explain how and why they would want to take this approach.
In any case, it is almost always in the seller's interest to get the property onto the MLS® system and ensure that they do have the widest possble audience to market their home to.