By Katherine Johnson, NAR Senior Vice President and General Counsel
What does it mean to advertise a property as “coming soon”? The answer to that seemingly simple question varies among agents, brokers, MLSs, and state regulators nationwide. While the real estate industry has not agreed on a definition of “coming soon,” one thing is certain and consistent — a broker’s decision to market a seller’s property as “coming soon” must always be made based on the client’s informed determination of what best serves the client’s interests.
Some “coming soon” advertisements involve unlisted properties that may or will be listed with a broker in the near future, while others relate to properties that are subject to listing agreements where property is available to potential purchasers only through the listing broker and not available, temporarily or indefinitely, for showing or purchase through other MLS participants. In either case, “coming soon” properties are commonly withheld from the MLS.
The first important step in advising a seller-client on whether to advertise a property as “coming soon” is to identify the client’s best interests, as defined by the client. Failing to act in the client’s best interest and failing to disclose the pros and cons of a limited marketing plan, such as “coming soon” advertising, can violate state real estate license laws and regulations, MLS policies, and the REALTOR® Code of Ethics.
For most sellers, getting the highest possible price on the best terms is their “best interest,” and maximizing exposure of their property to potential buyers advances that interest. Multiple Listing Services promote the interests of sellers by compiling property information in an orderly manner and distributing that information to MLS participants who have buyer-clients actively seeking to purchase property in the location served by the MLS. Restricting the marketing of a seller’s property to only small networks, private clubs, or even to national websites without also making it available to other area brokers and agents and their buyer-clients through the MLS results in the property not being exposed to the widest group of potential willing and able buyers, and may not provide the seller the best opportunity to attract offers at the highest price.
It’s important that sellers understand the implications of various ways of marketing the property so that they can knowingly determine the choice that best serves their interests.
If a broker determines that “coming soon” advertising is in the client’s best interest and confirms that the client understands the possible consequences, then it’s imperative for the broker to know the state’s real estate license laws and regulations to ensure that such advertising is in compliance. A broker who fails to comply with state laws and regulations risks facing disciplinary action from licensing authorities, as well as the possibility of litigation from unsatisfied clients.
Many state license laws impose certain duties on licensees including the duties of care, loyalty, good faith, and honest and fair dealing. An unsatisfied seller could allege that a broker breached one of these duties if the broker did not seek to obtain the highest possible price for his client where the client didn’t understand that the marketing of the property might not achieve the highest price.
Recently, the Colorado Department of Regulatory Agencies, Real Estate Division, issued “CP-44 Commission Position on Coming Soon Listings” clarifying that a licensee’s existing duty to “promote the interests of the seller or landlord with the utmost good faith, loyalty, and fidelity” requires Colorado licensees to advise clients during the negotiation of the listing contract of the benefits or risks of limiting a property’s exposure through “coming soon” advertising. The broker’s motivation for such limited exposure of the property must be for the seller’s benefit – not the licensee. The Commission Position concludes by requiring licensees to describe in the listing contract the marketing plan agreed upon by the broker and seller prior to any marketing being performed.
In South Carolina, advertising a property as “coming soon” prior to entering into a listing agreement with the seller violates South Carolina license law. Check out the license laws and regulations in your state for guidance regarding “coming soon” advertising.
In addition to complying with state license laws, brokers advertising a listed property as “coming soon” must ensure the advertising complies with their local MLS rules. As previously discussed, MLSs serve the interests of sellers by compiling property information in an orderly manner and distributing that information to MLS participants who have buyer-clients actively seeking to purchase property in the area served by the MLS. However, MLSs also benefit consumers generally because they facilitate aggregation and evaluation of numerous factors that can affect a property’s fair market value. MLS information facilitates preparation of appraisals, comparative market analyses, and broker price opinions that help consumers ascertain a property’s fair market value. Sellers often rely upon those valuations when setting listing prices; buyers use them when making offers to purchase. Those valuations are especially useful when they include information about comparable properties, including sales prices, days on market, and property conditions. Withholding that market information from the MLS hinders consumers’ ability to receive useful estimates of value.
Prior to advertising a listed property as “coming soon,” brokers should check their local MLS rules to ensure compliance. For example, many MLSs require listings to be submitted to the MLS within a specified, usually fairly brief time, period after the listing contract has been executed; some may permit listed properties to be advertised as “coming soon” while being kept out of general distribution on the MLS as long as such advertising is not targeted to the general public; and some require participants to obtain sellers’ written consent to keep a listing out of the MLS.
Finally, adherence to the NAR Code of Ethics is an important consideration for brokers when advising clients on whether or not to advertise properties as “coming soon.” REALTORS® must remember to promote and protect the interest of the clients; present a true picture in their advertising, marketing, and other representations; and make property available to other brokers for showing to prospective purchasers when it is in the best interest of the sellers. Failing to do so harms the reputation of the broker and REALTORS® generally and may result in disciplinary action from the broker’s local association of REALTORS®.
Source: National Association of REALTORS®