Pocket listings have never really been gone - they occur in all kinds of markets - but they seem to be back now in a big way. And a lot of people - real estate agents in particular - are not happy about it.
Articles debating their value and impact have appeared on the National Association of Realtors® (NAR) web site, Realtor®.org, and pro and con opinions have been weighed in on real estate sites throughout the blogosphere. Responding to expressed concerns, the California Association of Realtors® (CAR) will host a Hot Topic webinar "The Pressing Issue of Pocket Listings" later this month.
The term "pocket listing" has more than one use. Sometimes it is used merely to refer to a situation where a homeowner has, without a contract being signed, told an agent that he has some interest in selling and would entertain an offer if the agent brings a buyer. There really is not much controversy, nor much enthusiasm, about pocket listings in this sense.
The kind of pocket listing that generates controversy is the situation where an agent does have a listing contract, but the listing is not entered into the Multiple Listing System (MLS). In most MLS organizations this practice is generally prohibited. The California Regional Multiple Listing System (CRMLS) requires "Broker participants shall input exclusive right to sell or exclusive agency listings on 1-4 units residential property types, and vacant lots located within the service area of the MLS within 2 business days of the start date of the listing." Other MLS organizations have similar requirements.
Most will also have an exemption provision. At CRMLS the exemption is stated this way: "If the seller(s) refuses to permit the listing to be disseminated by the MLS, within 2 business days, the listing broker shall submit to the MLS a certification signed by the seller(s) that the seller(s) does not authorize the listing to be disseminated by the MLS." Other systems may have a variation on this. For example, the CRMLS exemption does not require that the seller's certification appear on a particular form. Other systems may provide that a particular verbiage is required. CRMLS requires that the certification be submitted to the MLS. (I can guarantee that this does not happen 100% of the time.) Other systems might find it satisfactory simply that such a certification be on file with the listing broker.
CAR produces a form that can be used in this situation, "Seller Instruction to Exclude Listing From the Multiple Listing Service or Listing Information from the Internet", Form SEL. The SEL contains language that goes to the heart of the controversy about pocket listings. That is, it makes it clear to the seller that, by keeping the property out of the MLS, the seller is reducing the property's potential exposure to the market place.
First, the form explains, "It is likely that a significant number of real estate practitioners in any given area are participants or subscribers to the MLS. The MLS may also be part of a reciprocal agreement to which other multiple listing services belong." It then notes, "Listing property with an MLS exposes a seller's property to all real estate agents and brokers who are participants or subscribers to the MLS, all real estate agents and brokers receiving access to the MLS by way of an MLS reciprocal agreement, and potential buyer clients of those agents and brokers." [my emphasis]
The opt-out section then reads, "If this option is checked, Seller certifies that Seller understands the implications of not submitting the Property to the MLS."
The SEL allows for the listing to be withheld from the MLS either for a period of days or for the entire duration of the listing.
We won't debate the wisdom or the ethics of pocket listings here, but we do note that if one is to be used, it's a good idea for both the seller and the agent to use a form like the SEL. By signing it, the seller indicates that he understands what's going on. And that's a good thing.
Published: April 9, 2013
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