Pocket listings are now trending

Last week I attended a webinar entitled “Pocket Listings the Legal, Ethical, MLS, and Industry Issues of off-MLS listings.” This was put on by the California Association of Realtors (CAR) of which I am a member of and tap into regularly in an effort in keep informed of our always changing real estate market.

Pocket listings are not a new concept. What is notable is that the number has more than doubled in 2013 and is becoming more common in our current lack of inventory market.

The actual number of pocket listings is still relatively low with an estimated 15 percent of the market today per MLS Listing Inc. However, this trend is expected to continue as long we are in this lack of inventory, seller’s market. What is different about this current wave is that it accompanies the age of the internet and social networking sites.

A pocket listing generally refers to a listing agreement that a realtor has obtained but does not place on the Multiple Listing Service (MLS). This can be done legally but a pocket listing raises a number of legal, ethical, and practical issues that realtors and/or homeowners need to consider and address.

First, complying with MLS rules which mandate submission of a listing once signed must be uploaded onto the MLS within two days. There is an opt-out form, “Seller Instruction to Exclude Listing,” that must be signed by the seller that addresses this.

Second, all realtors recite under oath to adhere to a code of ethics and standards of practice written by the National Association of Realtors (NAR).

Articles 1-9 address the fiduciary duties realtors have to clients and customers. Realtors, under Article 1, pledge themselves to protect and promote the best interest of the client. This obligation is primary, but this does not relieve realtors of their obligation to treat all parties honestly.

Article 3 relates to the obligation to share information on listed property and to make property available to other brokers for showing to prospective buyers when it is in the best interest of the seller.

One must ask, is it in the best interest of the client to restrict the availability of information and showings to outside brokerages with potentially ready, able, and willing buyers? CA Civil Code #2079.16 states, “Listing agent has a duty of utmost care, integrity, honesty, and loyalty when dealing with the seller, and a duty of honest and fair dealing, and good faith with the seller.”

The bottom line is that pocket listings, or the use of private listing groups or clubs, can be a violation of CA law by constituting a breach of fiduciary duty. This is especially true if this arrangement is made for the benefit of the listing agent only and is not in the seller’s best interest.

Realtors, make sure the seller understands in a meaningful way the pros and cons of doing a pocket listing, including the options available within the MLS to address their concerns, such as declining internet display or non-placement of a lockbox if concerned about security.

The MLS is a great cleanser. It has built-in legal safeguards by being open to all licensees. Its structure and rules are adopted with antitrust concerns in mind, including express policies against price-fixing and setting commission creating an open marketplace so that all can benefit from.

If you have questions regarding this and/or other real estate matters, contact Mike Mason, Broker/Owner of MASON Real Estate DRE: 01483044, Board of Director of your Southwest Riverside County Association of Realtors® (SRCAR), Short Sale & Foreclosure Resource certified by National Association of Realtors® (NAR) at Mike@GoTakeAction.com or call (951) 296-8887.

One Response to "Pocket listings are now trending"

  1. Michael Izquierdo   May 4, 2013 at 4:54 pm

    Great article, I also was listening to that same webinar. As a listing agent, there are several reasons to keep a listing off the MLS which benefit the seller both financially and in other regards. Of course you want to give the property the maximum exposure without hurting the sellers others requests (ie privacy, privacy and a stress free sale. ) If you are a seasoned agent with a strong network, a pocket listing can sell and benefit your seller greatly. Loved the article

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