Are pocket listings unethical? The National Association of Realtors (NAR) has a new rule regulating how and when properties are listed.
Our recent article on pocket listings and “coming soon” listings elicited quite a number of comments. Here is one take:
Comment: I think you did your readers a disservice by not informing them that the National Association of Realtors has officially banned pocket listings. This will take effect on May 1, 2020.
Also, different areas of the country have their own way of dealing with pocket listings. In Northern Illinois, the MLS that I am a member of created a section in the MLS called “Private”, or PLN (Private Listing Network) where all signed listing agreements must be entered within 24-hours of signing. This private section is viewable only by agents with access to this MLS – it is not public-facing and cannot be found online on any real estate site. Use of the PLN is varied: sellers needing to do work on the home but don’t want to miss out on a potential buyer, agents needing time to photograph, get floor plans, prepared marketing, etc. The ban is definitely a good thing and agents that don’t comply will face a stiff penalty.
You have several misconceptions about pocket listings: 1. Yes, getting multiple offers usually raised the price but usually by just a little over list price. Certainly not $10,000, especially if it’s a lower-priced home. 2. Sometimes homes are overpriced because the seller wants to “try it” for a short time. Sometimes there’s pressure from a relative or the market is hard to judge. 3. The concessions given to buyers are not reflected in the sale price but these concessions are shown on the listing sheet. 4. If the concession is negotiated at the time of sale and it’s a “net” commission, the seller does not pay commission on that reduction. Of course, markets vary. Personally, as an agent for 40 years, I’m not in favor of pocket listings either.
The National Association of Realtors has adopted a Clear Cooperation Policy which will be in effect nationwide on May 1, 2020, for all real estate licensees who are Realtors. It simply states that any property that is publicly promoted must be in the multiple listing service within one day of the promotion, or the Realtor member will face sanctions. (In our Association, that is a $500 fine for the first offense.) This will effectively end “coming soon” and “hip pocket” listings for Realtor licensees across the country. You may want to get with your sources at NAR for more details.
Are Pocket Listings Unethical?
A: We thank all our readers for their comments about this topic. Clearly, there’s a level of disagreement both with whether pocket listings (also known as “whisper listings”) are an actual problem and with how the National Association of Realtors (NAR) is choosing to resolve this issue.
Our prior column dealt with the practice of real estate agents and brokers who place “coming soon” signage on a home as well as the other practice of not listing the home on a multiple listing service immediately, but keeping the listing to show to only those real estate agents within the agent’s office or within a select group of people.
More importantly, these unlisted listings may never actually get to the public multiple listing service, if the broker has a ready, willing and able buyer waiting in the wings.
According to the National Association of Realtors, pocket listings exclude consumers because not everyone has access to the same information about a particular property. And by limiting eyeballs on a property, it’s possible (even likely) that you will exclude prospective buyers and the home would sell for a lower price than it would if the largest number of people had a chance to view each property.
Of course, there are times when a pocket listing might benefit a seller. With the continued presence of sites like Zillow, Trulia, Redfin and others, there appears to be a tug of war going on. These sites make it easy for homebuyers to see the starting price for a home, what it previously sold for and how long the property has been on the market. Having said that, having that days-on-market clock start ticking immediately could be detrimental to a seller’s prospects.
National Association of Realtors New Rule on Pocket Listings
Still, last fall the National Association of Realtors voted to enact a new rule that provides as follows: “Within one (1) business day of marketing a property to the public, the listing broker must submit the listing to the MLS for cooperation with other MLS participants. Public marketing includes, but is not limited to, flyers displayed in windows, yard signs, digital marketing on public-facing websites, brokerage website displays (including IDX and VOW), digital communications marketing (email blasts), multi-brokerage listing sharing networks and applications available to the general public.”
The vote to pass the new rule was 729-70 according to Housingwire.com. That means that approximately 8 percent of the members voted against this new rule. Comments left on various real estate websites reveal frustration that this rule won’t allow public figures and other expensive market owners to market their properties privately.
This may be true, but over the years we’ve seen real estate agents get pretty creative in their handling high-end properties. For example, some agents refuse to show expensive homes without confirming the prospective buyer’s financial ability to actually buy the property with a representative from their bank or financial services company. Still, what’s right for public figures, sports stars or other wealthy people doesn’t always work for everyone else. Most sellers just want to be able to sell their home as quickly as possible for as much money as possible.
Maximum Exposure vs. Limited Audience
At the end of the day, the Realtors are trying to decide whether a seller wants maximum exposure for a listing with all of the information that goes with it online or whether you want a listing to have a more limited audience, with little or no information available publicly. Which way will generate the most money for the seller (and, of course, the listing agent)?
Complicating all of this is the advent of iBuyers, companies like OpenDoor (and Zillow and Redfin are competing in this venue, too), which offers sellers the opportunity to sell instantly, on the seller’s timetable, for a larger chunk of cash.
We’ll see how things play out over the coming months as the Clear Cooperation Policy gets implemented and real estate agents gauge how to work with it and around it.
One possible workaround: We recently came across a listing where the property’s list price has been reduced by a nominal amount each week (generally $10) for the past few months, and you can now see the dozens and dozens of price changes on the online listing.
It certainly will make the online listing quite a bit longer. The question is, will it help or hurt the seller?
We thank our readers for their comments.