Why pocket listings are a disservice to home sellers. This reader had an agent who used a pocket listing to market exclusively to a religious community.
Q: I’ve been following your discussion of pocket listings with interest. I had an unfortunate experience with a broker who used a pocket listing to try to sell my father’s home. He blatantly used the pocket listing to discriminate and market the property only to members of the religious community dominating the area.
A house of worship was built near my father’s home and members of that house of worship are now the primary buyers of homes in that neighborhood. I made sure that the broker we hired had experience in selling to that community, but the broker didn’t tell me that he didn’t sell to anyone outside that community.
Why Pocket Listings Are a Disservice to Home Sellers
We listed the home with him and at his request allowed him to keep the listing as a pocket listing for a short period. After several months with only one showing, we directed him to put the home on the multiple listing service (MLS). He resisted and insisted that the home only be sold to a member of that house of worship.
When I insisted, he placed the home on the MLS but described the house so that only members of that house of worship community would want to see the house: the only description of the property in the MLS related to the distance to shopping and the houses of worship in the area. The listing didn’t mention any of the usual descriptive items for homes and only showed one photo of the home from years ago that did not show current improvements.
When I saw the MLS listing I immediately told the broker that the listing was in violation of state and federal law. I insisted that he remove the listing from the MLS and fired him the next day. We filed a complaint against the broker with the state agency that regulates real estate brokers. We relisted the house with another broker and within a month had a full price, all cash offer and closed a month later.
Interestingly, of the potential purchasers that the new broker brought in, none were members of that community. I assume that we were blacklisted for trying to sell outside the community and filing the complaint. I have no idea who the purchasers were other than that they were not members of that community. I thought your readers would benefit from hearing about our experience.
What Pocket Listings Are and Why They’re Prohibited
A: Thank you for sharing your story. Over the past year, we have written several articles on pocket listings and the potential damage they can cause buyers and sellers.
A pocket listing refers to a situation where a home seller hires a real estate agent to sell a home, but rather than put the house on the market immediately the agent holds off on listing the home and instead markets the home privately to potential buyers, some of whom the agent may represent directly. The agent does not make use of the MLS and the home does not show up on any of the online listing sites like Zillow, Trulia, or any of the other real estate marketing websites.
Last year, the National Association of Realtors (NAR) came out with a policy that prohibited the use of pocket listings. The policy is called the “Clear Cooperation Policy” and requires Realtors to place the property on their local MLS and share that listing with other multi-brokerage networks within one business day of marketing a property to the public.
While the NAR debated the proposal, it emerged there were quite a number of Realtors that opposed banning the practice of pocket listings. In the end, the NAR passed the rule with some opposition.
NAR has a page on its website describing the “Clear Cooperation Policy.” The policy does permit certain exclusions from the policy but makes it clear that once the property is publicly marketed, the property must then go into the various services as a whole.
What Happened in This Case
The issue with any policy like this one is its implementation and how some Realtors may decide to follow the rule. You clearly had an experience where a real estate agent was abusing the pocket listing, and your father suffered by having to wait until you changed agents (and brokerage companies) to receive a full-price offer for his property.
You were right that the way the agent implemented the pocket listing violated the law. The Fair Housing Act prohibits discrimination against people in the renting or buying of a home, getting a mortgage, seeking housing assistance, or engaging in other housing-related activities.
Your father’s agent appears to have attempted to sell your home to a specific group of people to the exclusion of others. That was wrong. Then, your father’s agent tried to influence your father’s ability to sell the home in the marketplace by attempting to keep you from using the MLS, in clear violation of NAR’s Clear Cooperation Policy. Finally, the agent worked against your father’s best interests in listing the home in such a way as to keep potential buyers from seeing your home and discouraging buyers from buying your home, a violation of other NAR ethics rules.
All in all, your father’s experience was about the worst we have heard in a while. We’re so sorry that’s how it turned out, but we think you were right to report the agent.
As home sales heated up this summer in suburban neighborhoods across the U.S., we saw a resurgence of pocket listings. How do you know? “Coming soon” signs that stay up for weeks on end without the properties ever being officially listed are a good indicator that something is wrong. Agents may mistakenly believe they are just giving their own buyers first dibs, but their managing brokers need to stay on top of what’s happening in their firm and teach agents how to grow their business without running afoul of the law or NAR’s rules and regulations.
Thank you for your letter.