When you make the decision to sell your home and enter into an agreement with an agent, one of the initial steps your agent will take is to list your home on the Multiple Listing Service (MLS). The MLS serves as a database of homes for sale where agents can share listings with each other. These listings are then disseminated widely to real estate search platforms, including Redfin.com, enabling potential buyers to view available properties for sale.
However, what if you prefer not to have your listing publicly showcased on the MLS? In such cases, you may opt to sell your home as a pocket listing.
So, what exactly is a pocket listing? Let’s delve into understanding how pocket listings operate, the advantages and disadvantages for both buyers and sellers, and recent discussions surrounding Clear Cooperation.
Understanding Pocket Listings
A pocket listing, also known as a “whisper listing” or “office exclusive,” refers to a property for sale that is not listed on the MLS. Instead, the agent maintains the listing privately, offering it solely to select buyers or agents within their network. These listings are categorized as “off-market” and are not actively marketed to the general public.
While this approach can provide privacy for the seller, it also limits exposure to potential buyers, among other drawbacks.
Pocket listings are discouraged by the National Association of Realtors (NAR) under their Clear Cooperation Policy (CCP), which applies to all NAR-owned MLSs. Most MLSs mandate that brokers submit listings promptly to the MLS after the seller signs a listing agreement. However, there are instances where pocket listings are permitted.
The Mechanics of a Pocket Listing
When a seller engages a real estate agent to list and sell a property, they typically sign a contract, known as a listing agreement, that binds them to collaborate. Subsequently, the agent lists the property on the MLS and initiates marketing activities. Per NAR’s Clear Cooperation Policy, the agent must list their client’s property within one business day of commencing public marketing efforts. This requirement aims to foster collaboration between the seller and their agent, as well as between a buyer and their agent.
Conversely, with a pocket listing, the agent refrains from listing the property on the MLS or publicly marketing it, thereby limiting exposure to buyers within the agent’s and seller’s networks. This strategy circumvents the broader market and is typically reserved for specific scenarios, such as divorces and family estate matters. Individuals with substantial net worth and public figures may also opt for pocket listings to preserve privacy and exclusivity.
Pros and Cons of Pocket Listings for Buyers and Sellers
Here are some key advantages and disadvantages of pocket listings to consider.
Pros:
- Exclusive properties are accessible to select buyers, offering them a competitive edge.
- Sellers retain strict control over who views their home, ensuring privacy, which can be enticing for high-profile or luxury properties.
- Reduced foot traffic in a seller’s home minimizes disruptions to their schedule.
Cons:
- Buyers may miss out on broader market exposure, limiting their ability to compare properties and potentially leading to inequity.
- Sellers encounter decreased visibility, resulting in fewer offers and potentially lower sale prices.
- Pocket listings can undermine the Fair Housing Act by restricting access, favoring individuals with connections, and eroding trust in the real estate sector.
The Legality of Pocket Listings
Pocket listings are permissible, but agents affiliated with an MLS must adhere to the specific rules and regulations of their respective MLS. Sellers seeking privacy in their sale can opt to have their home listed on the MLS for other agents to view, but not syndicated to real estate websites (depending on the MLS guidelines). Alternatively, a seller can instruct their agent to designate the listing as an “office exclusive,” restricting sharing to other agents within the same brokerage.
In essence, agents and REALTORS® can still utilize pocket listings, but Clear Cooperation dictates that they cannot publicly market the property (e.g., on social media, through yard signs, or via email) without adding it to the MLS. Sharing it with other agents within the same brokerage is permissible. Consequently, this tends to benefit larger non-franchise brokers as they can disseminate the listing to a broader agent network.
Pocket listings are more prevalent in competitive markets or for luxury properties where confidentiality is paramount. They enable sellers to regulate who views their home and can decrease public foot traffic or speculative buyers. However, the limited exposure may restrict the pool of potential buyers, which studies indicate can impact the selling price or timeline.
The National Association of Realtors significantly restricted pocket listings in late 2019 as part of its Clear Cooperation Policy, aimed at promoting fair housing, enhancing data quality, and fostering collaboration. Notably, the policy still permits private, unlisted properties (pocket listings) under specific circumstances, such as when sellers request confidentiality.
Understanding Clear Cooperation in Real Estate
Clear Cooperation is a policy instituted by NAR in 2019 to curtail the use of pocket listings and foster equal access to housing.
Clear Cooperation mandates real estate agents to submit a listing to the MLS within one business day of commencing public marketing of the property. This ensures that all potential buyers, irrespective of their connections, have equal access to available listings, promoting fairness and transparency in the housing market. By restricting pocket listings, the policy aims to prevent exclusionary practices that could restrict access to certain properties and ultimately compromise fair housing.
While the policy was designed to create a more open and collaborative marketplace, it has faced criticism for potentially limiting sellers’ options and not always serving their best interests. Breaching Clear Cooperation also incurs stiff fines and penalties. With the recent industry-changing commissions settlement, there are renewed efforts to challenge the policy.
Controversies Surrounding Pocket Listings
Pocket listings have gained traction in recent years but have been gradually growing for over a decade, especially in high-demand markets. The industry took notice, prompting NAR to effectively prohibit the practice in 2019 through its Clear Cooperation Policy.
However, following NAR’s industry-wide settlement and subsequent rule modifications that took effect in late August, opponents of Clear Cooperation have raised concerns about its anticompetitive nature and its potential negative impact on home sellers and fiduciary duties of agents. Some critics view it as a means to safeguard the industry against antitrust lawsuits, one of which is currently in progress in the courts.
Redfin’s Support for Clear Cooperation
Redfin advocates for Clear Cooperation as essential for fostering a fair, collaborative, and equitable housing market where everyone can find their ideal home. The company believes that abolishing Clear Cooperation would only benefit large brokerages, to the detriment of consumers, agents, and fair housing. It would devalue the MLS and empower major players who can monopolize their inventory.
Glenn Kelman, Redfin CEO, expressed in his op-ed that overturning the Clear Cooperation policy could pressure agents to join larger brokerages, even if it means accepting lower commission splits, to ensure their clients access all available listings. This market dominance by a single company could stifle competition from smaller brokerages.
At its worst, ending Clear Cooperation could regress to an exclusionary past. Studies have shown that buyers at risk of losing access to pocket listings are often individuals of color, contravening fundamental fair housing principles. This is a primary reason why Redfin endorsed the passage of Clear Cooperation in 2019 amidst the rise of pocket listings.
Although Clear Cooperation is not foolproof and contains loopholes, a policy with loopholes is preferable to no policy at all. Other proponents of Clear Cooperation include industry leaders eXp Realty and Zillow, who warn that discarding Clear Cooperation could have detrimental effects on consumers, agents, and public trust in real estate professionals.
Future of Pocket Listings
Pocket listings have been a longstanding feature of the real estate industry but have recently garnered increased attention. While they offer privacy and exclusivity, concerns about fairness, transparency, and limited market access persist.
Clear Cooperation aims to address these concerns, but the debate on the future of pocket listings continues within the industry.
Redfin has consistently supported an open marketplace and will continue to advocate for transparency, better deals, and equal access to listings for consumers. The company believes that fair housing is essential for a prosperous and equitable society and considers ending Clear Cooperation as a threat to these core principles.