Avoid trouble with pocket listings

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A row of well-kept two-story homes with immature landscaping in front of them.

12/08/2015 | Author: Editorial Staff

Pocket listings, off-MLS listings, coming soon, whisper listings—whatever you call them, these listings can lead to problems if you don’t know the rules concerning them.

What are pocket listings?
Pocket listings refer to a listing arrangement or agreement in which the seller decides to keep the property off the MLS.

Are pocket listings illegal?
No. There are no state, local, or federal laws that prohibit pocket listings. However, you could run into trouble from issues related to antitrust, fair housing, or not meeting your fiduciary obligations.

Who can decide to keep a listing off the MLS?
Only the seller may decide to keep a listing off the MLS—not a broker or agent.

What should I do if my seller wants to keep her listing off the MLS?
Check with your local MLS to see how it treats these types of listings. Section 1 of the Model Rules requires listings to be submitted to the MLS within a certain time frame. Section 1.3 provides an exemption if your seller refuses to allow the listing to be disseminated through the MLS. Section 1.3 allows a participant to file the listing with the MLS without it being disseminated to other MLS participants, but a signed certification by the seller should accompany the listing as evidence of the seller’s refusal to disseminate it through the MLS.

Remember when you take a pocket listing, you are still acting in a fiduciary capacity and should put your clients’ interests above your own. You should also consider the Code of Ethics, as well as Texas Real Estate Commission rules. In fact, TREC says that you could be in violation of its rules and subject to disciplinary action if you did not obtain a seller’s informed consent after fully disclosing that limited exposure could result in fewer showings and offers.

Learn more about pocket listings and how to avoid trouble in “Why isn’t that house on the MLS?” from the August 2013 issue of Texas REALTOR® magazine.

Categories: Legal
Tags: legal, pocket listings, selling


Edith Raney on 12/15/2015

Jason, I would be particularly concerned if I knew a buyer or seller did not want the sales price disclosed in order to avoid paying taxes. Although I am not an attorney, I would question whether this practice is legal. As a real estate broker, I would consider this practice unethical. The can of worms opened here could potentially catch the attention of multiple alphabet agencies.
The pocket listings referred to in this article are primarily referring to delay or not posting in MLS without the sellers consent. It gives specific instructions as to how to be MLS compliant if the Seller does check the no MLS box.

Jason Coleman on 12/15/2015

I sell a number of multi million dollar properties a year, and a number of them are pocket listings.  The main benefit is to the buyer on not reporting the sales price which affects the appraised value; property taxes.  This can be $50,000 a year difference.  Also, on the seller’s behalf, it cuts down on the number of people who just want to see expensive homes and everything that goes with that…  There is no question about the marketing exposure differences between a pocket listing and an MLS listing.

I don’t understand why there is so much mentioned on disclosing to the seller when the TAR Res Listing agreement has a paragraph devoted to it:
Broker will not file this Listing with a Multiple Listing Service (MLS) or any other listing service.
Notice: Seller acknowledges and understands that if this option is checked: (1) Seller’s Property will not be included in the MLS database available to real estate agents and brokers from other real estate offices who subscribe to and participate in the MLS, and their buyer clients may not be aware that Seller’s Property is offered for sale; (2) Seller’s Property will not be included in the MLS’s download to various real estate Internet sites that are used by the public to search for property listings; and (3) real estate agents, brokers, and members of the public may be unaware of the terms and conditions under which Seller is marketing the Property

Ralph Buller on 12/12/2015

When getting our MLS rules to match NAR rules by section numbers, I read in NAR rules the only signs allowed are For Sale and Sold.  Coming Soon was not listed and therefore is prohibited unless there have been revisions since I read them.
I would like TAR to research this and print the finding.

Kathleen DeBarbieris on 12/11/2015

I had a pocket listing several years ago in which the Seller absolutely did not want his property listed publicly on the local MLS. Even after I explained all of the benefits of expanding the possible Buyer market and online exposure the Seller was adamant. They wanted to keep their privacy with the listing and sales price. I could only market to other Agents and potential Buyers through outside marketing sources.  It shouldn’t always be assumed pocket listings are the Realtors choice. I would never choose or even want a pocket listing personally.

Edith Raney on 12/11/2015

I am also seeing agencies who encourage their agents to do pocket listings and post them weekly to all agents to see if there are in house buyers before listing on MLS. Or seeing signs in yards with “coming soon” as a marketing tool.

There is no way I can see this as in the Seller’s interest—it is the agent only that benefits from these dark gray areas.

Miriam Moorman on 12/11/2015

I’m not sure that pocket listings are necessarily so much of a “marketing technique” as they are an attempt to keep all of the commission in that broker’s hands.  It might be a marketing technique designed to attract buyers by stressing that the brokerage has access to more houses because they have everything on the MLS and then their own group of homes that no-one else has access to!  However, I would question the ethics in that. This isn’t a value to the seller nor acceptable in terms of fiduciary duty.  I can’t imagine many sellers, if they are actually advised of what a pocket listing means, who would consent to it.  Why would they want to limit the number of potential buyers when it means that their house could stay on the market longer or go for a lower price?

Theresa Akin on 12/10/2015

I have seen what seems to be a pocket listing and often the way they’re handled is just wrong and I don’t care who you are. To me it is totally unethical. No one will convince me otherwise. Some one is going to lose. It is usually the seller whose property is on market and agent representing the buyer/ tenant is waiting for them to be qualified when there may be a buyer/tenant who is better qualified for the property and the ball could be rolling down that road to closing/leasing.

Richard Weeks on 12/09/2015

Irene here was the order imposed:  Agreed reprimand of broker. Agreed administrative penalty of $5,000.00.

Irene Pence on 12/09/2015

Richard, thanks for the post, very interesting information.  Given the seriousness of just those violations, makes you wonder what other incompetent practices that Agent routinely commits.  License should have been suspended, in my opinion.
This issue of pocket listings comes up now and then in these posts, and I’ve yet to see anyone suggest even one benefit to the Seller.  Perhaps someone can enlighten us.

Richard Weeks on 12/08/2015

I thought this was an interesting Bais For Order from the last TREC Disciplinary Actions:
Consumer Complaint
Respondent acted negligently or incompetently by using a limited exposure marketing method known as a “pocket listing” without first obtaining the seller’s clear and unambiguous consent and by failing to inform the seller as to the potentially negative effect of limited exposure to the market; and by listing the wrong price on a property. Respondent acted as intermediary between parties to a real estate transaction without first obtaining written consent from the buyers. Respondent failed to obtain written consent of the parties authorizing the broker to make an intermediary appointment; failed to provide written notice of intermediary appointment; respondent appointed himself as intermediary agent when he should have appointed another license holder associated with the broker.

Tom Morgan on 12/08/2015

An excellent remind of these important rules regarding a widely used and growing marketing technique.

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The material provided here is for informational purposes only and is not intended and should not be considered as legal advice for your particular matter. You should contact your attorney to obtain advice with respect to any particular issue or problem. Applicability of the legal principles discussed in this material may differ substantially in individual situations.

While the Texas Association of REALTORS® has used reasonable efforts in collecting and preparing materials included here, due to the rapidly changing nature of the real estate marketplace and the law, and our reliance on information provided by outside sources, the Texas Association of REALTORS® makes no representation, warranty, or guarantee of the accuracy or reliability of any information provided here or elsewhere on texasrealestate.com. Any legal or other information found here, on texasrealestate.com, or at other sites to which we link, should be verified before it is relied upon.

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