Are Pocket Listings Ethical?

by Stephanie Sims

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The pros for agents who have pocket listings are they may be able to secure a double commission on any deal, because they could be acting for both parties involved in the transaction; if the agent representing the seller knows a buyer who would want the property, that agent would earn double commission.

Another outcome could be that the seller’s agent can split the commission with a colleague – if the agent knows that another agent within his or her brokerage has buyers who would be interested before the home is listed on the MLS, they keep the commission within their company. There can be positives for sellers, too: some sellers prefer pocket listings due to the privacy factor; also, if they’re not motivated to move, the pocket listing will only be shown to a few interested parties.

The cons come into play not for agents, but for sellers – there is a question of whether pocket listings are beneficial to sellers. Could they get higher offers, and more of them, if the property is listed on the MLS? In addition, the promise of a pocket listing is that it will sell the home quickly – what happens when the home does not sell as a pocket listing?

If that happens, most agents say they would advise their clients to reconsider the asking price and to list it on the MLS. And if the pocket listing turns into a transaction, said Betty Graham of Coldwell Banker Previews International/NRT in an interview with CNN Money, “Most of the time, pocket listings are transacted fairly and ethically.”

“Off-MLS listings may have a value when clients request privacy or anonymity, but as a marketing tool, these listings have yet to prove their value,” says MRED CEO Russ Bergeron. “As they are not exposed to the full complement of agents found in an MLS, you run the danger of not getting the best price or multiple offers. A recent study by an MLS in Northern California shows that off-MLS listings sell for about 13 percent less than those entered into the MLS.”

“It is imperative that brokers consult their managing broker for guidance on best practices,” Ginger Downs, CEO of the Chicago Association of Realtors, says. “Also, MRED’s policy outlines that a broker has 72 hours to enter a listing into the MLS. If a seller elects to not have their property listed in the MLS, the broker is obligated to have the seller’s signed authorization indicating the same.”
The National Association of Realtors and Illinois Association of Realtors do not have a policy on pocket listings, but other regional real estate boards are known to dislike the practice. What do you think – are you a fan of pocket listings for your sellers?

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  • Dave says:

    HORRIBLE idea, 95%+ of the time…there is NO guarantee of a quicker sale (that doesn’t even make sense) since LESS public knowledge means less possible views, showings, offers, etc…
    If you are not living in the 80′s or sooner, why would a seller even consider this? Unless it is to ‘control’ the listing’ better (for something betwixt shady and illegal reasonings)…otherwise…just no purpose from a seller standpoint, ESPECIALLY on residential. I do understand privacy concerns with commercial deals, but realistically, every site has ‘confidential’ listings and we never hear tales of requests for privacy being rampantly broken.
    Even a ‘top seller’ can’t pretend they have ALL the MLS as a personal client connection. So it is either a client up to no good or an agent doing all they can to obtain dual agency. Since dual agency only allows for ‘ministerial acts’, you do not represent anybody but yourself and the contract…while some be fine with that, the reality is we should then stop telling people that they need agents and that we aren’t ‘merely gatekeepers’ since that is the only impression one would get from this type of service being provided.

  • Gary Lucido says:

    Not only is this a bad idea for the sellers as already pointed out but the so-called benefits are not real. If I have a listing and a buyer for that listing and I put the listing on the MLS either my buyer is going to buy it or they are going to buy something else. I make the same amount of money no matter what.

  • Michael Parish says:

    The agent trying to DOUBLE DIP, is NOT thinking of their clients best interest, but their own..

    I Think this is a bad business practice, and should NOT be instituted..

  • Bette says:

    It reeks of a bad smell. Discrimination laws are the first thought that entered my mind. Are the sellers saying “lets keep certain people out of the loop and worse yet are the agents going along with the seller which could lead them to be in violation of the fair housing laws? Stinky!

  • Will says:

    Is it Legal, Does the house sell, isn’t that the point of it all, is to sell the house, so what’s the problem? I think it’s a great “Thinking outside of the Box” tool. Sell more houses.