Pocket Listings

Earlier this year, California’s MLSlistings Inc. chair, Robert Bailey, began to raise concern over the growing trend of off-MLS listings and so-called “pocket listings.” According to a study that compared public records with MLS listings in the California communities of Monterey, San Benito, San Mateo, Santa Clara and Santa Cruz, Bailey found that off-MLS listings increased from 15 percent in 2012 to 26 percent of the market in the first quarter of 2013.

The National Association of Realtors (NAR) reports that supporters of pocket listing practices often cite situations where sellers are seeking privacy or are concerned about having strangers view their homes. Bailey admits there is a legitimate concern for privacy and security, but cautioned sellers and agents that by resorting to these tactics, they could run into fair housing issues. While some believe this is a trend, others aren’t so sure.

“Since we can’t easily track the volume of off-MLS listings, it is difficult to say if they are increasing or not,” says Russ Bergeron, CEO of Midwest Real Estate Data (MRED). “They have definitely received a lot more attention recently.”

Bergeron cites the formation of private “listing clubs” as a possible reason. “I feel it is mostly due to the reduced inventory of listings that have made the use of off-MLS listings more noticeable to brokers who are looking desperately for properties to match up with their buyers,” he says.

Bergeron is so against this practice he doesn’t even believe in the term “pocket listing.”

“A pocket listing implies that an agent is not exposing that listing to anyone else,” he says. “We all know that is false, because without some kind of exposure – be it limited to just your friends, a few other agents, a few other offices or throughout the entire MLS membership – the property will never be sold. You either have an MLS listing, or an off-MLS listing.”

If the MLS is critical to the majority of agents and brokers’ business, why would someone choose not to use it? There are seller reasons and agent reasons. Among the reasons sellers might want to keep their property off the MLS are: the sellers are celebrities or well-known in the community, and don’t necessarily want word to get out that they are selling their home.

Or maybe the sellers prefer to stay off the MLS so they don’t have to repeatedly show their homes, but deal with a much smaller sect of interested buyers that their agent knows, whether through other agents or friends. However, pocket listings are more often suspected of being an agent’s idea – a way to sell the home without several days or months of staging, open houses and showings, and ultimately, not exposing the home to as many potential buyers as it could be exposed to if it were on the MLS.

In addition, if a pocket listing is kept within an agent’s brokerage, the commission for both agents is greater and their brokerage makes more money. It’s a win-win for the agents, but whether or not pocket listings are a great deal for sellers is being debated more and more. The only time a pocket listing is okay is when the seller wants their home to be one.

In addition, not listing properties on the MLS is detrimental to the industry. MRED has approximately 38,000 real estate professionals constantly searching and viewing properties in that database, according to Bergeron, and at any one time, approximately 250,000 potential buyers are entered into the system (though this number does fluctuate.

Every listing is matched against those prospects to see if that listing matches a buyer’s price and characteristics. When a listing price changes, all of the prospective buyers’ criteria is searched again to see if it might align with more of what they’re looking for.

“This is an ongoing process, with hundreds of potential buyers added into the system every day. No other system can match this pool of buyers,” Bergeron says. “And this clearly demonstrates how a pocket listing hurts the consumer, because minimal exposure is given to a property when it is not placed in the MLS.”

When participating in the MLS, agents and brokerages agree to abide by its rules and regulations.  One of MRED’s rules requires listings be entered into the system within 72 hours of contract execution unless a waiver of MLS services has been executed by the seller.  Every MLS across the country has a similar rule, and the timeframe for this is usually 24-72 hours.

If an agent sells a home without placing it in the MLS, and without the seller’s signed waiver, he or she is subject to a fine for violating MLS rules. Illinois Licensing Law requires some form of a written marketing agreement between a seller and a broker prior to marketing a property to be in place, as well.

MRED developed a seller’s exemption form that brokers use to communicate to sellers the consequences of choosing an off-MLS listing. According to Bergeron, “We encourage our brokers to report to us if they are taking an off-MLS listing, but it is not required.”  An off-MLS listing is not a violation of rules, as long as the appropriate exemption form is executed by the seller.

While many agents appreciate the rules of the MLS, many do not necessarily believe any group should be legislating how a broker serves a client. And Bergeron agrees. “MRED has no interest in controlling the business model of any broker. Our job is to ensure that there is compliance with our rules,” he says.