The National Association of realtors last week voted to ban the use of “whisper listings”/ “Pocket listings”. The new rule will require listing brokers who are participants in a multiple listing service (MLS) to submit their listing to the MLS within one business day of marketing the property to the public, according to NAR. How will this impact real estate? How will this “ban” be enforced?
What is a pocket listing?
This is a property that is technically for sale, but agents won’t find it listed on the multiple listing service, the database they use to peruse local options for clients. Likewise, home buyers won’t find pocket listings online or by a “For Sale” sign in the front yard, either. Instead, the real estate agent who’s been hired for a pocket listing keeps it in his metaphorical pocket and shares it only with a smattering of agents he knows and trusts can turn him on to the right clientele. Essentially it is a property that an agent has an exclusive right to sell and markets the property outside of the traditional MLS
I’ve used this method in Colorado. When we were finalizing our house to put on the market, we signed the listing agreement and let the agent market it as “coming soon” to her various contacts to drum up business. We went under contract shortly after the property was put into the MLS.
Many sellers prefer a pocket listing to maintain privacy. Especially in high end houses, sellers don’t want the whole neighborhood traipsing through their house. They would prefer to target the marketing to specific contacts their agent has.
Pocket listings constitute only a slim percentage of total listings, by most estimates under 10% of the national total (realtor.com)
What is the new rule?
The national association’s 800-person board overwhelmingly voted Monday to limit the use of pocket listings, by requiring agents who sell through Multiple Listing Services to submit their listings to the MLS within one business day of marketing the property to the public, whether that’s with a sign in the yard, an email blast or a Facebook post.
Why the new rule?
Critics of pocket listings complain such “off-MLS” tactics cut agents and buyers out of real estate deals, often allowing listing brokers to “hog” the whole commission while depriving sellers of the widest possible exposure to the full market. And it’s can be discriminatory against minorities who “are often the last to find out about pocket listings,” one critic wrote.
Major loophole
Although this new rule on the surface would effectively eliminate pocket listings, there is one major loophole. Agents are still able to market the property within their office before it comes on the market. What if you have an agent in a wealthy ski town where 60% of all transactions are done by this brokerage firm. This new rule would be useless as the agent could market within their office just as before.
It will be difficult if not impossible to enforce
Regardless of the new rule, it will be essentially impossible to enforce. Who is going to look at every listing to find out when it was sold, when it was first listed on the MLS, and when the agent sent out the first piece of advertising on the property? Nobody will!
Summary
This new rule could actually hurt the National Association of Realtors as a seller may demand that their property not be listed in the MLS. Can the National Association of Realtors require you to put your property into an MLS against your will? Over the next year or so I guarantee the courts will get to answer this question.
Although the new rule “banning pocket listings” sounds good on paper, the reality is the rule will do little to alter the real estate landscape. Sellers along with their realtors will continue to operate business as usual although I suspect a realtor association might attempt to enforce this new rule which will likely backfire.
Resources/ Additional Reading
- https://www.mansionglobal.com/articles/what-a-new-ruling-on-whisper-listings-means-for-real-estate-209310
- https://www.houstonchronicle.com/business/real-estate/article/Consumer-advocates-say-NAR-s-ban-on-pocket-14834361.php
- https://www.denverpost.com/2019/11/14/realtor-association-bans-pocket-listings/
- https://www.realtor.com/advice/sell/what-is-a-pocket-listing-2/
- https://www.ocregister.com/2019/11/12/nar-votes-to-ban-pocket-listings/
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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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