As we have discussed many times in the past, today’s market has brought out numerous questionable and frustrating practices. One of these, when not done correctly, is the pocket listing. In these cases, the property is not put in the MLS but is instead marketed through word of mouth or through informal marketing groups. Invariably, it seems, the property is sold to a buyer represented by the listing agent and our buyers feel cheated. So, has the listing agent done anything wrong in this scenario? The question, as usual, is not so simple to answer.

First, the easy part of this discussion relates to the MLS Rules. As you know, those Rules require that all listings be submitted to the MLS within 2 days of signature. In the pocket listing context, of course, we are not doing that. As a result, without more, we are violating the rules. The Rules do, however, provide an exception if the seller refuses to permit that the property be advertised in the MLS. In that case, you can keep the property out of the MLS if you get the seller to sign CAR form SEL, Seller Instruction to Exclude Listing from the Multiple Listing Service or Internet. By getting that written instruction, you are complying with the Rules and cannot be subject to a Board complaint.

The other, more difficult part of this equation is your fiduciary duty to the seller. As you know, as the seller’s fiduciary, it is our obligation to put the seller’s interests above our own. As a result, our desire to double end the deal, which often happens with a pocket listing, should be irrelevant to us. Instead, we should care only about doing what the seller wants. In most cases, that means getting the the highest possible price for their home by exposing it to the widest market possible. Of course, such exposure would only be helped by putting the property in the MLS. In some cases, however, that is not our seller’s top concern. Some sellers are more concerned about privacy and don’t want their house held open to the public at large. Some value confidentiality, and therefore want the marketing of their property limited. Others are concerned about theft, and don’t want pictures of their home on the internet or MLS. Of course, your seller has the right to decide what matters most to them. As a result, it is our job to make sure they consider all these issues and instruct us how to proceed.

As a result, the key in this situation, as in most others, is disclosure. In order to properly handle a pocket listing, you need to explain to your seller that by marketing the property this way, they are limiting its exposure and may therefore negatively impact its price. The SEL form explains this issue to some extent, so using it helps. But make sure to be real clear: A wider marketing campaign may get you more money. But it also may negatively impact your privacy, etc. Then your seller can decide and tell you what to do. More importantly, by having this discussion you have done your duty. It is really that simple. So don’t feel the need to go away from pocket listings. They are a fine practice as long as you handle them correctly. And when you do so, you can earn your full commission and have no worries about future problems.

Attached for your reference are two items: a CAR article and Q&A on this subject. If you have any additional questions, please contact your manager, who will get the Legal Department involved if necessary. Thanks.