Pocket Listing

Definition

A Pocket Listing is a real estate practice where a listing broker delays the entry of a property into the Multiple Listing Service (MLS). The objective is to find a buyer through the broker’s own network without sharing the listing information with other brokers. This delay gives the listing broker an opportunity to earn the full commission rather than splitting it with a cooperating broker involved in the MLS.

Examples

Agent Advantage: Salesperson Sue is confident that a house will sell quickly. Even though the seller prefers to list the property on the MLS immediately, Sue delays the entry. By finding a buyer through her own network first, Sue hopes to capture the entire commission rather than sharing it with other brokers.
Homeowner Privacy: A high-profile homeowner prefers maximum privacy during the sale process. They opt for a pocket listing to avoid public exposure and to sell the house discreetly.

Frequently Asked Questions (FAQs)

Why do brokers use pocket listings?
- Brokers use pocket listings to have an advantage in securing the entire commission and sometimes to cater to seller preferences for privacy.
Are pocket listings legal?
- Yes, pocket listings are legal, but they might be constrained by local MLS rules or the brokerage’s policy regarding ethical practices.
Do pocket listings benefit sellers?
- It depends. While pocket listings can offer privacy and exclusivity, they might limit buyer exposure potentially affecting the sale price and timeline.
How do MLS rules affect pocket listings?
- Policies vary by region. Some MLSs have strict rules regarding timely listing entries to ensure fairness, while others may allow more flexibility.
What are the risks of pocket listings?
- Risks include limited market exposure, possibly resulting in a lower sale price, and potential breaches in agent fiduciary duty if not disclosed properly to the seller.

Multiple Listing Service (MLS): A database used by real estate professionals to share information about properties for sale.
Listing Broker: The broker who represents the seller and is responsible for listing the property.
Commission: The fee earned by a real estate broker or agent for facilitating a property transaction, typically a percentage of the sale price.
Cooperating Broker: A broker who finds a buyer for a property listed by another broker, thereby sharing the commission.

Online Resources

References

National Association of Realtors Legal Department. “Understanding Pocket Listings.” NAR Legal Resources, 2022.
Real Estate Standards Organization (RESO). “ML Standards and Practices.” RESO, 2021.
The Multiple Listing Service (MLS) Handbook. “MLS Operations and Compliance,” 2020.

Suggested Books for Further Studies

“The Millionaire Real Estate Agent” by Gary Keller - A fundamental book that explores strategies for building a successful real estate business, including various listing strategies.
“Your First Year in Real Estate” by Dirk Zeller - A guide for new agents with insights on listing practices and ethical considerations.
“The Book of YES” by Kevin Ward - Focuses on scripts and strategies for real estate agents, including how to approach exclusive listings and pocket listings.

Real Estate Basics: Pocket Listing Fundamentals Quiz

### What is a pocket listing? - [x] A property that's held back from the MLS to find a buyer within the listing broker's own network. - [ ] A list of properties that are out of the agent's pocket. - [ ] A discounted MLS listing service. - [ ] A real estate listing available only to pocket buyers. > **Explanation:** A pocket listing is a property that's not immediately put into the MLS so the listing broker has an opportunity to find a buyer within their own network first. ### Why do brokers use pocket listings? - [x] To earn the full commission. - [ ] To save marketing costs. - [ ] Because they have to. - [ ] To lower the property's selling price. > **Explanation:** Brokers use pocket listings to have an advantage in securing the full commission and to occasionally cater to preferences for seller privacy. ### Are pocket listings legal? - [x] Yes, but they may be constrained by local MLS policies. - [ ] No, they are against real estate laws. - [ ] Yes, with no restrictions whatsoever. - [ ] They are illegal in most states. > **Explanation:** Pocket listings are legal, although local MLS policies and brokerage ethical guidelines might impose constraints. ### What is one potential disadvantage of a pocket listing for a seller? - [ ] Too many buyers may compete. - [ ] It ensures maximum exposure. - [x] Limited market exposure. - [ ] Easier marketing costs. > **Explanation:** A potential disadvantage of a pocket listing is limited market exposure, which could affect the sale price and process duration. ### What do local MLS rules aim to ensure regarding property listings? - [ ] Delayed entries in the database. - [ ] Exclusivity for certain brokers. - [x] Timely and fair entries ensuring market competition. - [ ] Minimizing the profit for listing brokers. > **Explanation:** Local MLS rules typically aim to ensure timely and fair entries into the database, promoting fair market competition. ### What is a Cooperating Broker? - [x] A broker who finds a buyer for another broker's listed property and shares the commission. - [ ] A broker who only works inside the MLS system. - [ ] A lender for real estate deals. - [ ] A sole agent for listing and selling properties. > **Explanation:** A cooperating broker finds a buyer for a property listed by another broker and shares in the commission from that transaction. ### What aspect of pocket listings could create ethical concerns for brokers? - [ ] The immediate exposure to numerous buyers. - [ ] Higher market sales price. - [x] Limited disclosure to sellers. - [ ] Increased cooperation among brokers. > **Explanation:** Ethical concerns around pocket listings typically revolve around limited disclosure and potential conflicts of interest, where brokers may prioritize personal gain over the seller's best interest. ### How can pocket listings align with sellers’ preferences? - [ ] By ensuring maximum market competition. - [x] By offering privacy and controlled exposure. - [ ] By guaranteeing the highest market value quickly. - [ ] By lowering the sales commission rate. > **Explanation:** Pocket listings can cater to sellers who prefer privacy and controlled exposure during the sale process. ### Which term refers to a cooperative way brokers share property information? - [x] Multiple Listing Service (MLS) - [ ] Real Estate Market Network (REMN) - [ ] Broker Commission System (BCS) - [ ] Exclusive Listing Database (ELD) > **Explanation:** The Multiple Listing Service (MLS) is a cooperative database where brokers share property information to facilitate market transactions. ### What benefit might a listing broker have in keeping a listing off the MLS initially? - [ ] Higher competition among buyers. - [ ] Enhanced marketing exposure. - [x] An opportunity to earn the full commission. - [ ] Avoiding brokerage fees. > **Explanation:** Keeping a listing off the MLS initially gives the listing broker an opportunity to find a buyer within their network and earn the entire commission rather than sharing it through MLS cooperation.