An ombudsman, a legal hotline and a distressed property helpline are just a few of the innovations that the California Association of Realtors (CAR) has put into place to serve its members and the state’s buyers and sellers, while pocket listings are proving to be a major challenge, not only at the state level, but also at the brokerage and individual agent level.

The CAR finance hotline

At the recent Awesome Females in Real Estate (AFIRE) conference for executive women in real estate leadership, Sara Sutachan, manager of broker and real estate finance outreach for CAR, shared a powerful idea that has proven extremely popular among both agents and consumers. Sutachan drew her idea from CAR’s ombudsman and legal hotline services combined with concerns voiced during “fireside chats” with broker-owners.

Obtaining timely responses from lenders in short-sale or foreclosure situations has always been a challenge. Sutachan’s idea was to create a distressed property hotline. This program allows agents who are having difficulty obtaining short sale- or foreclosure-related information to have a direct point of contact with the lender. This contact works directly with the lender and expedites the process. Although still in its infancy, the finance hotline has been a huge success with both agents and consumers. As one agent put it, “This one service alone is worth the 10 years I have paid in dues.”

A mushrooming, dangerous practice

Ever since the advent of the multiple listing service, there have always been pocket listings. What is a pocket listing? Here’s how real estate columnist Ken Harney defines it:

“Essentially it’s a private, off-market listing, often of short duration. Instead of putting the house on the local multiple listing service, which exposes it to a vast number of shoppers and agents via real estate websites, agents restrict access to information about the house to their own buyer clients or colleagues in the same brokerage, hoping for a quick, full-price sale.”

Pocket listings sometimes result when a seller would consider a move but wasn’t motivated enough to go through and formally list his property.

The most common place to find pocket listings occurs in the ultra high end of the market. These listings are sometimes known as “discreetly marketed properties.” In this case, the sellers opt to not place their properties on the MLS.

For example, it’s highly unlikely that Microsoft co-founder Bill Gates would allow an agent to put his property on the MLS. Since high-wealth individuals are often targets of kidnapping and other types of criminal activities, any benefits would be far outweighed by the risk involved.

‘Coming Soon’

Several months ago I noticed “Coming Soon” signs popping up all over Austin, Texas. Technically, these really aren’t pocket listings. Instead, the owners have decided to list with an agent; however, they may be doing work to get the house ready for market. Usually, the listing agent does not conduct showings during this period. The sign becomes a powerful way to generate interest prior to the time that the home is ready for showing.

Pocket listings: the litigation risk

According to CAR’s chief economist, Leslie Appleton-Young, as much as 30 percent of the inventory in all price ranges may be held off the market as pocket listings in parts of California. Statewide, 8.6 percent of all transactions are double-ended (i.e., the listing agent represents both buyer and seller), and 15 percent are held off the market as pocket listings.

In the past, sellers often had no idea how much their decision to allow their agent to market their listing as a pocket listing might be costing them. The market is so heated now that this is no longer the case.

Appleton-Young reported that there had already been two lawsuits filed in California over pocket listings, although these two suits were settled out of court.

How did the lawsuits come about? Buyers who are desperate to find properties are actually going to the doors of sellers or contacting them via snail mail or email and explaining, “I would have paid $100,000 or more for your property.” Others are going directly to the sellers and asking, “Why didn’t your listing agent present my offer?”

While it may be in the agent’s best interest to take a pocket listing, in most cases it limits the seller’s exposure to the marketplace. The old adage about marketing is still true: Maximum exposure to the marketplace results in maximum price. When an agent opts to limit the property’s exposure by not placing it on the MLS, the agent is not fulfilling her fiduciary duty to help the seller obtain the highest possible price for the property.

CAR is taking active steps to correct this situation through a series of consumer marketing campaigns that outline the downside of not have adequate exposure to the marketplace. It is also proactively reaching out to Realtors to let them know that taking pocket listings could not only damage their reputation but land them in court as well.

Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author of the National Association of Realtors’ No. 1 best-seller, “Real Estate Dough: Your Recipe for Real Estate Success.” Hear Bernice’s five-minute daily real estate show, just named “new and notable” by iTunes, at www.RealEstateCoachRadio.com.

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