We learned at NAR’s Midyear 2018 that the proliferation of pocket listings is on the radar of the Department of Justice (DOJ) and the Federal Trade Commission (FCC) — this could be music to the ears of multiple listing systems and Realtors concerned with the integrity of the multiple listing service (MLS) model.
Pocket listings, or “off-market listings” as they are now known, will reportedly be on the table at the upcoming joint workshop on real estate competition sponsored by the DOJ and the FTC.
Pocket listings violate the spirit, if not the letter, of the Realtor Code of Ethics.
“As a general practice, actively discouraging the submission of listings to MLSs is inconsistent with the fundamental cooperative nature of the MLS and the obligations of the Code of Ethics,” NAR General Counsel Katie Johnson stated, in a video on the NAR site.
As long as listing brokers get the approval of their customers, the Code is powerless to stop off-market listings.
As recently as March, the Real Estate Board of New York (REBNY) tried unsuccessfully to curb “whisper listings,” a Big Apple version of pocket listings. According to The Real Deal, the proposal “elicited immediate blowback from many of the city’s largest residential firms, prompting the board to scrap its plan.”
A secondary market for luxury properties
Once an anomaly, pocket listings are thriving in the age of online real estate. The open access that is the hallmark of today’s real estate markets motivates celebrities and other luxury owners concerned about their privacy and security to control access to their listings, even if they may sell for less than they would on the MLS.
Pocket listings have become a secondary real estate market for luxury properties. A mini-network of off-market listing sites accessible only to approved agents has blossomed. ThePLS.com (The Pocket Listing Service) was launched to replace today’s scattershot marketing of pocket listings with a central repository accessible to all real estate agents — and no one else. This first national platform for off-market properties launched last summer and claimed $1.4 billion worth of listings by the end of November.
A testing ground for new luxury listings
In spite of the disapproval of Realtor leaders, in Southern California, the Bay Area and other major markets, off-market marketing today is an established and popular practice. Pocket listings may account for as much as 18.9 percent of homes for sale and 61.9 percent of all listings over $4 million in the Los Angeles market.
Beverly Hills-based Douglas Elliman agent Kelsey Kroon believes pocket listings are an effective way to sell luxury properties and help sellers price their homes.
“Most sellers want a little bit of opinion built-in to leave room for negotiation, and some just have an unrealistic number in mind. If a couple of offers are made that are lower, they educate the seller,” said Kroon, who has sold two homes off-market at or over list price.
“There [are] a lot of sales on pockets. It just might take more time and patience,” she added.
Will the Trump-era DOJ take on pocket listings as the George W. Bush DOJ took on opposition to virtual office websites 14 years ago? If so, what, if anything, would it do?
No doubt the upcoming workshop will shed some light on that question.
Steve Cook is a communications consultant and editor of Real Estate Economy Watch.