It sounds like something you might learn about on Sesame Street, but it's actually a policy enacted by the National Association of REALTORS® (NAR) in 2020. In keeping with its Code of Ethics, this rule was enacted by NAR to protect the consumer and advance the interests of home buyers and sellers.
You may be familiar with the real estate industry term "pocket listings," or perhaps you've driven past a home with a "Coming Soon" sign in the front yard. These are both ways that a real estate agent can begin to market a client's home and search for buyers. The debate has always been whether these practices are in the best interests of the seller and the public.
A pocket listing is a property that an owner has expressed interest in selling and has given their agent permission to begin talking about but not list on the Multiple Listing Service (MLS). Sometimes there are good reasons for a client to want to do this. Perhaps they do not have a replacement home yet and are looking for a buyer who allow them to remain in the home until they have somewhere to go. Until an ideal situation presents itself, the owner is not quite ready to sell and move. Or maybe there is an occupant in the home who cannot accommodate showings and open houses and would rather quietly and quickly sell the home off-market.
Coming Soon listings are often used to generate anticipation and excitement about a new property for sale, so when the showing schedule opens up it fills up just as quickly. However, this approach can be abused when it's used specifically for the listing agent to find unrepresented buyers before the property is available to other agents, thus avoiding the obligation to share the commission with a buyer's agent.
There is an argument that these private sales hurt consumers in general, by depriving buyers of purchase opportunities before the sale, skewing data after, and not providing sellers with adequate market exposure which could result in a higher price than originally sought. Without a central database of properties for sale like the MLS, information can be fragmented and hard for the consumer to find and understand.
The MLS is an extremely important and useful industry tool. Agents who participate in the MLS already agree to cooperate with other members to find buyers and get their listings sold. NAR has attempted to level the playing field by requiring members to list their properties in the MLS once they are marketed to the general public. This ensures that the listing will be available to the largest group of agents and potential buyers, and minimizes business practices that are in the best interest of the agent or brokerage firm rather than the client.
Pocket listings may be used when the marketing of them is kept within a brokerage firm, as there are still situations when this may be in the client's best interests and at their direction. A Coming Soon listing must be put into the MLS within one business day of being marketed to the general public.
NAR has been accused by some private listing services of anti-trust law violation by discouraging listing on their systems. In February, a federal judge ruled for NAR in the case of The PLS.com, LLC v. The National Association of Realtors et al, noting that anti-trust laws were enacted to protect competition, not competitors. The court said that the Clear Cooperation Policy has "some plainly pro-competitive aspects," and does not have a restrictive effect on brokerage services to consumers. Other lawsuits are ongoing.
It makes sense to me that both sellers and buyers would benefit from the most eyeballs looking at the largest MLS repositories in each sales area. I've run across many properties in my research that were sold off-market, and sometimes it looked to me like the seller left money on the table. Was selling price always their biggest priority? Perhaps not, and I'll give the benefit of the doubt to those handling the transaction that the client's best interests were served. If you're a REALTOR® like me and not just a real estate agent, you've taken an oath to uphold the Code of Ethics. I believe that the Clear Cooperation Policy clarifies the duties of the REALTOR® and is a beneficial change for the consumer.
I would love to help you with your real estate journey.
