Ask Kathy: Off Market / Pocket Listings

Q: I keep hearing the term “Pocket Listing” from my colleagues — can you define it for me?

A: Less of a Definition, more like an Interpretation - “Pocket Listings” — are the subject of varied interpretations; here are mine!

1. Most common interpretation:

a. A property that is subject to a Residential Listing Agreement, fully executed by Seller(s) and Broker(s) including price, terms and payment of Broker compensation and a fully executed Disclosure Regarding Real Estate Agency Relationships ;

b. The Seller(s) after carefully considering the consequences instructs Broker(s) to withhold the property from publication in the Multiple Listing Service (MLS);

c. The Seller(s) and their Broker(s) execute a Seller Instruction to Exclude From The MLS (C.A.R. Form SELM);

d. The SELM is provided to the relevant MLS pursuant to and in accordance with the rules and regulations;

e. The property is marketed to a select group of potential Buyers and Brokers;

f. Because the property is not placed in the MLS there is no “presumed understanding” of any Broker to Broker commission sharing agreement.

g. Historical perspective: The phrase “Pocket Listing” was coined because the broker was holding the listing “in their pocket.”

2) Frequent interpretation:

a. The Broker(s) secures the Seller(s) signature on a Single Party Compensation Agreement including price, terms any payment of Broker compensation and possibly the name(s) of prospective Buyers;

b. The property is marketed to a select group of potential Buyers and Brokers;

c. Because the property is not placed in the MLS there is no “presumed understanding” of any Broker to Broker commission sharing agreement;

d. The Single Party Compensation Agreement was revised recently and now includes a admonishment to the Seller that advises on the risks of marketing the property without benefit of the MLS;

e. Disclosure Regarding Real Estate Agency Relationship;

f. A Buyer’s agent who anticipates earning a commission should secure a Cooperating Broker Compensation Agreement (C.A.R. Form CBC) PRIOR to showing the property to a prospective Buyer.

3) Often describes what I refer to as an “Imaginary Listing”

a. No underlying agreement between Seller(s) and Brokers(s) regarding price and terms;

b. No agreement to pay either Listing or Selling Broker(s) compensation;

c. No agreement between Brokers regarding compensation;

d. Can result in serious disappointment for all concerned.