11/5/2016 Pocket Listings Home > Legal > MLS Folder > Pocket Listings Pocket Listings find the article at: "http://www.car.org/legal/mls­folder/PocketListings/" Member Legal Department Tel (213) 739­8282 Fax (213) 480­7724 October 21, 2016 (revised) I. Introduction II. General Overview III. Pocket Listings and California Real Estate Law Pocket Listings and the NAR Code of Ethics and Standards IV. of Practice V. Pocket Listings and Fair Housing VI. Pocket Listings and Antitrust I. Introduction REALTORS® marketing a property for which they have obtained a listing will generally place that listing on the Multiple Listing Service (MLS). At times, however, listings are not placed into the MLS. Listings not placed on the MLS are commonly referred to as “pocket listings”. This article will discuss the various legal issues and risks of pocket listings. Unless otherwise stated, this article references the California Model Multiple Listing Services Rules. REALTORS®, however, must comply with their own local MLS rules. Many local MLSs adopt the Model MLS Rules in its entirety, whereas other MLSs may have slight variations and may have different numbering systems. II. General Overview Q 1. What is a pocket listing? A A pocket or off­MLS listing generally refers to a listing agreement that an agent has obtained but does not place on the MLS. A “pocket listing” is not a legally­defined term, and can have other meanings as discussed below. Q 2. Is a pocket listing legal? A Yes, a pocket listing can be legal. However, a pocket listing raises a number of legal and practical issues that agents should consider and address as discussed below. http://www.car.org/legal/mls­folder/PocketListings/?view=Print&url=http://www.car.org/legal/mls­folder/PocketListings/ 1/7 11/5/2016 Pocket Listings Q 3. Doesn’t a listing broker who is a broker participant of an MLS have to submit all listings to the MLS upon obtaining a signed listing agreement from a seller? A Generally, yes. A broker participant of an MLS must generally submit new listings for one­to­four residential units and vacant lots located within the MLS service area to the MLS within 2 days after all necessary signatures of the seller(s) have been obtained or at the beginning date of the listing, whichever is later (Model MLS Rule 7.5). Some local MLSs may have different time frames. However, the Model MLS Rules provide an exception to the mandatory submission requirement if the seller refuses to permit the listing to be disseminated by the MLS. In that instance, the listing broker must submit to the MLS a certification signed by the seller stating that the seller does not authorize the listing to be disseminated by the MLS (Model MLS Rule 7.6). C.A.R. standard form Seller Instruction to Exclude Listing from the Multiple Listing Service (Form SELM) serves this purpose. Generally this form should be submitted to the MLS within the time period required for submission of the listing. Q 4. Some agents obtain listings which they do not place in the MLS, but share the listing information with other agents through informal or formal groups of agents. Is this legal and is it still considered a pocket listing? A Yes, such groups may be legal assuming they do not violate, for example, anti­discrimination and antitrust laws as discussed below. A listing shared by a broker with only non­MLS groups would still generally be considered a pocket listing as it is not submitted to the MLS. Q 5. If I have a pocket listing, am I required to present to the seller any offers received from agents who are not in my brokerage or group? A Yes. A listing agent is generally required to present all offers to the seller under the listing agent’s fiduciary obligation to the seller. A listing agent who is a REALTOR® also has an ethical duty to present “offers and counter­offers objectively and as quickly as possible” under Standard of Practice 1­ 6 of the NAR Code of Ethics. So if a buyer’s agent who was not a part of the listing agent’s brokerage or non­MLS group became aware of the listing and presented an offer to the agent with the pocket listing, the listing agent would generally be obligated to present the offer to the seller. However, as it is not on the MLS, the listing agent may have no obligation to offer compensation to the buyer’s agent, unless otherwise agreed. Q 6. I am a buyer’s agent. My client wants to write an offer for a pocket listing. The property is listed for sale as indicated by the listing broker’s “For Sale” sign in the front yard, but the property is not in the MLS, even though the listing broker is a broker participant of our local MLS. What should I do? A You can check with your local MLS to determine whether the listing broker has submitted a signed seller’s certification not to disseminate the listing in the MLS. If not, you can file a complaint with the MLS for a violation of Model MLS Rule 7.5. You can also submit your buyer’s offer to the listing agent for the seller’s consideration. Because the property is not in the MLS, you are not entitled to compensation from the listing broker. You should consider entering into a Buyer Representation Agreement – Exclusive (C.A.R. Form BRE) with the buyer to secure your entitlement to compensation. You and the listing broker may also enter into a http://www.car.org/legal/mls­folder/PocketListings/?view=Print&url=http://www.car.org/legal/mls­folder/PocketListings/ 2/7 11/5/2016 Pocket Listings Cooperating Broker Compensation Agreement (C.A.R. Form CBC) to secure your entitlement to compensation. III. Pocket Listings and California Real Estate Law Q 7. Could a pocket listing violate the California real estate law? A Yes. A pocket listing could be deemed as a breach of a listing agent’s fiduciary duty to the seller if the arrangement is not in the seller’s best interest. To avoid violating the law, a listing agent should make sure that a seller understands the pros and cons of doing a pocket listing, and voluntarily agrees to the pocket listing before withholding the property from the MLS. Since seller will be giving up the benefit of wide­scale exposure of his or her property and the potential upward impact on price that a full vetting to the market may bring, a seller should carefully and knowingly make this decision. C.A.R.'s standard form listing agreement (RLA) and seller exclusion from MLS (SELM) outline the many advantages of submitting a listing to the MLS so that seller is made aware of them and what would be waived by agreeing to a pocket listing Q 8. Why does a pocket listing potentially violate the real estate law? A Real estate licensees have a fiduciary duty to their clients. California law imposes an “obligation of undivided service and loyalty” of an agent to his or her client (Rattray v. Scudder (1946) 28 Cal.2d. 214). An agent owes a complete duty of the highest good faith in his or her dealing with the client and cannot use the position to his or her own advantage (Thomas v. Snyder (1930) 114 Cal. App. 397, Ward v. Taggart (1959) 51 Cal.2d 736). Furthermore by statute, a listing agent has a “duty of utmost care, integrity, honesty and loyalty” when dealing with the seller and a duty of “honest and fair dealing and good faith with the seller” (Cal. Civ. Code § 2079.16). Generally, placing a listing in an MLS advertises the property for sale to a wide range of people to help sellers obtain the highest possible price for their home as they desire. The MLS gives a property very wide exposure and provides an economic incentive, through the offer of compensation to cooperating brokers, for buyer representatives to show their clients the property. It is possible that a seller may not wish to place his or her property on the MLS after a full discussion of how the MLS works and the particular interests of a seller. Typically, such reasons can include a desire for privacy and to avoid showing the seller’s home to many prospective buyers and their agents, a desire to keep the sale confidential, such as in the case of, for example, wealthy or celebrity clients, a desire to safeguard the property against vandalism or theft, or the need for a quick sale in order to realize cash quickly for personal or business reasons. However, an agent should still make sure that he or she has discussed with the clients the benefits of placing a property on the MLS and the downsides of not doing so. While there may be some sellers who opt for limiting the marketing of their property by not placing it in the MLS, the reasons for MLS exclusion are usually not readily apparent and yet, the upside of a pocket listing for the broker is clear. If the listing broker procures a buyer, the brokerage will receive a full commission with no monies having to be paid to a cooperating broker outside the listing brokerage. If the listing broker is sharing the pocket listing with a small group of brokers, there is likely to be a benefit to the broker for being a member of this small club, such as access to certain properties which may benefit the broker’s other clients or the broker’s ability to earn commissions but which do not provide much of a benefit to a particular seller.