The truth about pocket listings
The topic of pocket listings is a bit of a sleeping bear—I’m not entirely sure I want to wake it, but it needs to be discussed. So here goes.
A pocket listing suggests that something is being kept secret—like a listing hidden in your pocket. There are two types of pocket listings: one that is illegal and one that is legal.
1. The Illegal Kind
This type of pocket listing occurs when an agent thinks they may have a potential listing but does not yet have a signed agreement with the seller.
• The seller may be hesitant or unsure about listing their home.
• The agent, believing they have a strong buyer, attempts to encourage the seller by bringing an offer before a listing agreement is signed.
• The agent may even promote the property as “coming soon” or “potentially available” without a formal agreement.
Why Is This Illegal?
According to Missouri Licensure Law Chapter 339.100 2.(14), a real estate license can be revoked if an agent:
“Places a sign on or advertises any property offering it for sale or rent without the written consent of the owner or his or her duly authorized agent.”
This means that advertising any potential listing without a signed agreement—whether on social media, a Facebook group, or elsewhere—is illegal. It’s simply not worth the risk of losing your real estate license.
2. The Legal Kind
A legal pocket listing occurs when an agent has a signed listing agreement, but the property has not yet been entered into the MLS.
Even though this form of pocket listing is allowed, it still raises ethical concerns. Many agents are tempted to share these listings on private social media groups to sell the property faster.
Why Do Pocket Listings Happen?
One major factor driving pocket listings is low inventory.
We are in a seller’s market, meaning there are more buyers than available homes. For context, as of August 2013, the Springfield MLS had 5.7 months of inventory—meaning if no new listings were added, the market would run out of homes in just over five months.
According to the National Association of REALTORS® (NAR), when inventory falls below six months, it is considered a seller’s market. This trend is nationwide, as NAR reports that inventory levels are at a 13-year low.
The Risk of Pocket Listings
It’s understandable that agents want to sell homes quickly. A fast sale makes them look good to their clients, saves time, and reduces marketing expenses. However, pocket listings contribute to the problem.
According to NAR Chief Economist Lawrence Yun:
“The 13-year low in inventory on the market has been made worse by pocket listings.”
Even if a pocket listing is legal, there are important considerations:
1. Follow MLS Rules and Regulations
Listings must be entered into the MLS within four days of obtaining signatures.
Failure to comply can result in fines from the MLS.
2. Use the Proper Paperwork
If a seller requests not to list their home in the MLS, a “Not to Be Processed by MLS” (Form M130) must be signed and kept on file.
3. Consider the Impact on the Market
Keeping listings off the MLS contributes to an unbalanced market and limits competition, which can negatively affect both buyers and sellers.
Do Pocket Listings Benefit Sellers?
As a REALTOR®, your job is to secure the best possible price for your seller. But limiting exposure by only advertising in select Facebook groups or private networks may not serve their best interests.
At a recent NAR conference, Laurie Janik, NAR’s Legal Counsel, made a strong statement:
“The seller rarely benefits from keeping their property out of the MLS and will likely not receive the highest price and best terms by restricting the marketing of the property.”
Final Thoughts
Pocket listings—whether legal or illegal—raise concerns for the real estate market. While private Facebook groups have their place, agents must use them ethically and in compliance with the law.
This was originally published on 9/4/13 23:15 on springfieldaereport.com
