Pocket listings remain as strong as ever despite NAR’s “Clear Cooperation Policy” approved two years ago.
Pocket Listings Remain Alive and Well
Pocket listings, listings that are exclusive to a limited number of well-connected agents, were essentially “outlawed” two years ago when the board of directors of the National Association of REALTORS® (NAR) adopted its Clear Cooperation Policy. This policy was intended to ban pocket listings that are marked private and often never make it to an equally accessed multiple listing service (MLS).
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Why did NAR adopt this Clear Cooperation Policy? Pocket listings, also known as “private”listings, do not offer equal access to all agents and consumers concerning for-sale properties.
That said, pocket listings remain alive and well, and in some parts of the country, pocket listings are thriving.
Current Happenings with Pocket Listings
According to Jonathan Miller, president and CEO of Miller Samuel Inc., a real estate appraisal and consulting company, pocket listings represented 25.3% of all home sales in more expensive parts of Los Angeles (the West Side and Downtown) during Q2 2019. One year later, when the Clear Cooperation Policy went into effect, pocket listings in this same area represented 27.5% of all home sales.
In Q1 2021, the share of pocket listings in this pricier section of Los Angeles fell to 21.4% of all sales.
Why this fall in 2021? Miller doesn’t know for sure but does note that “the more expensive the location (Bel Air, Brentwood, Beverly Hills, Malibu and other enclaves of the rich and famous), the higher probability of pocket listings.”
Miller said, “This isn’t (just) an LA thing, this is just everywhere. We definitely see it in New York and other markets we cover.”
Other data, though spotty, substantiates Miller’s findings. Redfin indicated in November 2019 that pocket listings” appeared” to account for 2.4% of the total sales market. In May 2021, Redfin indicated that the share of pocket listings in the total market increased to 4%, an increase of +67%.
Additional data points, such as “days on the market”, indicate the prevalence of pocket listings. Why? Hot sellers’ markets with low inventory supply such as the one the industry has been experiencing make it easier for agents/brokers to find prospective buyers without the exposure of an MLS.
Tighter Supply, More Pocket Listings
Miller said, “I suspect the probability of pocket listings proliferating will remain elevated as inventory continues to be in short supply. That keeps the market moving quickly. It also pulls in sellers who are not necessarily willing to go all in but who are testing the waters.”
Pros & Cons of Pocket Listings
Pro Side of the Argument – Some sellers want the privacy pocket listings provide. “Why,” asked Russ Cofano, CEO of Collabra Technology and industry veteran, “should the seller be forced into doing something they don’t want to do (like listing their property on a public MLS site)?”
Con Side of the Argument – Some industry experts say pocket listings exacerbate discrimination and segregation. Redfin’s Glen Kelman said that pocket listings exclude “disproportionately people of color.” Elizabeth Korver-Glenn, an assistant professor of sociology at the University of new Mexico, said, “Black and Latino potential home buyers and sellers receive lower levels of competition/service and have limited access to white-controlled homes through practices like pocket listings.”
Bright MLS wrote that pocket listings can result in “inaccurate and delayed statistical information” that impacts valuations.
Evolution of Pocket Listings
New entities, such as Aalto and DropOffer, are approaching pocket listings from both the buyer’s and seller’s vantage points.
DropOffer allows agents and homebuyers to make offers on homes that aren’t listed. Aalto enables sellers to list their properties on its “homeowner marketplace.”
Obviously, the appetite for off-market listings remains intact.
Thanks to Inman.
