What’s permissible and what’s not, from marketing to inputting sales for comps
Canopy MLS requires Subscribers to input all “for sale” listings subject to an Exclusive Right to Sell listing agreement into the MLS system, and all MLS listings must authorize the listing brokerage to offer cooperation and compensation to the other Member Participants of the MLS acting as subagents or buyer agents.
However, if the seller does not want the listing to be input into the MLS system, the listing brokerage may then make the listing “office exclusive” (aka a “pocket listing”). The listing agreement must indicate that the seller does not want the listing to be input into the MLS system. Additionally, a certification signed by the seller (such as the “Firm Exclusive Agreement” form) that he/she does not want the listing to be disseminated by the Service must be filed with the Service within two business days from the Effective Date (or, if applicable, the Marketing Date if a specific Marketing Date is provided in the listing agreement) as each term is defined in the listing agreement or the beginning date of the term of the listing. [NOTE: SCAR Form 220 authorizes the listing brokerage to market the listing during the term of the listing, and NCAR Standard Form 101 specifies that none of the following marketing activities are permitted prior to the Marketing Date: the placement of signs, open houses, submitting the listing to the MLS, advertising other than on the Internet, and Internet advertising.]
While not expressly prohibited by the “Canopy MLS Rules and Regulations,” the “Pocket Listing” approach to the sale of real estate undermines the purpose of the MLS and the spirit of cooperation and compensation that is encouraged by the Charlotte Regional Realtor® Association and facilitated by Canopy MLS. There are also additional legal and ethical risks to consider. In a recent YouTube video, National Association of Realtors® General Counsel Katie Johnson discusses the questions arising from pocket listings and coming soon marketing and explains why the NAR Code of Ethics makes this issue important to all REALTORS® and consumers.
“Withheld Listings” (i.e. pocket listings) cannot be input once under contract: With the advent of “unlisted buyer agent sales” data entry (described below), listings that are withheld from the MLS system by the listing brokerage (i.e. pocket listings) are prohibited from being input after the listing is under contract. Closings of withheld listings can be input by the buyer agent as described above.
Inputting listings for “comparable purposes:” Buyer agents can report a closed sale for property not listed in Matrix (i.e., for sale by owner listings and closings of withheld listings) if the buyer was subject to an Exclusive Buyer Agency Agreement. The new “Unlisted Buyer Agent Sale” option is available in Add/Edit for single family, condo/townhouse, lots/acres/farms, multifamily and commercial.
“Unlisted Buyer Agent Sales” must follow the same rules that apply for data entry:
Unlisted Buyer Agent Sales must be input within five business days after closing.
New Construction, Withdrawn and Expired listings: Listing agents should continue to report new construction as a pending sale (Under Contract-Show or Under Contract-No Show status), and a valid street address must be reported to the MLS as soon as possible and no later than the close of the sale. Listing agents can also report “Withdrawn” or “Expired” listings as “Under Contract” if the sale occurs as a result of the property having been listed in the MLS, and the listing brokerage represents the seller in the transaction. When pending sales are reported the data must be input within 48 hours (excluding holidays and weekends) after the “Effective Date” as defined in the purchase agreement, or as otherwise determined under applicable state law.
Legal, Ethical Risks of Pocket Listings: Think about all ramifications prior to keeping a listing out of the MLS. In addition to complying with the Canopy MLS Rules and Regulations and NCREC policies, there are additional legal and ethical risks to consider.
A webinar by the California Association (CAR) of Realtors® titled, “The Pressing Issue of Pocket Listings,” prompted our association to identify potential legal and Code of Ethics risks of pocket listings, including breach of fiduciary duties and ethics, anti-discrimination, and antitrust. Here are our findings:
Code of Ethics issues: Article 1 requires Realtors® to promote and protect the interests of the client. Has the decision to keep the listing out of the MLS been made by the seller, voluntarily, after full disclosure that keeping the listing out of the MLS may potentially reduce your client’s chances of getting the highest and best price for their home by reducing the number of cooperating brokers viewing the property?
Standard of Practice 1-12 specifically requires a Realtor® to discuss with the seller “company policies regarding cooperation and the amount(s) of any compensation that will be offered.” Has it been explained to your seller that your company is not sharing compensation with outside agents?
Article 3 requires Realtors® to cooperate with other Realtors®. SOP 3-10 relates the obligation to share information on listed property, and to make the property available to other brokers for showing to prospective purchasers/tenants when it is in the best interests of sellers/landlords. Is it in your client’s best interest to reduce the availability of information and showings to other brokerages that may have a buyer?
Legal issues — fiduciary duty: The North Carolina Real Estate Commission (NCREC) states that listing firms and agents have a duty to: promote their client’s best interests; be loyal; and use reasonable skill, care and diligence. Fiduciary duty is defined as a legal duty to act solely in another party’s interests. Can a pocket listing result in a breach of fiduciary duty? It can if the arrangement was made for the benefit of the listing firm/agent only and is not in the seller’s best interests. Has it been explained what it means to keep the listing out of the MLS?
Keeping the listing out of the MLS:
It is important to explain to your seller the pros and cons of keeping the listing out of the MLS. Furthermore, ensure that after full disclosure the decision to keep the listing out is made voluntarily by the seller and the seller alone.
Legal issues — fair housing and antitrust: If agents limit listing exposure to only certain market sectors, it may have a discriminatory effect even if there was no intent to discriminate. Additionally, beware of informal “pocket listing clubs” that set the minimum commission to participate; this is known as price fixing and it violates federal antitrust regulations.
Canopy MLS complies with state and national regulations and policies set by the National Association of Realtors®.
The CAR webinar ended with this advice: “regulate yourself before the regulators/trial attorneys/legislators regulate you.”