Are office exclusives the new pocket listings? Yes, some real estate professionals say.
These pros complain that some agents are skirting the National Association of Realtors’ edict on pocket listings by instead emphasizing office exclusives. And some industry executives believe NAR should ban office exclusives, just as it did pocket listings.
What is clear cooperation?
NAR adopted its Clear Cooperation Policy in November 2019. The policy requires a listing broker who participates in an MLS to submit a listing to the MLS within one business day of marketing the property to the public. Any MLS affiliated with NAR was supposed to carry out the policy by May 2, 2020.
In enacting the policy, NAR aimed to crack down on the growth of off-MLS listings known as pocket listings or whisper listings. The policy did not prohibit office exclusives, though. Through an office exclusive, a seller dictates that a listing be marketed only within a brokerage. As such, the listing doesn’t appear in MLS and isn’t marketed publicly.
Despite the Clear Cooperation Policy, today’s iteration of the pocket listing continues to proliferate.
A Redfin analysis of MLS data shows the share of listings that likely were pocketed rose from 2.4% in November 2019 to 4% in March 2021. According to Redfin, off-MLS listings are relatively common in several markets. This March, 14.6% of listings in Anchorage, Alaska, appear to have been pocketed, with Oklahoma at 12.3%, Tampa, Florida, at 10.7% and Spokane, Washington, at 10.2%.
Against off-market listings
In a recent blog post, Glenn Kelman, CEO of real estate brokerage Redfin, railed against these off-market listings. Another industry giant, real estate marketplace Zillow, also opposes office exclusives.
“The increase in pocket listings isn’t because brokerages are opposed to people of color buying homes. After a year of protests, many made public commitments to racial justice,” Kelman wrote. “But with the number of homes for sale down 47% from last year, it’s just too lucrative to pocket a listing. When an agent sells a home without marketing it to the public, it helps the brokerage recruit new customers with the promise of exclusive access to listings. And on that specific listing, the brokerage also gets a shot at two fees instead of one, by representing both the buyer and the seller in the same sale.”
Kelman went on to say that at its November board meeting, NAR should close the office-exclusive loophole. In the meantime, he added, brokerages should halt what he dubbed “a monopoly on a monopolistic practice” that NAR unintentionally created with the Clear Cooperation Policy. For more than a year, NAR and several MLS organizations have been fighting off legal challenges to the policy from Top Agent Network and PLS.com, which embrace pocket listings.
The flip side
Although Kelman views office exclusives as a monopolistic practice, this strategy does have its defenders. Among them is Ryan Schneider, CEO of real estate brokerage Realogy Holdings.
“A property listing is as unique as the home seller, who should have choice in how they position, price and market their home,” Schneider told The Wall Street Journal.
Mantill Williams, NAR’s vice president of public relations and communication strategy, said the association regularly reviews rules and policies to protect consumers and provide transparency.
Asked whether NAR is doing anything to discourage or outright prohibit office exclusives, Williams provided this response:
“Office-exclusive listings have long been an option for sellers concerned about public marketing of their property being for sale. Examples include divorce situations and celebrity clients. The seller instructs the listing broker to market a property among the brokers and licensees affiliated with the listing brokerage. If that listing is displayed or advertised outside of the office, however, it must be submitted to the MLS for cooperation.”
Along with Redfin’s Kelman, Ryan Carter thinks NAR should ban office exclusives, which he and others criticize as thinning out an already shallow inventory of homes. Carter is president and managing broker of 8z, a residential real estate firm in the Denver area.
Carter believes the Clear Cooperation Policy actually “institutionalized” the practice of pocket listings.
“The intent of the Clear Cooperation Policy to get rid of pocket listings, in my opinion, actually cemented them and had the opposite outcome with office exclusives,” Carter said. In 99% of cases, office exclusives do a disservice to homebuyers, constituting a former of professional malpractice, he asserted.
“We, as a brokerage, don’t believe in office exclusives,” Carter said. “We don’t believe they put the sellers’ interests first.”
Do they hurt buyers?
Like Carter, Kristina Morales, a real estate professional with Berkshire Hathaway HomeServices Professional Realty in Cleveland, is no fan of office exclusives. These off-market listings deprive sellers of the chance for their property to be widely marketed, she said. As such, the property might not fetch the “best and highest price,” Morales said.
Exclusive listings “hurt buyers that are not part of the listing agent’s brokerage or circle. Buyers in the market never know that this home is an option available to them,” she said.
Furthermore, an office exclusive might be perceived as discriminatory, since a brokerage essentially can handpick the buyer, she said. A 2019 report from the Consumer Federation of America noted that pocket listings permitted biased agents to “discriminate more easily against certain classes of consumers including minorities.”
Morales acknowledges, though, that office exclusives do enable a seller to keep a home sale private. She also points out that office exclusives allow agents to test the pricing of a property. “Another pro is that many sellers are open to selling but do not need to sell. If the right deal came along, they would be happy to sell but are not under any pressure to do so,” Morales said.
By contrast, the seller may feel the burden of the ticking MLS clock, adding time to how many days a property spends on the market and perhaps devaluing the property in the eyes of prospective buyers, according to Morales.
The impact of office exclusives
As for the effects of office exclusives on agents and brokers, Scott Grigg, a Realtor at Realty Executives in Paradise Valley, Arizona, said these deals can hurt real estate professionals who aren’t well-established in their market. But they give a leg up to pros with big Rolodexes, so to speak, and a strong presence in their market.
Grigg and others said they’ve noticed an uptick in off-MLS deals, even though NRA clamped down on pocket listings in 2019.
One brokerage that’s seizing on office exclusives is real estate brokerage Compass, which promotes these listings as “private exclusives.” Compass exclusives are shared within the company and among potential buyers but aren’t publicly advertised. On its website, Compass notes that private exclusives aren’t available in all of its markets, and local policies may restrict sharing of these listings among agents. Compass representatives couldn’t be reached for comment.
Grigg explained the allure of office exclusives to sellers and their agents.
“Sellers [want] to explore the idea of selling at an inflated number without fully committing through the MLS. This allows them to see if someone is willing to pay their ask price and also creates some demand, since it’s not available to everyone,” Grigg said. “This also allows the agent to reach out to their preferred contacts with an exclusive opportunity, which minimizes the traffic flow through the home and usually generates more qualified buyers.”
Morales said that in the Cleveland market, agents and brokers are steering clear of pocket listings and office exclusives through “coming soon” offerings. In a “coming soon” scenario, a real estate professional in the Cleveland area makes the market aware of a listing up to 14 days before it hits the market. However, the professional can’t show the listing to a potential buyer until it’s active on MLS.
Coming-soon opportunities “have proven to level the playing field in low-inventory markets like the ones we are currently experiencing. This allows all buyers to have the opportunity to view all inventory in the market,” Morales said.