An article in the June issue of the “Real Deal” claims an increasing trend towards “pocket listings” as a way of selling real estate across the country in a hot market. The Hamptons, it could be argued, is a very hot market especially in the summer season.
I would welcome comments from realtors as to how they view the practice, but first I will try to define a “pocket listing,” under what circumstances might it be permissible, and which not.
Historically, “pocket listings” do not enjoy a good reputation. It was common for real estate agents to limit exposure to these listings to a select number of agents, sometimes just themselves, rather than a large array of agents and buyers. The advent of multiple listing, where all members of the multiple listing service have an equal opportunity to sell the listing, has dramatically limited, if not entirely eliminated this practice. These listings have also been called “quiet listings” and “whisper listings.”
Neither the License Law of the State of New York nor the New York Department of State, the licensing agency of the State of New York, has taken a position specifically on these types of listings. What the courts and the DOS have taken positions on is conduct by a licensed real estate agent that may be a violation of their fiduciary responsibilities or the obligation of fair and honest dealing.
In a market of luxury homes such as we have on the East End of Long Island, particularly the Hamptons, sellers may not want their listing available to the mass market. It may also be true that real estate agents with whom they list would have a contact base of ready willing, and able buyers. Also, the seller may wish to retain some privacy. All of these are legitimate reasons for the so-called “pocket listing.”
The situation that may violate the agent’s responsibilities under the law is when it acts out of self-interest rather than the client’s and compromises the seller’s opportunities for a better price in a shorter period of time to assure itself a greater commission than might be earned through cooperation with other brokers. In an area of moderately priced homes, such as the East End’s North Fork, there would be less benefit to the seller with a “pocket listing.”
I posed the question to Anthony Gatto, Esq., Director of Legal Services for the New York State Association of Realtors. His view depends upon whether the seller requests that type of listing as opposed to the real estate agent recommending it.
Many members of the public confuse an “exclusive listing” with a “pocket listing.” Exclusives are defined in the License Law, “pocket listings” are not. In an “exclusive,” the listing broker shares the opportunity to sell the listing with other brokers. This type of listing is characteristic of “multiple listings” and the common “co-brokerage” arrangement practiced in the Hamptons.