In the dynamic world of real estate, the increase of “secret listings” has raised eyebrows recently. Known by various names such as "pocket listings," “SBI” or "internal office listings," these practices have ignited a debate within the real estate industry, prompting questions about ethics, transparency, and fiduciary duty.
Pocket listings, or SBIs refer to properties that are for sale but not publicly advertised on the Multiple Listing Service (MLS) or other widely accessible platforms. Instead, these listings are kept within the real estate brokerage or shared among a select group of agents. Similarly, internal office listings are properties that are exclusively marketed within a particular brokerage, often hidden from the MLS and the general public.
The rationale behind these practices is by limiting exposure to a smaller, more exclusive group of potential buyers, agents and brokerages believe they can secure a faster sale. This may also be appealing to sellers who value privacy.
The National Association of Realtors (NAR) has established a comprehensive code of ethics that governs the conduct of real estate professionals. Article 1 of this code states that realtors should "promote and protect the interests of their clients above all else.” This article serves as the cornerstone of ethical behavior in the industry and raises critical questions about the practice of pocket listings and internal office listings.
The central dilemma surrounding pocket listings and internal office listings lies in the perceived conflict of interest. Proponents argue that these practices can benefit clients by preserving their privacy. By avoiding the MLS, they may eliminate a prolonged public listing or price reductions due to market conditions.
However, many argue that this practice simply benefits the agent or the brokerage and can be detrimental to clients. By not exposing the property to a broader audience through the MLS and other platforms, sellers miss out on competitive offers and potentially higher selling prices. In today’s digital age, exposing a listing to as many technology platforms as possible has become imperative. This leads to concerns about whether brokers are prioritizing their own interests over the best interests of their clients.
In response to the growing concern over pocket listings and internal office listings, the National Association of Realtors implemented the Clear Cooperation Policy in 2020. Within one business day of marketing a property to the public, the listing broker must submit the listing to MLS for cooperation with other MLS participants. The aim is to increase transparency and ensure that all properties have equal access to the market, ultimately protecting the interests of both buyers and sellers.
The debate surrounding pocket listings and internal office listings continues to be a hot topic in the real estate industry. It is crucial for real estate professionals to uphold their fiduciary duty to clients. The Realtor Code of Ethics, particularly Article 1, places the interests of clients at the forefront of any real estate transaction. When an agent recommends a pocket listing to a client, it is crucial that he or she thoroughly discusses with the seller the pros and cons of listing a property publicly through the MLS. The agent should go one step further and be sure the seller understands the benefits being waived by not including the property on the MLS. In general, the MLS offers sellers the greatest exposure of their property, allowing it to be actively marketed to every real estate agent belonging to MLS and the general public through the many online platforms such as Zillow, Realtor.com and Trullia
Striking the right balance between client privacy and market transparency remains a challenge, but adherence to the Clear Cooperation Policy will help maintain integrity in the industry.
Ultimately, the practice of SBIs’ or internal office listings raise important ethical questions; its implications on the broader real estate market and the interests of clients will continue to shape the discussions and regulations within the industry.
