Starting from 2020, January first to be precise, but with a likely extension to several months out, the NAR (National Association of Realtors) members will be banned from practicing pocket listings.
Also known as “private listings” or “exclusive listings” this practice is seriously hurting the reputation of Realtors by casting doubts on the ethics of such practice.
The fiduciary relationship between Seller and Listing Agent requires the agent to act in the best interest of the Seller and of the Seller only. However, in such scenarios, Sellers could actually lose significantly by seeing their property marketed to a restricted number of bidding Buyers. The risk is fetching a lower selling price.
The agent using this technique increases the chances of getting a full commission. Instead of having to split with a Buyers Agent who wouldn’t know about the availability of the property, the listing agent gets both sides of the commission, usually totaling 6%.
Marketing so the Agent benefits and the Seller misses out, betrays the special fiduciary relationship that characterizes the listing of a property for sale with a real estate agent, especially a Realtor (member of the NAR). Realtors are theoretically obligated to a strict code of ethics or risk disciplinary action, including getting excluded from the organization.
With a limited amount of cases where a Pocket Listing would be justified, the decision to limit this practice will open up many more opportunities to Buyers. In times of low inventory this is good news for the whole industry.
As far as our Buyers are concerned, freeing up the market by banning Pocket Listings isn’t necessarily beneficial because it would be about properties marketed by real estate agents. Notoriously, most real estate agents don’t have the training, experience and inclination to market the properties and set up alternative deals like lease-options.
However, more properties on the market could mean more Sellers and a better chance of homes offered on alternative selling methods like lease-purchase. With an extremely low inventory of homes available for lease-option/lease-purchase, that’s awesome news. Despite Lease-Purchasers and Lease-Option Buyers being very motivated, some homes are just an impossible choice, no matter how hard they try to make them work. So good news!
Concluding we think that ordinary Buyers and our Buyers will benefit from more properties to choose from. If not lowering prices significantly, it should allow less of the “take it or leave it” type of situations. Right now, the unconventional market of lease-options is very heavily a Sellers’ market. Many times the inventory in this niche market is just too thin and qualifying Buyers are just too many.
Hopefully our Buyers will find the opportunities they deserve, but we still have to find out how heavily enforced the ban will be and see the real effects on the market. Its implementation is already delayed in most locations ’til May 2020…
More info available on our main blog: NAR bans Pocket Listings