Off-market listings, also known as “exclusive” or “pocket” listings, happen when the property is withheld from the MLS.
This is a common occurrence and is often requested by sellers who value privacy over complete market saturation. However, occasionally exclusive listings are cited by overly litigious people as evidence of a more corrupt purpose. One such argument is that it can lead to fair housing violations.
Potential Violations with Off-Market Listings
Obviously, if the seller says that he or she does not want to put the property on the MLS because the seller does not want to sell the property to a certain group of people, the licensee can be subjecting herself to a fair housing violation by participating.
However, if the seller does not have the intent to discriminate, but the off-market listing creates a discriminating effect where it results in a disparate impact on a group of people, that could also be a violation. For example, if the location of the pocket listing is in an area that is predominantly made up of a certain racial group, and the seller and licensee show the property exclusively to members of a particular racial group, and advertising is directed to that racial group, then this listing practice could create a discriminatory effect resulting in a segregated housing pattern and in a preference based on race. In this case, the off market nature of the listing, coupled with the advertising, can effectively eliminate buyers from the equation due to their race despite that not necessarily being the seller’s/Listing agent’s intention.
In recent years, off-market listings have become more common as a result of privacy concerns and low inventory in the real estate market. Before an agent recommends an off-market listing opportunity to a client, the agent should make sure that the client is aware of the potential pitfall of such arrangement. According to the NAR, an agent needs to:
- ensure that he/she is doing the off-market listing because of the anticipated benefits for the seller and not because of any benefit to himself/herself or the brokerage.
- thoroughly discuss with the seller the pros and cons of listing a property through the MLS.
- make sure that the seller executes an MLS exclusion agreement after the seller fully understands the benefits being waived by not including the property on the MLS.
- never engage in any practice that has a discriminatory intent or discriminatory effect on a group of people based on race, color, religion, sex, handicap, familial status, or national origin.
For more information on the Fair Housing Act, please visit the NAR website.