ADRE Does Not Prohibit Serving Alcohol At A Marketing Event

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Beware of Pocket Listings

A pocket listing is when a property is not advertised on the multiple listing service (MLS).  This can occur in a couple of different ways.  One way is when the seller signs a listing agreement and either (a) opts out of MLS advertising – this is also commonly referred to as an office exclusive listing or (b) a property is advertised as “coming soon” and the property sells before the property is marketed on the MLS.  Another way is when the seller and agent do not have a listing agreement.  Instead, the seller and agent have an understanding that the seller will sell the property if the right offer is presented.

Due to the inherent dangers with pocket listings, real estate agents should understand the legal, ethical and industry issues related to pocket listings.

Office exclusive listings are prohibited by MLS unless the seller opts out

MLS rules usually require agents to file listings on the MLS within two days of receiving a signed agreement.  And, in the event the seller opts out of marketing their property on the MLS, the seller is then typically required to provide written authorization confirming the seller’s decision to opt out.  Significantly, if the seller does not opt out and the listing is not filed on the MLS, the agent is probably in violation of MLS rules and could be subjected to significant penalties and fines.

Is a pocket listing ethical?

Article 1 of the Code of Ethics requires that REALTORS® “protect and promote the interests of their client.”  Accordingly, it can be argued that the agent is violating Article 1 if a property is not marketed to a larger audience via the MLS so that the seller can receive more competitive offers.  Additionally, the valuation of a property may not be as accurate because the seller does not have the benefit of the use of MLS comparables.

Moreover, Article 3 of the Code of Ethics places a duty to cooperate on REALTORS®.  Arguably, if an agent has a pocket listing and does not file the listing on the MLS for broader exposure and allow for cooperative marketing, the agent is not cooperating with other REALTORS®.

Is a pocket listing legal?

Arizona allows pocket listings.  However, agents should proceed with caution and consider the related risk management concerns pocket listings pose.

Arizona law provides that “[a] licensee owes a fiduciary duty to the client and shall protect and promote the client’s interests.”  A.A.C. R4-28-1101(A).  Similar to the argument for Article 1, less exposure could limit competitive offers thereby appearing as though the agent did not “protect and promote the client’s interests.”  With regard to fiduciary duty, the agent must place their client’s interests above their own.  Because a pocket listing could be perceived to benefit the agent (dual agency) over the seller, it could be determined that the agent breached their fiduciary duty.

Furthermore, if an agent limits listing exposure to only certain markets, it may have a discriminatory effect even if there was no intent to discriminate.  And, if the agent belongs to a “pocket listing club” that sets the minimum commission to participate, it amounts to a price-fixing arrangement and violates federal antitrust regulations.

Other issues

Keeping properties from the MLS may skew market value.  In other words, because pocket listings are never entered into the MLS database once they are sold, it limits the available information about the market and makes it difficult for other agents, buyers and sellers to determine values of nearby properties.  Likewise, an appraiser’s appraisal may be compromised with limited information.

If the agent markets a property as “coming soon” via a sign with a “coming soon” rider, the agent must first obtain the seller’s written authority.  Typically, written authority is issued with an employment agreement which, in turn, may trigger the requirement for the property to be listed in the MLS.

A changing market could cause the seller to not receive the highest and best offer if the property is not marketed on the MLS.

Benefits of MLS

Generally, it is in the seller’s best interest to market the property to as large of a forum as possible.  MLS provides that kind of exposure. Additionally, marketing via the MLS is not only open to all REALTORS® that participate with that MLS but MLS feeds are usually provided to a larger pool of consumers by way of the internet.

Brokers should educate their agents

Although they are not the same, the terminology for pocket listings and coming soon listings are sometimes used interchangeably.  Because using the wrong terminology could convey the wrong information, brokers should educate their agents regarding the differences between the listings.

Additionally, brokers should educate their agents regarding the pros and cons of a pocket listing.  An educated agent will be able to provide their seller with the necessary information to make an informed decision.

Finally, brokers may want to consider updating their policies and procedures to address pocket listings.

For more information on pocket listings, go to http://www.realtor.org/topics/mls.

Prospecting? Avoid These Danger Zones

Editor’s Note: The Code of Ethics turns 100 in 2013. AAR will be celebrating the code with monthly articles published under the caption, Code Talk, in the Arizona REALTOR® Magazine, discussing the various ways the code governs professional conduct and interaction with the consumer in every day transactions.

When it comes to obtaining new clients, real estate agents are at the top of their game. But, there are several commonly used prospecting tactics that can land agents in hot water. This month, we’ll take a look at some danger zones to avoid when it comes to prospecting and advertising and give you tips on the right and wrong ways to do it.

Zone 1: Giving It Away 

While prospecting for new clients, some agents consider using a game of chance (like a drawing for an iPad).  However, agents should make certain that they are not doing so in violation of Arizona law.  A.R.S. § 13-3301(4) defines gambling, in part, as “the act of risking or giving something of value for the opportunity to obtain a benefit from a game or contest of chance or skill.”  Giving business to an agent in exchange for entry into a drawing is likely considered “giving something of value for the opportunity to obtain a benefit.” Agents should therefore refrain from offering new clients entry into a game of chance in exchange for business.

In light of the above, the better practice is to offer the same benefit to all members of the public that attend the agent’s open house or respond to the agent’s advertisement. Jerome King, designated broker of Long Realty in Tucson, Ariz., offers this advice for erring on the side of caution, “If you’d like to offer a free Starbuck’s card at an open house, you should give a Starbuck’s card to everyone.” The giveaways must be without condition and universal across the board. Furthermore, keep in mind that Article 12, Standard of Practice 12-1 of the code of ethics states: “REALTORS® may use the term ‘free’ and similar terms in their advertising and in other representations provided that all terms governing availability of the offered product or service are clearly disclosed at the same time.”

Zone 2: The Claim Game 

“I’ve seen a lot of marketing attempts lately that focus on ‘the last five homes sold in this neighborhood’. And then it gives the addresses of five homes sold, but not necessarily the last five homes the agent himself sold,” said King. “It’s a great marketing tactic, but it has one flaw: If you weren’t involved in the transaction you can’t give the impression in your advertising that you sold these homes.” Article 12, Standard of Practice 12-7 states: “Only REALTORS® who participated in the transaction as the listing broker or cooperating broker (selling broker) may claim to have “sold” the property.” Armando Contla, GRI with Arizona Turquoise Realty in Lake Havasu City, Ariz. adds, “I’ve also seen people advertise a property that has already closed escrow” in an effort to gain prospective clients. This is also found when people ‘poach’ listings and post them to Craigslist or other internet sites.

If you’re looking to paint a picture of a specific neighborhood in your marketing collateral, you should leverage other data such as that on your MLS or from your local newspaper.

 Zone 3: Slippery Signs 

“Many REALTORS® are posting ‘For Sale’ or ‘For Lease’ signs in their own yards to gain the attention of potential buyers. The only problem is, the agent’s home isn’t really on the market. This is just a way to get prospects,” said King. Clever? Sure. Unethical? Definitely. Article 12 of the code of ethics strictly prohibits false advertising of any kind. King offers this solution, “If you want to post a sign in your yard attracting new clients, have it say something like ‘For information regarding real estate in this neighborhood, call …’.”

Contla said that he’s also seen For Sale By Owner (FSBO) signs popping up in agents’ yards, when the property is not for sale. “Appealing to unrepresented buyers with a FSBO sign is just another bait and switch tactic.”
Along those same lines, Contla says that many agents are putting “For Sale” signs in front of homes where the owner may not want it advertised. “We’re seeing this in rental properties where the owner may live out of state,” said Contla. “Agents think that a home won’t sell unless it has a ‘For Sale’ sign in front. But, you must make sure that you have the express consent of your owner to do so.”

 

Can a Trip to Hawaii Be Used As a Marketing Tool?

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Agent Entitled to Send Money or Other Gifts to Prospective Clients

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Broker Can Offer Incentives to Potential Sellers and Buyers

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