“MLS Exempt” Listings – Is This Approach Good For Sellers Or Just Listing Agents?

Something that has become fairly common today in the St Louis real estate market are “MLS exempt” (or “non-MLS”) listings. Also known in the industry as “Pocket Listings“, this refers to a home that is listed with an agent but is not entered into the MLS.  When I first enteered the real estate business, back in 1979, these type of listings were known as “Vest Pocket LIstings” with the reason being the agent would instead of turning the listing agreement into his or her office, making everyone aware of it, would keep the listing in their vest pocket so they would be the only one aware the home was for sale.  At that time, from my vantage point, the only reason I saw for vest pocket listings was so the listing agent could “double dip”, meaning sell it themselves to a buyer without the involvement of a buyers agent, thus getting to keep all the commission themselves.

Before I go further, let me give a quick lesson on how real estate commissions work.  Almost always, the seller, in the listing agreement, has agreed to pay a percentage of the sales price of their home as commission.  This commission is split in some fashion between the listing agent and the selling (buyers) agent.  In fact, a requirement of the MLS is that all listings that are entered by listing agents must offer compensation to the selling (buyers) agent.  However, if the buyer is not represented by a buyers agent and works with the listing agent directly (which is a bad idea, see DontBuyFromTheListingAgent.com for why) then the listing agent keeps all the commission.

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Is MLS Exempt synonomous with pocket listing?

Just because the listing agent has chosen not to put a listing in the MLS does not necessarily mean they are treating it like a pocket listing and not letting anyone know about it.  Although, that is certainly the case at times.  There are many valid, and beneficial to the seller, reasons why a listing agent may choose to withhold the listing from the MLS including:

  • The house is not ready for the market yet.  The seller may be completing repairs, removing some clutter, etc.  Rather than enter it in the MLS and let the “days on market” start accumulating while the property cannot be shown, it’s a smart move to keep it out of the MLS until the home is ready.
  • It may be part of a Coming Soon marketing approach.  Many listing agents keep the listing MLS exempt, or out of the MLS, for a short period of time, while, at the same time running a “Coming Soon” campaign to generate interest and hype for the listing.  While most listing agents do this with the sellers best interest at hand, a dishonest agent can use this approach to the detriment of the seller by focusing more securing a buyer directly and thus being able to keep both sides of the commission as opposed to focusing on what would be the best deal for the seller.

Is the “Coming Soon” approach a good one for sellers?

As I mentioned above, the MLS exemption is often used with a coming soon promotion of a listing, another somewhat controversial subject in the real estate industry.  Like “MLS Exempt”, “Coming Soon” can be wisely used in the sellers best interest to create a ton of interest and anticipation about their listing resulting in an auction-like feeding frenzy once the home hits the market.  However, it can also be used improperly and to the detriment of the seller, perhaps even unintentionally when done by an aging lacking sufficient knowledge and/or experience to know how to do it properly and certainly can be done intentionally with a less than honest and ethical agent.

How to protect yourself as a seller.

First and foremost, when considering selling your home, approach the process of selecting a listing like you would when selecting another professional such as a Doctor, CPA or lawyer.  Look for a listing agent with the knowledge and experience necessary to properly market your home so it will bring the maximum value while, possessing the character to do so in an honest and ethical way always putting your interest first and foremost.  This may mean you need to avoid that cousin or other relative that does real estate part time, or the person you work with who has a friend that is an agent, etc, or at least not make your selection in that manner without fulling vetting the person.  I suggest checking out AvoidBadAgents.com for further advice.


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