Thousands of Homes Are Reserved for Certain Buyers

These private sales are known as pocket listings, or whisper listings. They have been around for many years. But they are on the rise now even though the National Association of Realtors adopted a rule last year aimed at discouraging their use following complaints from some of its members.

The new NAR policy requires agents to add listings to their local database within a business day of publicly advertising the listing. But there is a notable exemption: Listings can still be kept off the database if they are only shared within one brokerage, called an “office exclusive.”

Pocket listings accounted for 3% of sales on average in the year ended in March, up from 2.6% of sales in the year ended in March 2020 and 2.5% in the year ended in March 2019, according to an analysis by brokerage Redfin Corp. That 3% represents roughly 169,000 homes a year sold through this sometimes controversial practice.

Proponents say pocket listings offer a preferred option for sellers who want more privacy, or worry about letting strangers or other individuals into their homes.

“A property listing is as unique as the home seller, who should have choice in how they position, price and market their home,” said Ryan Schneider, chief executive of real-estate brokerage giant Realogy Holdings Corp.

In today’s housing market, buyers are furiously competing for a limited number of houses for sale. With the mortgage-finance company Freddie Mac estimating that the housing market is nearly four million homes short of what is needed to meet buyer demand, some brokers say that pocket listings are making a bad situation worse.

Critics say they exclude buyers from viewing all available properties and can keep sellers from getting the highest price for their home.

“There’s no rationale for, ‘I’m going to show it to one group of buyers but not another group of buyers,’” said Glenn Kelman, Redfin’s CEO, who told his agents to stop using pocket listings in 2018.

Mr. Kelman said he was influenced by research from sociologist Elizabeth Korver-Glenn that connects the practice to racial exclusion. Dr. Korver-Glenn’s research in Houston showed that white agents were more likely to use pocket listings and to share the pocket-listing information with predominantly white networks, excluding buyers of other races, she said.

Pocket listings traditionally have been more widely used in high-end markets, where celebrity sellers might not want their homes advertised because of privacy concerns. But Redfin’s analysis showed an increase in pocket listings in many markets around the country.

In Des Moines, Iowa, for example, Redfin estimated that 5.4% of sales were likely done without being publicly listed in the year ended in March, up from 3.1% two years earlier. In Tampa, Fla., the proportion of estimated pocket listings rose to 6.1%, from 4.4% two years earlier, Redfin said.

Pocket listings persist in part because they benefit big brokerages, which can shop listings in-house and advertise to potential clients that they have properties that aren’t available anywhere else.

On brokerage Compass Inc.’s website, a search for active listings or those coming soon in San Francisco pulled up 1,320 online listings as of midday Tuesday. The website also said 105 listings in the city weren’t publicly available but were available through a Compass agent.

A Compass spokesman declined to comment.

Pocket listings are difficult to track. Redfin’s analysis considered pocket listings to be properties that were marked as being sold or under contract the same day they were added to a local listings database.

Real-estate executives and consultants said that is a good proxy for measuring the trend, but it isn’t perfect. In today’s super-competitive market, some properties really might sell within a day. Other property sales are never added to the database, such as some that are sold directly by an owner.

Real-estate listings websites such as Redfin and Zillow Group Inc. benefit when all listings are publicly advertised, making their sites a one-stop shop for home buyers. Zillow opposes pocket listings, said Errol Samuelson, the company’s chief industry development officer.

Bright MLS, a database that covers parts of six Eastern states and Washington, D.C., said its research in 2019 and 2020 showed that in its region, properties that weren’t listed on the database sold for 6% to 20% less than properties that were listed.

“I’m sure there are people out there with privacy concerns,” said Bright MLS CEO Brian Donnellan. “The point is, they should know ahead of time that they’re actually probably going to get less money for their house.”

Write to Nicole Friedman at [email protected]