You may have seen real property advertised on Facebook as “Coming Soon.” Is this legal?
A property that is advertised as “Coming Soon” is often referred to as a “Pocket Listing.” This term is real estate agent slang used to denote a property where the broker holds a signed listing agreement but the property is not advertised nor entered into the multiple listing system. Because recent real estate realty shows have discussed “Pocket Listings,” people tend to believe that these properties are special because they are exclusive or secretive and only available to “people in the know.” While “Pocket Listings” are not illegal, they may violate your Multiple Listing Service rules.
South Carolina Code §40-57-135 (E)(1) holds: “A licensee may not advertise, market, or offer to conduct a real estate transaction involving real estate owned, in whole or in part, by another person without first obtaining a written listing agreement between the property owner and the real estate brokerage firm with whom the licensee is associated.”
The statute plainly declares that a real estate agent cannot market or advertise property for sale until the agent has a signed listing agreement. Once you have the listing agreement you can legally market the property in any manner allowed by law.
It is important to note that under the terms of the Consolidated Multiple Listing Service (Midlands), agents must enter listings into the MLS within 2 business days of receiving a signed listing agreement. Greenville’s MLS requirement is similar, requiring an agent to submit listings within 48 hours. Putting it all together, then, because it is illegal to market a property without a signed listing agreement, and because the MLS requires the listing be entered into the MLS within two days of receiving the signed listing agreement, agents are left with a two-day window to market the property as “Coming Soon.” Well, maybe. . .
Marketing property as “Coming Soon” during the two-day window could be considered misleading advertising by the Real Estate Commission. “Coming Soon” denotes pre-marketing, or marketing before you have a listing agreement which is illegal. The reality is, the property is not “Coming Soon.” The agent has a signed listing agreement, is in fact marketing the property, and the property is actually available for sale now. The Real Estate Commission could view this tactic as misleading or confusing to the public because the public may not understand that they can make an offer on the property now. Our position in counseling real estate agents is that they should be very cautious about marketing properties as “Coming Soon.”
The real estate agent should also be cognizant of the MLS rule that prohibits agents from advertising or showing property in any manner if the property was submitted to the MLS as “Withheld Temporarily.” Any advertising of the property during this period would be in violation of the MLS rules until the “property withhold” status is lifted or expires. Therefore, “Coming Soon” during a “Withheld Temporarily” period would violate this rule. If the property has a “Permanent Withhold” status, the real estate agent can market as allowed by law.
The rationale behind the MLS rule is two-fold. First, if “Pocket Listings” were allowed large agencies could shop the property internally, meaning that smaller agencies could be blocked in the market. Small boutique agencies that heavily sell and market a particular part of town could also freeze out other agents and their buyers as well. Secondly, “Pocket Listings” are a disadvantage for the seller. “Pocket Listings” are not being sold at market value because value is set by the market as a whole. The agent’s circle of influence or Facebook friends are not the entire market and are therefore not setting the value as the entire market might. Therefore, the seller could end up selling the house for less than the price that they could have received had the property been available to the entire market. In short, selling a property as a “Pocket Listing” could expose the listing agent to liability, and the agent should proceed with caution.
Blair Cato Pickren Casterline is happy to announce Richard “Dick” Unger has joined the firm as “Of Counsel.” Dick has more than 45 years of experience in representing private, public, and institutional developers, as well as purchasers, equity investors, and lenders. He counsels clients in the development, acquisition, financing, operation, sale, and leasing of all forms of commercial, industrial, and residential real estate, with an emphasis on the resort development industry. He is a frequent speaker and author on real estate development topics. Dick will be handling real estate development and commercial real estate transactions and will be in our Columbia office.
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