An office exclusive is when your home is sold by an agent, but not put on the MLS. Instead, it is shopped around where your agent works, or their "Brokerage.” Another word you might hear for this is a "pocket listing."
Just as a refresh, the MLS is a database that is created and maintained by real estate professionals. There are over 800 MLS in the US and to go by definition it's
in which brokers share information on properties they have listed and invite other brokers to cooperate in their sale in exchange for compensation if they produce the buyer.
Some, but not all of the MLS info on these specific homes are then pulled into aggregator sites like zillow, realtor.com, trulia, etc. which is what they use to get your info and sell it to agents and other services (learn more here).
Typically an office exclusive is promoted to a seller as giving them more privacy because the public doesn't see their home sale. Sure, if you are Kim Kardashian maybe you need that privacy, or maybe you are going through something personal, and that is fine. But the everyday home seller will want as many buyers as they can looking at their home. Because fewer buyers looking at your home means fewer offers, fewer competing offers, and quite possibly less favorable terms within those offers.
It's also promoted to a seller as not having strangers in your house. However, you are still going to have strangers, but these strangers are buyers that are clients of agents that work with your own agent at the same brokerage. Remember, you do not have to host an open house when you sell your home. In our opinion, they are more for agents to find new clients than it is to find you a buyer for your home sale.
More importantly, studies have shown that these office exclusives can have an impact on fair housing issues and the disproportionate amount of buyers that are excluded, who do not find out about these exclusives are people of color.
Below are a few different scenarios as to who gets paid when you sell your home. For these examples, we are going to assume that every time the home sold for $300,000, even though we know at times an office exclusive (a pocket listing) might sell for less.
Let’s also assume that of the commission, there was an agreed 5.5% split evenly between the buy-side and sell-side. That's $16,500. That amount will be split in half and then each broker, where that agent works, is going to get a set percentage of that commission before it goes to the agent. Every single agent has a different agreement with their traditional broker. Some pay 5%, some pay 10%, some pay 60%, but to make it easy, let's assume it is at 30% for these examples. We are going to also assume that both the buyer and seller contacted their agents directly, and not via a referral platform.
Remember your home is only being shopped within the brokerage and the buyers are represented by agents within that same brokerage. So again, let's assume a $300,000 home sale, with $16,500 paid in commission but this time both agents work for the same broker. So instead of almost $2500, the broker now gets $4950 from your sale, and the agents still end up making about the same.
In this scenario, the buyer also works with your listing agent and they represent both of you. This is called dual agency and is not legal in some states. With the buyer and seller both working with the same agent that agent might say "...since I am working with both of you, I'll do this for 4%." Now the broker will get $3600, instead of the $2500 in the other scenario and the agent is now walking away with $8400.
What that agent might say is that they are not comfortable with representing both sides and that they will find someone else to represent the buyer. This is typically going to be an agent from their brokerage. When this happens, the broker is getting almost $5000. Assuming both agents have a 30% agreement with their broker, they each walk away with $5775. BUT, because the buyer was originally a client of the listing agent, the new agent that came into the fold is most likely going to giving that listing agent a referral fee. These referral fees can be anywhere from 20% to 50% of whatever that new buyer agent made and would go back to the listing agent. This means the listing agent will walk away with more than $5775.
In our opinion, the agent and the brokerage make more money. They can also use your exclusive home to bait in new buyer clients because they have "special access" to homes that no one else has.
Most homebuyers because now pocket listings, homes sold by agents that are not on the MLS, are up 67% since November 2019 when the National Association of Realtors put policies in place to diminish pocket listings. What's interesting is when NAR announced these policies in 2019, within 6 months, multiple brokerages rolled out shiny new “Office Exclusive” programs. In our opinion, these are the same thing as a pocket listing.
If your number 1 priority is privacy, you can certainly sell your home this way, but please make sure you understand your options and your costs because there are many ways to sell your home but they all come with different conveniences and expenses.
Remember at some point you are going to be a buyer, and it's going to be really frustrating and discouraging when you find out homes that you love were sold already because it was an office exclusive, but for an agent that works at a different brokerage so you never found out about it.