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In a Texas divorce, a court cannot sign a final decree and close the case until it confirms that all issues related to the divorce have been addressed. If the parties have minor children, this means that either they must have reached a settlement agreement on child custody and child support, or the court has ruled on these issues after a trial. The final decree of divorce must also resolve all disputes relating to property division, including identifying community and separate property and dividing community property between the spouses. Real estate often presents significant challenges for divorce lawyers and their clients. Some creative solutions might be available for those challenges.
If divorcing spouses jointly own the house where they lived, it is community property under Texas law. It is possible for the two of them to continue as co-owners after the divorce, but it is often best if one spouse is able to divest entirely from ownership. Selling the house and splitting the proceeds could be the best option for many people, but this often presents its own difficulties. A controversial practice known as “pocket listing” has gained prominence among real estate professionals in recent years, although the National Association of REALTORS (NAR) has effectively banned the practice for its members. It is worth examining more closely, as it could offer advantages, as well as risks, for some people going through a divorce.
The Houston real estate market can appear glutted with properties, or listings can seem sparse. Properties in up-and-coming parts of Houston may only spend a few days on the market before they sell. High-end properties might wait weeks, months, or longer for a buyer. Pocket listings attempt to avoid many of the pitfalls of putting one’s property on the general real estate market.
To understand how a pocket listing works, one must first understand how a regular listing works. Most real estate agents use a multiple listing service (MLS), which collects property listings throughout a geographic area and allows buyers and their agents to search based on factors like location and price. Listing one’s home on an MLS makes it visible to all real estate agents in that area, and opens it up to inquiries from anyone looking to buy a home.
In a pocket listing, the seller’s agent never enters information about the property into MLS. Instead, the agent only markets the property to a select group of agents and potential buyers. The goal is to find a buyer from within a smaller network than the entire MLS. This is sometimes known as an “office exclusive” listing when an agent only makes property information available to other agents in their own agency.
Pocket listings are legal, in the sense that no specific law at the local, state, or federal level prohibits homeowners and real estate agents from entering into a contract to sell a property without listing it on MLS. Whether pocket listings are ethical or not is a different question.
In November 2019, the NAR Board of Directors approved a policy prohibiting pocket listings by NAR members. This policy does not have the force of law, since the NAR is a private trade association, not a government agency. It can only enforce the policy against real estate brokers and agents who have voluntarily joined NAR.
High-net-worth people involved in a divorce might find advantages in some aspects of pocket listings:
The advantages of pocket listings all relate to the economic aspects of selling a home. Pocket listings also have the potential for economic disadvantages, as well as economic and legal risks. The economic disadvantages, or risks, derive from the flip side of the advantages:
The legal risks of pocket listings specifically relate to how spouses are expected to conduct themselves during a divorce case:
Stacey Valdez is a board-certified family attorney who practices in Houston, Texas, representing people in divorces, child custody disputes, and other family law matters. Clients at Stacey Valdez & Associates, along with their families, are always our top priority. We are committed to helping our clients through profoundly difficult experiences with compassion, support, and tireless advocacy. Your first meeting with us is free in most situations. Please contact us online, or give us a call today at (713) 294-7072 to schedule a confidential consultation to discuss your case.