As the market gets more and more competitive due to lack of inventory, we are hearing of more and more "pocket listings" being talked about. What is a pocket listing? A pocket listing is when a seller tells one or more agents that he would be willing to sell his property if they find him a buyer. The agents keep the listing in their "pocket" and only pass on the info to their limited group of buyers. They do not put the listing in the MLS (The Multiple Listing Service). Also, when the agent brings the buyer to the seller, the agent can then "double end" the deal and represent BOTH the buyer and the seller, thus getting paid both sides of the commission.
What's wrong with that, you may ask? Well there are several issues...
#1. You are actually LIMITING the exposure that your listing is going to get.
We Realtors use The MLS as our "holy bible" for accurate Real Estate information. The MLS spiders out its member's listings ( Realtors are the members) to all of the different Real Estate websites. The original source of the listings you see on Zillow, Redfin, etc. all come from the MLS. With over 98% of buyers shopping online, why wouldn't you want the world to see what you have for sale?
#2. You will sell your property for a LOWER price. GUARANTEED.
This point is related to my first point. Property prices are based on supply and demand. The lower the supply, the higher the demand, the higher the price. Sell your home as a pocket, and you remove or reduce the demand (by limiting exposure), so naturally, you get a lower sales price. Why? See #3
#3. People are naturally competitive.
When you expose your property through the MLS, (assuming you market it correctly as far as price and presentation...a topic for another day), you get multiple people showing up for your open house. For my open houses, I usually have a line up just before we open the doors. Additionally, I usually have at least 5 groups of people in a property at once (sometimes I have as many as 20 groups in a property at the same time). When buyers see other buyers looking at the house that they want, they start elbowing their partner and whispering that they MUST get their offer in asap. A multiple offer situation is in the seller's best interest. Not only does it drive up the price, but it also gives the listing agent the opportunity to negotiate THE BEST possible terms for the seller. We can then choose from the top offers.
#4. Who is representing you Mr. Seller?
Almost all pocket listing transactions have the same agent representing both the buyer and the seller. Although it is legal for the same agent/brokerage to represent the buyer and the seller in a transaction, it takes a very unique type of agent to be able to handle the transaction fairly and well. In my opinion, it is a very difficult position to be in (as an agent) as you could be negotiating credits for repairs,or other deal points as the transaction progresses.
So who benefits when a house is sold as a pocket listing? In my opinion, the main beneficiary is the Agent who gets to receive both sides of the commission. Yes, I said it. And yes, I am an agent. But I am not that kind of Agent.
Is there ANY benefit to the seller?
As far as I can see, the only benefit is that the seller won't have a sign on their lawn and their neighbours won't know that they are selling their house. (But maybe the neighbours have a friend from out of town that wants to live in the neighbourhood?? See #1 above) Do you think that this benefit is worth potentially losing thousands of dollars in sales price?
Frankly, I would much rather represent my Seller to the best of my ability and have the SELLER get a HIGHER sales price. That is not to say that I have not been in a situation where representing both sides on a transaction has not fallen in my lap. When that rare situation takes place (twice in the past 10 years), there is a very specific protocol to put into place, so that everyone is protected. When my sellers hire me, they are trusting me with one of the biggest assets they will likely ever have in their lifetime. I take that responsibility VERY seriously. Doing a great job for my clients is the most important thing to me. If you take that approach to your job and your clients, the money and success will follow.
Want to discuss this topic? Feel free to call me at 310-963-7384.
Warm Regards,
Revi Mendelsohn, Realtor
Rodeo Realty
