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In My Opinion – Pocket Listings Don’t Help Home Sellers

In My Opinion – Pocket Listings Don’t Help Home Sellers

Do You Want To Shoot Yourself In The Foot?  Sell Your Home Off-Market Or Don’t Expose It To The Multiple Listing Service With An Open House – That Will Do The Trick Every Single Time – Guaranteed!

No matter what you call it, “off-market, private, or pocket listings” are on the rise again as sellers are somehow being persuaded again to keep their properties off of the Multiple Listing Service and out of the stream of commerce during this “red-hot” real estate market.  The typical “song-and-dance” they are told is that by keeping their property listing ‘private’ their privacy will not be invaded by troops of public gawkers walking through their homes, and that they will not have to hassle with signs, lock-boxes, and agents showing their property, etc.  Whatever the rationale that is being sold to sellers it is unfortunate because they are actually unknowingly leaving large percentages of potential profits on the table.

Pocket Listing shoot-self-in-footThe Multiple Listing Service Is The Only Way To Get Full Value For A Seller

As I wrote last year today’s victims of secret or private sales are homeowners that are letting their property be marketed at least 10% under real market value.  Dishonest or “less than honest” brokers/agents who are playing coy first gain the sellers’ confidence then encourage them that it would be most effective to keep their property off the Multiple List Service (“MLS”); to maintain personal privacy and stay away from potential fraud; and limit the inconvenience that comes with marketing one’s home like signage, broker tours, lock-boxes, etc.  The claim that some brokers and agents are using to convince sellers to have a “private” or “pocket” listing/sale is to guarantee buyers to their clients. However, in a lot of instances those guaranteed buyers are coming from the broker’s and agent’s own offices or circles of close net friends which dramatically reduces exposure to the marketplace, but allows for the brokers and agents to possibly double-end the transaction, or “keep the whole deal in the office.”  This practice is a violation of Department of Real Estate rules and is an ethical violation as well.

Sellers That Acquiesce And Don’t Place Their Home On The Market Leave Substantial Money On The Table

What brokers/agents also fail to tell naive sellers is that exposing the property on the MLS places the property in front of over 14,700 local networked broker and agent members, all of whom then have the possibility to work with the property.  Limiting exposure to the MLS is by definition limiting the marketability of the property to the maximum potential – and is what should always be done.  As always these “private” or “pocket” listings are common when the real estate market heats up and there is limited inventory.

In 2012, it is estimated that in Santa Clara county residential properties on the MLS sold for 13% more than “private” or “pocket” or “off-market” listings.  That is a lot of money.

Pocket Listing Eyes On MoneyBrokers/Agents Breach Their Fiduciary Duties To Sellers More Often Than You Think – Unfortunately

It is a violation of a listing broker’s fiduciary duty to the seller to keep the home off the MLS unless the homeowner, after being fully and faithfully informed, has a legitimate reason for not marketing the property to all brokers and agents in the MLS.  In my experience homeowners are almost never ‘fully-informed’ in accordance with the law because it would be almost impossible for anyone to be able to tell a seller precisely what their home was worth UNLESS they exposed it to the entire marketplace.  Anything short of an explanation detailing the precise sales price would be less than “full information.”  This is the primary reason people put their homes on the Multiple Listing Service.

Maximum Exposure To The Maximum Audience Is The Best Practice

It is always in a seller’s best interest to have a massive advertising of a home, which encourages and promotes bidding wars and greater sales prices. Sellers who are convinced to have an “off-market” listing probably do not recognize the advantages of placing their home on the MLS, so they acquiesce and go along with their broker or agent’s recommendation based on guarantees from their broker/agent that they will get either equally as good a sale price by doing so; all without the hassles of signs, tours, brochures, lock-boxes, etc.

More importantly, an agent who convinces a seller to keep the home “off-market” doesn’t have to do any marketing, doesn’t have to print any brochures, doesn’t have to prepare any social media, and doesn’t have to hold any open houses.  The reason for this is because they already have a buyer sitting in their office (usually from a team member or someone who will pay the agent a referral fee on top of the listing agreement fee they are getting from the seller).  To make things worse, the listing agent doesn’t tell the seller this – only tells the seller that there are buyers looking for their particular neighborhood.  So the listing agent makes more money, doesn’t do any traditional marketing work, and the seller gets significantly less money for their home.  Who loses in this situation?

If APocket Listing Lips Seller Is Considering A Pocket-Listing Please Get Three (3) More Informed Opinions And Speak With A Real Estate Attorney Before Moving Forward

Broker and agents have the duty to exercise care, integrity, fair-dealing, and loyalty for their customers.  This task consists of performing their best possible acts and conduct to acquire the greatest sales price for the home.  Recommending “private” or “pocket” listings is typically NOT in a seller’s best interests.  There are however exceptions or rare occasions where these type sales make sense for sellers, but they are extremely rare; not 10-15% of the active marketplace.

It is estimated that as the local real estate market began warming back up, exclusions from the MLS raised considerably, almost doubling for the first quarter of 2013 as compared to the same timeframe in previous years.  In 2012, homes not put on the MLS amounted to approximately 15 % of the market or $340 billion in sales volume.  Incredibly, at a conservative 10 % decrease in fair market value (due to private or off-market listings), that would equate to $340 million in potential lost seller net proceeds – all “cloaked” in the name of privacy and/or hassle free transactions.

Pocket Listing Legal or EthicalThe MLS was designed to subject properties to maximum exposure leading to a maximum sales price for the specific timeframe.  Leaving a property off of the MLS dramatically limits exposure – doing exactly opposite of what a seller should be doing.

The brokers and agents who recommend “private” or “pocket” or “off-market” listings should be held to answer with specific rationale and factual data for this recommendation and be asked to provide verifiable proof that their recommendation will lead to a maximum sales price for the seller – they can’t do it.  The bottom line is that a broker or agent will never be able to prove that limiting exposure of a home by preventing the listing on the MLS will maximize the sales price.

 

About Shelly Roberson

Shelly Roberson has 25 years of experience; 600+ closed transactions; UC Berkeley grad; Shelly has worked in the same Palo Alto office for 23 years; She brings a wealth of skill, experience and professionalism; Shelly is incredibly detail oriented and a savvy negotiator.

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  1. Daniel Fast
    April 10, 2015 at 1:45 pm

    Hi Shelly –

    I read your post and wanted to address a few points of your argument.

    First, you say: “Sellers that acquiesce……leave substantial money on the table. That is a data proven fact.” Then you go on to say “In 2012, it is estimated that in Santa Clara county residential properties on the MLS sold for 13% more than “private” or “pocket” or “off-market” listings.” Where does this “estimate” come from? Is it a hunch that pocket listings go for less or is it really a “Data proven fact?” If its more than a hunch or anecdotal, please point us to the source of data.

    Second, homeowners can do whatever they want with their homes and are driving this trend as much as anyone. The people I know who have sold privately have enjoyed the hassle-free experience while commanding top price. They don’t have to do the public open houses (see article below that suggests open houses are just tools for agents to generate leads for future business) or turn their lives upside down to market/sell their home.

    http://www.realtor.com/advice/true-purpose-open-houses/?MID=2015_0306_WeeklyNL_90day&RID=54d2ebdac4308786d5000401&cid=eml-2015-0306-WeeklyNL-blog_5_truth_open_houses-blogs_sell

    The MLS provides benefit to the agent not the homeowner. The only positive thing the MLS does for the homeowner is transmit data to the real estate portals (where maximum exposure occurs) but a homeowner can do that directly if they were so inclined. It takes about 90 seconds. So, remind us again why the MLS is beneficial for homeowners?

    Pocket listings do not create a level playing field for agents. That is a fact and I understand why you do not like them. They also limit access for buyers. That is a fact. But it is not a fact that they command lower prices. That is your opinion. If it is really a fact, point us to the data on your next post. Thank you Shelly.

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