Pocket Listings Could Sell For Less
A pocket listing is a property that doesn't come onto the Realtor-funded multiple listing system until it's already sold.
OCT 01, 2005
A property came on the market in my neighborhood the other day with a unique rider: "For Sale Soon." At first, I thought that was a unique marketing spin. The Realtor seemed to be on the ball and was able to get a sign in the yard before the property was really ready for showing. It's actually not a bad ploy -- it adds excitement, draws the neighbors' interest and gets the public ready to view the property once it's available.
However, almost two days later, the rider was replaced with a second rider stating: "Under Contract." I immediately suspected this was a pocket listing and the initial rider seemed to be a delay tactic to ensure the agent would receive payment from both sides of the transaction. My suspicions could be misguided. Maybe another agent saw the sign and called the listing agent with a buyer who wanted to purchase immediately without allowing a full market showing. It smacked of a "pocket listing," and there are several reasons why a homeowner shouldn't look to a pocket listing when he or she wants to sell a house.
A pocket listing is a property that doesn't come onto the Realtor-funded multiple listing system until it's already sold -- a practice that's rarely defendable. In fact, it's looked down upon so much that your local MLS may have rules against it. Metropolitan Regional Information Systems, Inc., one of the largest MLS in the country, serves nearly 50,000 Realtors in the Mid-Atlantic region. Its rules include:
As far as Realtor-imposed fines go, that's a pretty serious fine and is one that doesn't go unnoticed. Realtors pay millions of dollars per year to maintain a cooperative MLS -- violate those rules and you'll be reprimanded and/or fined. Keep doing it and you'll be disciplined and ousted (well, at least suspended) which can nearly put an agent out of business.
Nevertheless, some agents like to bend the rules and will take a listing on Friday -- give the seller the weekend to clean up and get in the final touches -- then start hitting the streets for their own buyer before they place the listing in the system within the 48 hours (business day hours, mind you). Thus they've been able to market the property for four days without bringing in the competition.
The pocket listing rarely benefits the seller -- at least not an informed seller.
Is there ever a good reason for a pocket listing? Of course … it's just that I've never seen a good one in a hot market. Pocket listings work fine in a buyer's market when it's taking months rather than days to sell a home. Many home sellers in a buyer's market are hesitant to place their property on the market and their lives on hold while waiting to sell the house. In this situation, they may be willing to sell "when you have a buyer who wants to purchase my house."
A seller with a unique situation where they cannot open the house to hordes of people trampling through -- such as someone with a sick family member residing in the dwelling -- may benefit from a limited showing of the home.
What I have found in these situations, however, is that in the seller's best interest, it's best to continue to put the home on the market through the MLS and instruct in the showing instructions to other agents to "call listing agent before showing to disarm burglar alarm," or "show by appointment only." This works well enough to make sure that the house is only being shown to serious buyers who are willing to be sensitive to your seller's unique needs.
Editor's Note: Join M. Anthony Carr for lunch on CNNfn's Open House broadcast, Oct. 6, Noon EST/9 a.m. PST or 3 EST/Noon PST as he discusses how small real estate investors can get involved in land investing.