The practice of selling homes without putting them on the MLS (Multiple Listing Service) is commonly called “Pocket Listings” and has created some controversy among real estate brokerages. Inman News last week shared a panel discussion that sparked debate. However, what’s missing from the discussion is how this practice affects consumers.
How do ‘pocket listings’ affect you?
To start, let’s go over the basic concepts. A seller allows their realtor to keep their home off the public market and sell exclusively through their agent’s own personal network, and privately to agents within their brokerage.
Who benefits? There’s an ugly truth to this practice. Some brokerages have used this strategy specifically to entice buyers to use their brokerage for access to properties they can’t find on open, shared platforms.
Here’s how that benefits the brokerage:
- Source of buyer leads – offered as a benefit to buyers of working with XYZ Brokerage.
- Improving brokerage statistics – pushing a sales funnel to be exclusively through XYZ Brokerage inflates sales statistics, in essence padding numbers with dual agency in house sales.
You can understand now why there’s controversy in the brokerage community over this practice. Amidst this brokerage debate, rules and regulations have changed several times.
So what is the ugly truth I referred to?
The practice of pocket listings benefits the brokerage, not the consumer. In essence, it’s asking today’s buyers and sellers to be served by a business model from the 80’s and 90’s before use of an open MLS and internet marketing.
You had to know someone who knew someone and deals were put together on the golf course and in the private country clubs. In some areas that is still the practice such as in parts of Manhattan.
But in the PA and NJ markets, that is not the case. The realtor you choose to represent you can show you ANY listing that’s openly marketed on the MLS, from any cooperating brokerage. Your buyer agent’s commission is paid through that cooperation at settlement, not from you when you hire your agent.
This “old school” mindset reminds me of SNL’s recent parody of realtors, a funny example of being stuck in the 90’s:
Pocket listing impact for sellers?
While sometimes a seller needs to privately find a buyer, the majority of pocket listing sales are not in that category. In fact, if you follow luxury real estate news you’ll see updates on Hollywood star recent home sales. Very few individuals require that level of privacy when selling their home.
Success for sellers comes from the broadest exposure possible, to create competition and bring the highest offer the current market will support. That’s why marketing for sellers is so critical, regardless of market conditions.
It puzzles me why a seller would want to sell within the pocket listing restrictions, especially in a strong sellers market. You never know where your highest offer will come from. For instance, I helped my clients from another state win in a competitive Main Line luxury home offer bid recently. They ended up paying $125K over asking, the highest offer. It would have cost this seller significantly if they weren’t open to offers from other brokerages.
Pocket listing benefits buyers?
Having access to off-market coming soon and pocket listings seems very desirable for buyers, especially in a low inventory competitive market like today. Is selecting an agent based on their brokerage’s practice of pocket listings really how to win?
Networking with agents inside and outside of their brokerage should be your realtor’s approach to find you off-market opportunities. As well as proactively seeking homes that fit your goals through outreach to home owners in your desired neighborhood, contacting For Sale By Owners for you, as well as home owners who were on the market but did not sell.
Finding your next home is just part of your buyer agents role. In fact it’s a joint effort as you work together. Representation that supports your success through the phases of negotiations, putting your financial interests before their own is your buyer agent’s fiduciary responsibility and part of our professional code of ethics.
I have to ask myself, if a realtor is trying to earn my business through their brokerage’s practice of pocket listings, limiting their seller clients’ opportunities for success, how can I trust they’ll make my best interest their priority?
Pocket listings as proactive marketing
Pocket Listings should be a step in a marketing plan that’s viable and proactive. How that works is once the listing is signed, often there’s preparatory work to do before the photos and video can be scheduled. In order to maximize opportunities, it’s standard practice for listing agents to let other realtors in their office know of off-market “coming soon” opportunities as part of our proactive matchmaking efforts.
The technical ‘Coming Soon’ category on the Multiple Listing Service has a time limit before the listing goes fully Active. If that time limit is a constraint given the work needed to prepare the home for market, pocket listing exposure is a viable strategy.
That way you have a 3 step marketing plan:
- Off-market, pocket listing exposure within the brokerage network
- Coming Soon – listed publicly, and syndicated to other sites like Zillow. However, no showings are allowed. A minimum of 5 photos are required. During this time we are finalizing staging, photos and video to provide the best possible exposure when it goes “LIVE” as Active on MLS.
- Release of the listing as Active!
To learn more about how to effectively market your home to get maximum exposure and the highest offer, schedule a time at your convenience at ConsultWithSusanna.com