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Off-Market Listings Only Reduce Profits for Home Sellers

What is a “Pocket Listing”?  This is a listing where a homeowner lists with an agent but they do not put the home out to the whole brokerage community through the multiple listing system, literally keeping the listing “in the pocket of the listing agent”.

 Shhhh!

Off-market, private, or pocket listings are becoming more commonplace.   Some sellers are being persuaded to keep their properties off of the Multiple Listing Service  during what is starting to become a hot real estate market with low inventory.  Generally sellers are being told that by keeping their property listing “private” their privacy will not be invaded by troops of public gawkers traipsing through their homes, and that they will not have to hassle with signs, lock-boxes, and agents showing their homes, etc. Whatever the rationale being sold to some sellers, it is unfortunate because they are unknowingly leaving large percentages of potential profits on the table. It seems that  some brokers/agents whose integrity might be called into question, are playing coy and first gaining the sellers’ confidence and  then encouraging them to keep their property off the Multiple List Service (“MLS”).

Let’s look at what  an agent’s motivation might be.  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 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.”

What they also fail to tell unsuspecting sellers is that exposing the property on the MLS places it in front of over 8,000 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. And coincidentally these “private” or “pocket” listings are common when the real estate market heats up and there is limited inventory.

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. 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 with less hassle.

Brokers 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.

The 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 reasons and factual details for this recommendation and be asked to provide verifiable proof that their recommendation will lead to a maximum sales price for the seller. 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.

 

Adapted from a post by Shelly Roberson
Alain Pinel Realtors, Palo Alto, CA

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