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Pocket listings have definitely impacted the market here in our casual, gated community primarily by a non affiliated MLS real estate company.
I think we have to be careful to clarify the difference between a pocket listing, a ‘coming soon’ listing, and an MLS listing. If it’s on the MLS that’s easy everyone knows it. If it’s a pocket listing the general definition is that you ‘know about it and the seller would sell’. The “coming soon” listing however, from the areas that I work in means “its coming soon to the MLS but it IS listed”. The seller and agent have agreed to list it and then put it on the MLS at a later date. I teach all over the country and interestingly some people have never heard of coming soon and some already have rules in place for it like CA where they require the seller to sign something saying they know they could have more exposure if it were on the full MLS….which most listings do. It’s an interesting twist on an OLD tradition. I’ve been in this business for 40 years and pocket listings have ALWAYS been there.
I manage a large real estate office, and based on the transactions I review and the transactions I discuss with my agents, the underlying motivation is nothing more than simple Greed. The same agents that are holding pocket listings, are in many cases the same agents that attempt to short cut everything. They don’t understand or comply with real estate contracts and disclosures, and ignore the issue of fiduciary duty to their clients. Its not in the best interest of the public or the industry. Again, it’s all about Greed. I think the public would be shocked if they were fully aware of the full ramifications of this practice. It gives the appearance of “Back Room” dealing, which isn’t in the best interest of the public.
Agents who deal with pocket listings aren’t necessarily malevolent, they just know that they can sell the property themselves and at top dollar. Why pay a co-broke if you don’t have to? It’s like someone who has a great idea, and the money to put it into production, and then someone comes up and says, “I’ll be your partner and split all the revenues!”…What the Seller and the listing broker agree upon is the main issue. If the seller agrees to a pocket listing let’s say for the first 2 weeks of a listing, then what business is it of the Board, or other agents? Listing brokers should be able to decide when they want to cooperate with other brokers, and when it is in theirs (and their client’s) best interest not to cooperate. The Real Estate Boards around the country can be setting themselves up for an Anti Trust lawsuit if they try to dictate to their brokers that pocket listings cannot be taken by their member brokers.
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Pocket listings may be rising, in part, due to the growing number of agents who are sick and tired of being disrespected. One aspect may be web sites that take the data for free and then seek to get agents to purchase premier sites with them….as if we need middle men to get the job done (when the MLS works fine). This has been eroding our worth to some degree. Another aspect is buyers using the Internet to get educated, who then wish to make offers and negotiate on their own behalf without an agent (to save the commission and apply it to the purchase) where the listing agent in effect is doing two jobs for one paycheck. The Internet has fostered the false idea that we do not do much for the client and we are just raking in the dough. Buyers do not know what they do not know. Many are clueless about all that goes into performing due diligence. A third aspect is the safety issue, not only for the sellers, but for protection against scam artists attempting to rent out our listings, again thanks to certain web sites. Scarcity is a fourth aspect where companies are hoarding pocket listings so other brokerages try it too, simply to create opportunities for their agents. It is a slippery slope. I hope the trend diminishes as the market is improving.
I agree. I think the seller is the one who looses in the pocket listing scenario. If the home were exposed to the open market, he might have acquired multiple bids, or a cash buyer, or any number of other benefits.
What a self-serving bunch. The only threat is to the MLS business. Pocket listings do not exempt people from fair housing laws, and there are plenty of fair housing violations with listed homes. Casting sellers’ concerns about strangers coming into their homes as avoiding business with the “unwashed masses” is a ridiculous and deliberate distortion of their intentions. And Robert Bailey knows it. The MLS industry deserves a lashing, because their value continues to diminish. They are all monopolies, they rip off agents with their increasing prices and, in the case of my MLS and others, move more and more services into paid models (and act like this is an improvement). One day MLSs will be a distant memory, and the customer will win.
I’m a retired attorney, now a full-time real estate investor, and not a realtor, but have been engaged in over 500 transactions as an attorney and probably 100 for my investment purposes. I have an excellent realtor. When the situation calls for it I’m more than happy to do a pocket listing with him for a win/win agreement. I save, and he gets more than he would have. He is not a short-cutter as one writer stated in the comments. I have worked with many realtors over the years. I find most try to give legal advice for which they are not trained nor qualified, and that their approach is formulaic. I have had the pleasure of a couple of really fine ones, but they are truly rare. For another example – again a pocket listing about 10 years ago, I carefully researched the values and checked experienced realtors. One suggested list at $595, one $610, and the one I picked at $639. I had worked with all three previously. I used my research and chose the one at $639. We did a pocket listing and had a buyer in less than a week at $640. All quoted me 5%. Imagine my cost if I went with one of the others. It wasn’t the pocket list per se here that helped me, but it was the knowledge of the realtor regarding value. Again, a win/win. And, frankly, I don’t care about your MLS. It is now a dinosaur with all of the communication methods available today for sharing of information. There is no longer a big book of pages to go through. Wake up, do better, learn to compete in a new world.
The interesting irony here to me is that all the talk about the MLS being dated, expensive and doomed seems to neglect the fact that the MLS system is the source database for the majority of decisions that agents utilize to short circuit the system. But let’s look forward to the future where we list, or not, our listings on a national website where we’ll eventually pay dearly for our entries. Where we will be made totally irrelevant. Where the lawyers are lined up to pick what ever is left from our wallets.
The retired attorney, by doing a pocket listing-probably cost herself in the neighborhood of $30,000 to $40,000. I do not see the logic in her not participating in a multiple offer situation (by putting the home on MLS) and netting herself more $. The buyer you got would have come through the normal channels just as easily, along with many others. I just had a sale where the home was listing at slightly above market value, $418k, if the seller & I had kept it a secret I probably would have sold it for $425k to $430k. It sold for $450,000. The seller received about $20,000 to $30,000 more by entertaining multiple offers. The higher sales price brought me $500.00 more in commission. If I had sold both sides – I would definitely have increased my commission by about $10,000-but not the sellers net! Who do I owe a fiduciary responsibility to? Are agents truly explaining the market and ramifications of keeping their home secret from other agents?
I suspect when Roxanne was an attorney she guaranteed her fee by having her clients either pay a large retainer or sign a contract, or she was paid by her firm & received benefits as well. If your clients had 10 different firms working for them instead of signing a contract with you-how good do you think their representation would have been? When you were an attorney – did you work for months for no income? Happens all the time in real estate. Did you work for months, spend money, have no benefits and earn no income?
Yes-sometimes sales are easy and it seems like free money, but most sales take considerable amount of time & work, guidance, hand holding, expertise, and negotiating on behalf of our client. Just because you find it easy and think you make all the right decisions for yourself – does not mean that is best for most buyers & sellers.
Have you ever worked in a market or been a buyer in a market where all listings are “private”? It is a nightmare for the buyer. I believe it is the buyer or seller who we represent-am I right about that? (Yes-I am being sarcastic). If a buyer has access to all inventory, obviously it is better for them. If a seller has multiple offers it is better for them.
If agents cooperate with each other-frankly it is better for them as well. One day you will have a buyer that wants a home you can’t get them because listings are held off the MLS-the buyer will either have to run around and sign up with every agent in town or they will fire you-because a friend found a secret listing and you did not know about it. One time you may get yourself more income by convincing your seller it is in their best interest to be secret-but more than likely-it will bite you in the end.
How does that help your client? How is that good for your business?
It is good that the consumer is better informed and has access to listings on the Internet, and yes-some buyers don’t need much guidance-however most do! Most need the services we offer.
We belittle our value all the time by acting as if all a buyer or seller needs is listings on the Internet to look at. Each time we discount our value & our commission-from 6% to pretty much 5% all the time now, where will it go next? This is a tough business. It is a tough market for our clients. We bring great value to our clients-assuming we are telling them the truth, working hard for them and putting their interests FIRST.
I have always believed if you do what is right and best for your buyer or seller-the result is you will also get paid.
Secret listings benefit the agent-that one time-but probably hurt them in the long run. They definitely hurt the consumer-with an exception here & there.
You know how you tell your seller that if they ask the question “should I disclose this?” the answer is likely YES. If you ask yourself the question-am I obtaining the most for my client-is this a benefit to them, rather than myself-than go for it. I just doubt that is true in 80-90% of the time.
I don’t think pocket listings in themselves are necessarily bad as long as the listing agent follows ethical and fiduciary obligations. In the situations I’ve been running into, the listing agents are clearly violating multiple areas ethically and potentially legally — and it’s not in the best interest of the seller, it’s in the best interest of the agent. Some of you say it’s an agreement between the agent and the seller. Let’s be real — an agent can influence/advise/endorse the sellers toward whatever they may want — just like pricing or anything else in the transaction process. Most consumers don’t buy/sell houses frequently so the average consumer doesn’t have a clue and depends on their agent to advise them. I just experienced a situation where the sellers and tenant had a good relationship and the sellers wanted the tenant to submit an offer. Of course, she already had offers when it was listed (interesting). After I connected with the listing agent to let her know the offer was forthcoming, that evening the owners contacted my buyer, their tenant, (Buyer Agmt in place with me) and strongly suggested to her that she needed to submit her offer through the listing agent for consideration. Tell me the sellers came up with this idea on their own. Needless to say, my buyer dropped everything right away and we’re in escrow on a different house now.
I do not believe the consumer wins if there is no MLS-I have seen markets like that-and they definitely do not win. If I am a buyer having to contact 150 agents to try to find the secret listings- because I have all the time in the world and no other life-than MLS or the experienced, honest, hard working Realtors will not be missed. Don’t know that many people in that position…..
With respect to Roxanne the attorney, let me ask: How were all the Realtors she used able to get comps to determine value? Probably through the MLS, or one of the third-party sites that milk from it.
Extending Lucy’s comment above, to pull values out of a tax or recorder’s database is time-prohibitive, probably resulting in less-accurate data. And reducing the chances that any Realtor could do more than give a value-guess. Totally agree with Lucy and John Peterson above.
My MLS does an outstanding job, I believe, at a fair price (especially when I see what CoStar charges for commercial RE data). Regularly adding new features and value. If we had to depend on the Trulias or Zillows of the world to compile it, it might cost multiples based on what they want to charge us for leads on the data that we enter into the system ourselves.
If they are not listed on the MLS then they are missing out on the biggest market of buyers. So this means they will not get the best price, and so its not it their best interest (from a financial point of view). While I understand the need for some people to have privacy sellers need to realize that they are prob not going to get the best price. If they don’t want strangers to look round their home then don’t put a keybox on the property and force all showings to go through their Realtor. That way the sellers Realtor can be at the showing with the buyers Realtor and buyers.
Everyone seems to be concerned about how “pocket listings” are a disservice to the seller. I do exclusive /pocket listings for an investor because of his greed, not mine. He only wants to pay one side of the commission, if at all possible, and in this market, probable. I am more than happy to list these properties on the MLS, but it is not my call.
I am sure that Mr. Bailey receives a lucrative salary and has little concern for those members who struggle to make ends meet (survival or greed?). Not that 2 wrongs make a right, but look around yourselves and ask, who is immune from greed – politicians, doctors, lawyers, public servants? Perhaps greed too is what motivates Mr. Bailey to feign his concern for sellers and agents alike.
One last comment-I hope….Realtors know that Trulia & Zillow are not at all accurate regarding values. The value of a home in any given market is not based just on square footage or even neighborhood. Zillow and Trulia can’t know whether a house has granite or crown molding or good quality hardwood floors vs damaged cheap floors, etc.
My buyers have experienced numerous times – Zillow & Trulia not being up to date. Homes are pending, yet appear as if they are active. Realtors have been in the homes and know why one is worth more than another. There is always the “blue sky factor” as well-that extra special something that sets a home apart from another-that not just looking at area, # of bedrooms or sq footage can address.
I understand investor greed-not wanting to pay two commissions-however in this type of market-she/he may be a missing the boat as well-if a home is a pocket listing at $500,000 & sells for $500,000 with a 2.5% commission paid to one agent – the investor nets $487,500. If the home is on MLS and receives multiple offers & sells for $540,000 with .05% commission to two agents, the net to the seller is $513,000 (again just using commission & not any of the other closing costs). That is $25,500 more to the seller-using 2 agents.
Lastly, I must be reading Robert Bailey’s article incorrectly-I didn’t get the feeling there was any false concern for sellers or agents. I think it is a legitimate concern and smart business to continue to explore how to protect our business but of course at the same time, abiding by our fiduciary obligations to our clients. I have real concerns for sellers and buyers in regards to secret listings.
There actually was a law suit that a buyer won-suing their agent for not showing all the homes available to them within their parameters-secret listings contribute to such problems. Markets change all the time-in my view it has always worked best to work for the best interests of your clients and the income will follow.
There are always exceptions, but I think overall, buyers & sellers & Realtors are better off using MLS. Have a great and prosperous year doing your very best for your clents. :0)
As someone who has been a full time real estate agent since 1988 I found the comment about this being a threat to the “MLS as we know it” quite hillarious when currently our information is spread and sold by MLS to all of these other websites. Pocket listing are not a threat, they go up and down in number as the market fluctuates.
Selling our MLS data to every company out there willing to write a check is a real threat to our industry.
[...] Inc. in California recently attending the REALTORS® Midyear Legislative Meetings & Trade Expo, said, “Clearly they’re not ‘off the market,’ nor are they in your pocket. They’re not on the [...]
Joe: I <3 you.
Kevin: I agree with you completely. Providing our MLS data to every one out there IS the real threat, along with “opening up” the MLS. Now *that* threatens local businesses and agents.
Either you have pride in your profession and conduct your business with high standards or you don’t. I rest my case.
[...] In fact, some of my most trusted resources for industry news have discussed them, including REALTOR Magazine and KCM [...]
[...] it lead to the collapse of our MLS model as we know it today?” Bailey said, according to a report by NAR’s “Speaking of Real Estate” blog. “Could it lead to the erosion of an agent’s value? There’s not a market that’s exempt [...]
When a broker is hired to sell a property, a listing agreement is executed in writing. In an “Exclusive Right to Sell Agreement”, the broker normally agrees to cooperate with other brokers and to share a portion of the total real estate commission paid by the seller. However, in this situation, it is stated that the property shall not be placed in an MLS, and thus there is no agreement to work cooperatively with other brokers.
Those that are against selling or marketing premls, have you ever sold a home before the first open house? We did once. The offer was a neighbor, $20k over list, no appraisal. But a deadline that it must be accepted before the open. We called around all the agents that saw it. No interest. We usually have a ton of interest at this point.
Did we wait for “maximum exposure”? What and risk getting $30k less? Hell no, we took it.
Some premls marketing is still done with two agents. I don’t call this a pocket listing, some do.
There are two ways to premls market. One is as a “Mark the date” to give buyer agents a heads up, a coming soon, like the Tuesday meetings announcing coming soons. No showings, no offers. This can double the exposure before it hits and net the seller more.
Or sellers can allow showings premls. Sure bidding wars are great, but still only 25-30% of homes sell for over list. The rest… don’t! So the seller might be ok with the odds and take a full price offer today vs trying to get more later, but mathematically be more likely to make less. So the listing agent uses the looming listing to get top dollar. Just like the open house example earlier.
Is this the future? We shall see.
Frank LL0SA Esq
Broker FranklyRealty.com DC VA MD
Attorney in Nj
Two reasons: First, there are many easy to use internet tools that the public can use and that we can link to our practices to free, so second it makes no sense any longer to pay more than a $1,000 a year per agent to use the arcane MLS to local dictatorial real estate management groups that behave like a 1950′s straight white men’s country club–the world is changing very fast.
The court process is slow, costly, and yes those nine justices don’t work all that much.
They are also large companies who deal with these situations on a daily basis, so they know all the tricks to put
a stop to anything that is coming to you. The other thing that I
encourage people to do is, when they’re meeting with a
client, ask the attorney, “What is the extent of your involvement going to be on my case.
As a Broker and as a Certified Appraiser, I have to agree with Robert Bailey on the damage pocket listings can do to the Real Estate Profession. The sharp increase in the number of pocket listings has not overall benefited the sellers. The results have been lower sale prices of homes and agents wanting both sides of the transaction commission for themselves. When an agent takes a pocket listing, the seller only has 1 agent working for them to market and sell the property. Eliminating all other agents from the property is not in the best interests of the client or a community.
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