Should you Consider a Pocket Listing when Selling a Home
The overwhelming majority of real estate agents do the right thing for their home-selling clients, and try to market these homes to the best of their ability. A small number, however, appear to be gaming the system for their own gain. “Pocket listings” have been around for a long time, but appear to be growing in number right now for some reason. It’s not a huge problem, but it’s a situation that makes no sense for the average seller to even consider, so it’s worth calling attention to.
The way “pocket listings” work is that an agent typically lines up a buyer before engaging the seller, and prices the home for “quick sale,” which means something below full market value. Agents work on commission, so it seems odd that an agent would ever sell a home at less than the highest possible price. But a “pocket listing” is typically done without an agent representing the buyer, so the selling agent doesn't have to split the commission. Because of this, an agent can make more money on the sale, even at a lower sales price.
Here’s an example (a bit extreme, but simple to explain the concept):
Scenario One: Home is sold via “pocket listing” for $100,000. Agent makes 6% commission – $6,000.
Scenario Two: Home is sold traditionally for $150,000. Agent splits commission with the buyer’s agent and makes $4,500.
As you can see, the seller loses out on the engagement, but the agent benefits. Agents will sometimes offer to do a “pocket listing” at a reduced commission, say 4% instead of 6%. But the seller still loses out due to the lower sale price.
Generally speaking, there are very few good reasons for a home seller to consider a “pocket listing,” but there are a few. For example, if the seller is in a hurry to move the property, and less concerned about getting full value, a “pocket listing” might make sense. Or if the seller for some reason wants to keep the sale of the property relatively quiet for security or privacy reasons (if the seller is a celebrity, perhaps).
Almost all home sellers should market their homes as extensively as possible, which usually includes listing the home on the local Multiple Listing Service (MLS), to let other agents and brokers know that the property is available for sale. As noted above, there are rare instances where a seller might want to move a property without listing it on the MLS, but generally, a “pocket listing” is done for the benefit of the agent.
Tips for sellers:
Make sure that you go over marketing plans with your agent before signing a sales agreement. Make sure to specify that the home will be listed on the local/regional MLS (you can even require a minimum time the property goes on the MLS before offers are accepted). Ask to see the listing on the MLS, both the print and online versions. And make sure the listing doesn't say something like “Sales Pending,” which indicates to other agents that there’s already an offer on the home.
I’d also suggest that the home seller requests marketing the home on leading real estate sites like Zillow and Trulia , which are visited by tens of millions of prospective home buyers every month. 96% of home purchases include an online search, and almost half of the time, a buyer finds his or her next home online. rsharga
The overwhelming majority of real estate agents do the right thing for their home-selling clients, and try to market these homes to the best of their ability. A small number, however, appear to be gaming the system for their own gain. “Pocket listings” have been around for a long time, but appear to be growing in number right now for some reason. It’s not a huge problem, but it’s a situation that makes no sense for the average seller to even consider, so it’s worth calling attention to.
The way “pocket listings” work is that an agent typically lines up a buyer before engaging the seller, and prices the home for “quick sale,” which means something below full market value. Agents work on commission, so it seems odd that an agent would ever sell a home at less than the highest possible price. But a “pocket listing” is typically done without an agent representing the buyer, so the selling agent doesn't have to split the commission. Because of this, an agent can make more money on the sale, even at a lower sales price.
Here’s an example (a bit extreme, but simple to explain the concept):
Scenario One: Home is sold via “pocket listing” for $100,000. Agent makes 6% commission – $6,000.
Scenario Two: Home is sold traditionally for $150,000. Agent splits commission with the buyer’s agent and makes $4,500.
As you can see, the seller loses out on the engagement, but the agent benefits. Agents will sometimes offer to do a “pocket listing” at a reduced commission, say 4% instead of 6%. But the seller still loses out due to the lower sale price.
Generally speaking, there are very few good reasons for a home seller to consider a “pocket listing,” but there are a few. For example, if the seller is in a hurry to move the property, and less concerned about getting full value, a “pocket listing” might make sense. Or if the seller for some reason wants to keep the sale of the property relatively quiet for security or privacy reasons (if the seller is a celebrity, perhaps).
Almost all home sellers should market their homes as extensively as possible, which usually includes listing the home on the local Multiple Listing Service (MLS), to let other agents and brokers know that the property is available for sale. As noted above, there are rare instances where a seller might want to move a property without listing it on the MLS, but generally, a “pocket listing” is done for the benefit of the agent.
Tips for sellers:
Make sure that you go over marketing plans with your agent before signing a sales agreement. Make sure to specify that the home will be listed on the local/regional MLS (you can even require a minimum time the property goes on the MLS before offers are accepted). Ask to see the listing on the MLS, both the print and online versions. And make sure the listing doesn't say something like “Sales Pending,” which indicates to other agents that there’s already an offer on the home.
I’d also suggest that the home seller requests marketing the home on leading real estate sites like Zillow and Trulia , which are visited by tens of millions of prospective home buyers every month. 96% of home purchases include an online search, and almost half of the time, a buyer finds his or her next home online. rsharga