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A phenomenon in real estate, a “Pocket Listing” is one sold outside the Multiple Listing Service (MLS). The MLS exists to serve brokers, their seller and buyer clients or customers and to establish a database of properties that all brokers can access. Listing agents and brokers use the database to market property and provide information to prospective buyers and sellers through their agents. Buyer’s agents use the database to search for properties to present to prospective buyers that meet the buyer’s search criteria.
Pocket listings are not entered into the multiple list and so therefore are not accessible to potential buyers unless their agent is aware of the existence of the pocket listing, usually through word of mouth.
Pocket listings are not a new concept, but they have gained in both number and popularity in the current market. They are a controversial issue within the real estate industry. Below are some of the pros and cons as stated by real estate professionals in a recent article in RISMedia, entitled Pocket Listings: Helpful or Harmful
Pros:
Cons:
As for the pros:
While enabling privacy for celebrities and public figures has some merit, these sales are usually conducted under a name of a corporate entity, handled by the principal’s attorney or financial advisors and generally go unknown or unnoticed by the public. For instance, when Michael Jordan was playing for the Washington Bullets, a property in the general area was purchased as his residence and subsequently sold, all without public fanfare or general knowledge, because his name was not used in the transaction.
Again, generally speaking while there may be some merit for high-profile sellers wishing to prevent hundreds of buyers from traipsing through their homes as gawkers, most sellers would be happy to have such interest and it is the duty of the buyer’s agent to only show buyers properties for which they are financially qualified to buy. Most professional real estate agents have their buyers pre-qualified by a mortgage lender before going out to look at potential properties to purchase.
Commissions are always negotiable and while the seller may benefit from a flat fee commission arising from a pocket listing sale, it should be considered along with all the elements of the transaction, such as price and all other terms and conditions of the sale.
It is good marketing to begin promoting the sale of the listing as soon as possible and if a sale is procured that meets or exceeds the seller’s expectations that’s great, especially if it is done with the least inconvenience to the seller.
As to the Cons:
Our observations and reservations:
“Pocket listings” should probably be re-named “word of mouth listings”. In this day and age of social media and electronic devices that allow us to stay connected with everything, it seems to us that “pocket listings” are an anachronism that probably have no place in the 21st century, where approximately 90% of buyers begin their search for a home online.
This article is intended as information only and should be considered as opinion only. It is NOT to be construed as legal or financial advice. Please consult with your legal and financial advisers before taking any legal or financial action when conducting a real estate transaction.
It’s estimated that 10% of the homes sold in 2013 will be to buyers who lost a home in the past five years. Approximately 500,000 buyers who may have thought they wouldn’t own a home anytime in the near future will be homeowners again.
It’s estimated that several million of these previous homeowners will purchase again in the next eight years. This kind of activity will contribute significantly to the housing recovery.
Some people thought that the housing crisis would cause a shift in values placed on owning a home but the boomerang buyers definitely don’t support that theory. Having a home of your own, where you can raise your family, share with your friends and feel safe and secure is still part of the American Dream.
The rising rents, increasing prices and low, low mortgage rates are also influencing buyers into the market. In many cases, it is cheaper to own that to rent.
All new buyers, including those who have experienced foreclosures or bankruptcies, must have good credit history and the ability to repay the loan. It just may not take as long to reestablish the credit as some would-be buyers might have thought.
Read more about Bidding Wars This Spring, Spring’s Wild Card and Boomerang Buyers.
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