JtR: Pocket listings are mostly mythical around here, because sellers hear that the market is hot and want to test it with open market exposure.
A good article on the subject is here:
An excerpt:
“If the seller is fully informed and provides written consent not to place their home on the MLS, then I’m not concerned,” said Betty Graham, president of Coldwell Banker Previews International/NRT, the Realogy franchise’s luxury brand. “But I’m not sure that’s the case in many of the pocket listings I have seen. The fact is that our first responsibility is a fiduciary responsibility to act in the seller’s best interest and with a pocket listing there is a great potential to violate that fiduciary responsibility.”
“…CB Previews international draws the line on pocket listings…”
really!? that’s where they draw the line? Wow, if I were a client with them, that would make me feel soooo much better knowing they had such integrity.
:/
If the pocket listing idea is explained thoroughly and honestly, what seller in their right mind would say, “Oh yes please exclude my listing from full open market exposure”.
If the MLS is good enough for Jennifer Aniston, it is good enough for everyone.
Pocket listings are done by agents looking to double-end the commission, period.
Short sale fraud is probably another good example of pocket listings. Essentially you need a seller that doesn’t really care what the house sells for. Either there’s nothing in it for them or they’re extremely naive about the market and a Realtor cons them into it.
haven’t realtors been playing this card basically forever?
is this another one of those games where it is input into the MLS for a few days and then no one picks up the phone and make it impossible to see the house?
I just got a realtors letter today in the mail so it must have been generated late last week and mailed on SA for me to get it today about his new listing here in Aviara/Mar Fiore neighborhood of ours on 1309 Bulrush Court. So I look on SDLookup.com which mirrors the MLS and its not there, his letter says it is “For Sale and as a neighbor he wants us to be the first to know and to call him direct if you know of anyone who might have interest!” His pocket listing for a few days…or week, couldn’t get to his computer to enter it into the MLS until the direct mailer goes out to everyone in the hood and see’s if he can gaff a buyer and represent the seller too!
Agents don’t have a clue that there is anything wrong – they never stop to think this activity might be breaching their fiduciary duty to the seller because they see everyone else doing it too.
The biggest problem is that it is promoted by office managers – they want to sell listings in-house to maximize office income. If your manager is promoting it, then it must be a good thing, right?
We have heard the president of the association of realtors say on my blog talk radio show that he himself will shop around his new listings to his buyers first, then pitch it to the office, and if no takers there, then it goes on the MLS.
We have also heard on video an agent from KW pitching an open house attendee that the reason to work with her was because they sell their listings in-house. Agents use it as a ploy to get new buyer clients.
They are ripping off their own sellers by not exposing the listings to the open market, and breaking the code between agents – you agreed when you signed up for the MLS that you would share your listings with me, and I share mine with you.
Sharing listings on the MLS was how this current business model was founded back in the 1960s, and works great for the clients when agents play by the rules.
I have been in 2 pocket listing transactions, as a seller and a buyer. Sometimes it makes perfect sense.
2004 – Desirable northeast town. We were in escrow for a larger, more expensive home. Had interviewed a few realtors, but didn’t want to sell till we had the new purchase under contract. I follow my current market and know what my house is worth at any point in time. We could carry both homes if necessary. One of the realtors I knew was updated on our progress. She asked to bring a buyer and they offered my asking price. Realtor tried to have me sign for a 5% commission and I didn’t agree. We settled on 3%. I had 2 small kids and not having to show my house and go through that hassle was PRICELESS to me!! Everyone was happy.
2010 – Relocated to LA. Working with a female version of JtR!! Nothing we liked on the market. Realtor was called to do a CMA on a house. She thought it would be a good fit for us and asked to let us see it. We negotiated and came to a fair agreement. Our agent did not want to represent the sellers and collected 2-1/2%. Sellers used a lawyer. Sellers are very private and also placed a value on not having the house open to the public.
For both, there weren’t crazy multiple offers going on at the time, so neither of the sellers left money on the table. I’m sure our sellers in 2010 are wishing they had held onto the house for 3 more years, but maybe not, I’d heard they had several properties and “needed” to cut some expenses back then.
so neither of the sellers left money on the table.
You don’t know that without open market exposure to prove it.
And yes agents can dance around the fiduciary duty part by refusing to represent the seller, but that doesn’t make it right. It makes it more wrong that she knew there was a conflict, and deliberately sidestepped representing the sellers, and their best interest.
And yes it was all legal and in the end everybody thought they got a fair deal. It doesn’t mean it was honest.
And I don’t buy the ‘sellers are private’ thing unless they are specifically told that it will cost them money – in this market as much as 5% to 10% and maybe more. Let’s see how private they are when they have to commit to signing off on that.
Don’t try to compare an agent who does this type of deal with me. I would never do that. If a seller calls me over for a CMA, I tell them that it is in their best interest to put it on the open market to find top dollar.
I owe it to the sellers, and I owe it to my fellow realtors. Agents forget that they signed a contract that says that they will promote all of their listings in the MLS so all can benefit. It isn’t, or at least it’s not supposed to be a one-way street where agents can sell my listings, but I can’t sell theirs.
If the sellers value the “convenience”, that is their right, and I don’t have a problem there. They are welcome to sell their house for whatever they want, however they want.
It is purely the agent’s responsibility to exercise their “duty of utmost care, integrity, honesty, and loyalty in dealings with the seller” that is in question.
The CAR should add a form that plainly states that the sellers acknowledge that by refusing to go on the MLS they may be leaving money on the table.
Today in many CA markets it wouldn’t make sense due to the bidding war frenzy. In 2010, when we bought, not too much was moving in the $2mil+ range. They sold well and we paid on the higher end of comps to get the first house we really liked.
When we sold in 2004, the market was semi-hot, but we had a less desirable house style, so when the REA brought the buyers and they were willing to pay our price, it made sense to make the deal. Not having to show the house was truly priceless.
All parties had bought & sold before, and had their own legal representation, so no one was naive. Maybe I would have paid less for the house in 2010 if it had sat on the market for a month, but we had relocated from half way around the world and country, twice, and were ready to get out of a rental and into our own place (I was the one that followed you blog from Tokyo for a few years!)
My realtor is truly a very decent & honest person. She mostly works with buyers and goes beyond and above what others agents do, even to date, 2 years later.
I don’t want to beat it to death because the system isn’t going to change.
You are a nice person, the agent is a nice person, and the system is flawed and broken.
Agents not only don’t think there is anything wrong with off-market deals, they are encouraged to do them every day by their broker, by the other agents doing them out in the open by reporting them on the MLS (how often do you see “sold before processing’), by the sellers who don’t want to be bothered, and the buyers themselves who want an insider deal.
The only fix is to convert to an auction format.
It guarantees top dollar to the seller, it gives every buyer a fair chance to purchase, and it stops agents from being able to tilt the table.
Problem solved.
Will it happen? No chance.
Why? For the same reason that the commission rates don’t change – the top selling agents control the market, and they like it fine the way it is.
Frankly I was shocked to hear Betty Graham come out and say publically:
Have you ever heard a corporate type utter such words? You NEVER hear upper management talking about fiduciary or ethics. Why? Because they like the system just the way it is too.
I’ll take that back.
The system isn’t flawed, it is that there is no compliance with, or enforcement of the system.
The system would work great if agents complied, but when a double commission is lurking, it is easy for people to forget the rules.