The California Association of Realtors addressed the ‘pocket listings’ topic.
It took them an hour to boil it down to this – the listing agent is bound by California law to properly explain the benefits of exposing the property on the MLS, and how it is in the sellers’ best interest.
The webinar finishes with this threat: “Regulate yourself before the regulators/trial attorneys/legislators regulate you.”
So there, problem solved.
Data from the five counties around Silicon Valley were used to demonstrate the issue. Of last year’s sales in Santa Clara County, 15% of them weren’t in the MLS. The median price of those was 10% lower than the median SP of those that did sell in the MLS.
They only touched on one important question during the Q&A session:
What can be done about listings being inputted as ‘sold before processing’?
The MLS rules require that all listings be submitted onto the MLS within 48 hours. They wimped out on answering the question, saying that it is possible to consummate a sale within the first 48 hours, but the listing agent is still bound by their fiduciary duty to the sellers.
Sellers or other agents can complain to your local MLS to report violations. Those found guilty are faced with the possibility of severe hand-slaps and letters in files, though for good measure they did add that you could lose your real estate license. Yeah, right.
CAR’s skimpy review of pocket listings is just lip service.
Until there are perp walks, nothing will change.
well I started to listen and quickly figured out is an hour long. Don’t have the time today. beers going down already.
Its to bad so many people get so greedy and don’t do the right things for their clients.
If the regulators aren’t worried about it people seem to sense this and abuse the system.
Its also sad some many homeowners don’t know how this game works and demand that their home get full exposure.
Hat tip to Tom Stone for alerting me to the webinar!
So I’m trying to make sense on why someone would want to sell their home as a pocket listing and here are my guesses:
Seller: 1) Privacy. 2) Asking price can be set much higher than market value and hope someone comes along and bites. No market price discovery forcing the price down (but also not up either). 3) Can back out of listing easily.
Pocket Listing Agent: 1) Can get the buyer and seller commission on the sale. 2) Lower expenses for selling house. 3) Exclusive listings drive buyers to agent. 4) Pocket listing better than no listing. 5) Not bound to good real estate practices since not a actual listing.
These are just guesses on my part. Can someone with more insight comment? Thanks.
Those are accurate guesses, but rarely does the seller have an active role in their listing being pocketed – they usually aren’t aware of how they are being scammed.
The standard protocol once an agent gets a listing:
1. Shop it around their own stable of buyers to see if they can round-trip the listing. Then place signs and ads to find a new buyers before MLS input.
2. Shop it around their fellow agent to keep the sale “in-house” so they get a commission bonus and acknowledgement from the manager in front of everyone at the next office meeting.
Once an offer is procured through these tactics, the listing agent keeps the focus on negotiating the offer and the sellers get so excited about payday that they forget all about asking about MLS or full exposure.
3. At last resort, input onto MLS but don’t allow other agents to show the house for 5-10 days so the listing can populate through all the websites and buyers will call the listing agent directly instead.
There is no benefit to the seller, other than a quiet few days before MLS input – that’s when showings break loose and the house is innudated if the price is close to being right.
In spite of all these shenanigans, 85% of all sales are co-brokered.
The media doesn’t catch on either – they include these re-arranged pocket deals into the “flash sales” category and don’t question if it’s proper to sell a house within hours:
http://fox5sandiego.com/2013/03/26/real-estate-flash-sales-sign-of-times/#idc-container
As it was once an indicator of a hot stock market when your waitress at Denny’s asked you for stock tips, an indicator of real estate market heating up when you see realtors proudly going by the name of “Cowboy Steve.”