Are Home Sellers Hurt When The Listing Agent Double Sides The Sale?

By
Real Estate Agent with Joe Manausa Real Estate 8508880888
https://activerain.com/droplet/4fKh

I came across an article about the use of pocket listings by real estate agents that could very well shed some light on why closed home sales continue to increase, all the while new contracts continually post lower numbers. In case you missed our first article in this series, please see the start of my quest to expose the reason for the mysterious trend in the Tallahassee real estate market.

A "pocket listing" is a situation where a real estate agent is marketing a home for sale, but not in the Multiple Listing Service (MLS).

If you are thinking about selling a home in the near future, you would be well served to form a strong opinion about the benefits and liabilities of working with an agent who boasts an inventory of pocket listings.

How Pocket Listings Occur

There are a few good reasons for a real estate agent to work with a homeowner as a pocket listing, but none of them are in the best interest of a home seller who wants to get the top dollar possible in a reasonably timely manner. Typically we see them occur when:

  • A seller decides to remove his home from the market after failing to sell, but tells the agent to show it any time somebody might be interested (Over-priced sellers who are tired of being for sale at a price the market will not bear)
  • A homeowner with a less than cooperative tenant in a home which has many more months remaining on the lease
  • Special circumstances ... like a home builder living in a home that she built and who would be willing to move if a high enough price was brought in an offer

I am sure there are numerous other reasons that could have been identified, but regardless of the reason for it, a pocket listing will not be as well exposed to potential buyers than will a home marketed with a progressive home selling plan.

Real Estate Marketing

The internet has changed everything for those of us who market homes for sale.

If you are not actively promoting your listings online every day to the 94% of home buyers who use the internet, you are not working to get top dollar for your home sellers.

And if you are a seller who is considering working with a real estate agent in a pocket listing arrangement, you have to ask yourself if you are likely to get the same exposure as you would get working with full internet marketing plan for your home. I just don't understand the benefit of "hiding" your home from the market if you no longer want to own it.

Statistics from the Tallahassee MLS support the fact that real estate agents are attracting buyers through "other than pocket listings" on a greater scale today than in the past when there was no internet.

Realtors Selling Their Own Listing

In the real estate graph above, the blue line measures the percentage of homes sold by the company that had the property listed (meaning the real estate company worked with both the seller and with the buyer), while the red line shows the percentage of homes sold by the agent that had the property listed for sale.

Both trends are on the decline over the past ten years, and while many factors can be found to contribute to the declining double-sided transactions, the primary reason is due to the strength and speed of internet marketing.

We explain to our sellers that we plan on selling a home in 4 to 14 days, as 95% of ready buyers will see our listed properties on the internet by the 4th day of our marketing plan. There is no need to sell via a pocket listing when we can basically "tell the world" in less than a week.

Contracts Versus Closings

If we were seeing more and more pocket listings, it could explain the reason the MLS is reporting fewer contracts yet higher closings. Just as we addressed listings with zero days on the market in our last post, pocket listings would create an environment for more of these types of sales to occur. Obviously, the trend is going in the other direction.

The Mystery In The Tallahassee Real Estate Market

We have now examined the use of a pocket listing as well as zero days on the market listings, but we have yet to identify the reason for this new trend. Do our other readers have any other theories or suggestions? If so, let us know with a comment below and we'll use it to conclude this series of articles on the mystery in Tallahassee.

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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Scott Gleason 04/22/2014 11:26 PM
  2. Praful Thakkar 06/03/2016 01:58 PM
Topic:
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Florida Leon County Tallahassee
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Ambassador
1,540,892
William Johnson
Retired - La Jolla, CA
Retired Real Estate Professional

Hi Joe, I really agree with this and it is a sad trend when pocket listings are increasing to the exclusion of the broader market. When this trend continuing, Buyer agents would be very insightful to get their buyers under contract because many of these unscrupulous agents think it is cool and ultra powerfulto create all the drama.

Apr 22, 2014 03:41 PM #10
Rainmaker
805,546
Chris Griffith
Downing-Frye Realty, Bonita Springs, FL - Bonita Springs, FL
Bonita Springs Listing Agent

We have a lot of pocket listings in our high end, luxury market. I don't do a lot with pocket listings, just haven't grown to like it that much.

Apr 22, 2014 07:51 PM #11
Rainmaker
1,428,065
Kat Palmiotti
Grand Lux Realty, Monroe NY, 914-419-0270, kat@thehousekat.com - Monroe, NY
The House Kat

A home listed on the MLS system is available to all the home buyers who do searches there (which is most buyers); having it listed just opens it up to everyone.

Apr 22, 2014 08:25 PM #12
Rainmaker
1,373,397
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Joe, I think a lot of pocket listings are a result of the listing agent already having a buyer in mind. I don't think sellers mind if they get their price.

Apr 22, 2014 08:25 PM #13
Rainmaker
348,654
Ann Zieve
Keller Williams Success Realty - Eden, UT
Unmatched Ownership Experience

Joe, interesting, I hadn't realized this was an increasing trend.  Thanks for the post.  

 

I had one last year where the seller wanted all of my marketing with the exception of the MLS because he was refinancing.  The lender specifically told him he could do ANYTHING except put it on the MLS.

Apr 22, 2014 09:09 PM #14
Rainer
291,619
Ira Bodenstein
PNC Mortgage - Montclair, NJ
NMLS#: 445143

Very interesting. I'm not sure why a home owner would agree with anything other than a multiple listing as they are limited.  

Apr 22, 2014 09:18 PM #15
Rainmaker
1,514,127
Gary L. Waters Broker Associate, Bucci Realty
Bucci Realty, Inc. - Melbourne, FL
Fifteen Years Experience in Brevard County

The odds are always against the the list agent having both sides. I have only had one closing in 11 years where I was the list agent and the buyer side as well. I really did not like it.

Apr 22, 2014 09:25 PM #16
Rainer
227,737
Athina Boukas
Virginia Capital Realty - Richmond, VA
Certified Residential Specialist (CRS)

Sometimes homes listed in MLS are covert pocket listings. I recall two instances recently where we could never get a successful showing appointment "supposedly" because the tenants were difficult.

Then, the house sells and closes with the listing agent! 

Apr 22, 2014 10:45 PM #17
Rainmaker
4,957,075
Barbara Todaro
RE/MAX Executive Realty - Franklin, MA
Marketing Agent for The Todaro Team

Good morning, Joe.... all residential property should be submitted to mls...however, we DO keep our land listings out of MLS.... we do not charge a commission on tracks of land...we want our builders to buy our land and we will list all of the homes....

Apr 22, 2014 10:57 PM #18
Rainmaker
743,738
Rob D. Shepherd
Windermere/lane county - Florence, OR
Principal Broker GRI, SRES

I think as inventory decreases we will see more of it. I am not a fan of double ending.

Apr 22, 2014 11:09 PM #19
Rainmaker
622,510
Morgan Evans
Douglas Elliman Real Estate - Manhattan, NY
LICENSED REAL ESTATE SALESPERSON

I can see the advantages of getting the property on the local MLS and then having that wide amount of exposure. But I can also see some owners reaching out to agents who might have buyers directly and not go through the process of opening up their property to the mass public.  

Apr 22, 2014 11:40 PM #20
Rainmaker
2,446,796
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Lot of this going on and there is nothing you can do. The listing agent controls the sale. I have attended hearings in regards to this...It goes on

Apr 22, 2014 11:53 PM #21
Ambassador
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Ed Silva
RE/MAX Professionals, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

It is far to risky for that agent to take both sides, especially if there are issues and they need to get a third party, lawyer, involved

Apr 23, 2014 12:03 AM #22
Rainmaker
3,060,509
Nina Hollander
Coldwell Banker Residential Brokerage - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

I consider it a conflict of interest. And how do you represent both parties equally? As listing agents our job is to market a property to obtain the best offers for a seller not to find ways to increase our commission.

Apr 23, 2014 12:55 AM #23
Rainmaker
375,245
Doris Freeman
RE/MAX REALTY SOURCE - Jackson, TN
Broker/Agent, Realtor, Madison-Gibson-Crockett

Listing in the MLS will get a sellers home the most exposure, a pocket listing is just a FSBO and I'm sure the sellers have told mulitple people to bring their buyers and the agent with the good buyer for that home may never hear about the property without the MLS

Apr 23, 2014 02:10 AM #24
Rainmaker
303,139
Kate McQueen
CB&A Realtors - Cypress, TX
Tailored service for your real estate needs!

There was a very interesting thread in a real estate group on FB last night.  Seems the listing agent told a buyer agent that the only accepted offers would have to come from a specific agent (in other words if you are not THAT agent, don't bother to submit).  I think the pocket listing is rife with pitfalls and if handled incorrectly could put sellers and their agents at risk of litigation.  It's a marketing gimmick that will fizzle out, as most all fads to.  There are legitimate reasons for pocket listings, but in today'stoo many agents are using it as a primary marketing strategy, in order to hold an inventory that they can market with agents in their "circle."  This violates the Code of Ethics "cooperation" requirement.  I think we will see an end to this practice in the not so distant future.

Apr 23, 2014 02:47 AM #25
Rainmaker
51,206
Christi Hacker
Keller Williams Greater Omaha - Omaha, NE
Your Omaha Area Real Estate Specialist
In theory I understand the interest in a pocket listing from a seller's perspective. From the perspective of the licensed agent, there seems like too much risk for something to go terribly wrong and end up in litigation or a fair housing violation. No thank you.
Apr 23, 2014 04:02 AM #26
Ambassador
1,631,683
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

In listingsa that are public and are for all comers I don't think it matters if the listor is ethical. A recent survey done by some San Francisco area agents showed statistics where pocket listings sold for about $213,000 less on the average.

Apr 23, 2014 04:42 AM #27
Rainmaker
420,686
Michelle Francis
Tim Francis Realty LLC - Atlanta, GA
Realtor, Buckhead Atlanta Homes for Sale & Lease

Joe, 

Pocket listings are not my thing.  Now, having said that.  I do have a few owners who are would consider selling IF the right buyer price point comes their way.  They are not listed, but since we are always getting asked about any potential properties, sometimes this works.  I would still say this is different, but not sure how.  

Also, we just don't do dual agency, so any buyer's brokerage is GREAT with us.  We are not trying to be the only brokerage involved.

All the best, Michelle

Apr 23, 2014 11:14 AM #28
Rainmaker
2,189,557
Elizabeth Weintraub Sacramento Realtor Top 1%
RE/MAX Gold - Sacramento, CA
Put 40 years of experience to work for you

I suspect some sellers like pocket listings because they can ask an unusually high price and see if anybody nibbles without any actual consequences such as people wondering what's wrong with the house because it's been on the market forever or others laughing behind the agent's back about what doofus listed such a thing at such a ridiculous price, plus if they're not in a hurry to sell, what's the problem? Of course, they will probably get more on the open market but every seller has her own little quirks. I rarely get asked to take pocket listings but then I deal with fairly rational individuals most of the time.

Apr 23, 2014 11:19 AM #29
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