Appraiser and blogger Mary Thompson has really hit it out of the park with this post.
Sellers, want to see yourself get ripped off by selling your property without exposing it to the market?
Just fall into the "pocket listing" trap (or more gently put, "private listing"). It's a windfall for the agent who takes a pocket listing on your property. But it's a disaster for establishing comparable sales in your local market.
The point of this blog is to remind the real estate agent community that pocket listings are often absent from market data. This is the data that reputable agents and appraisers use to establish area values.
Of course, pocket listings are anticompetitive. Offices who offer pocket listings want to force you to visit their office in order to see all the inventory in your area. It's the only way they can hope to compete.
In northwest Wisconsin, most real estate brokers are avoiding this questionable practice, but we still see one or two local brokerages in the Apostle Islands area that play the shady pocket listings game.
I am sure most Realtors know what Pocket OR Private Listings are...If not Google it.
If you get these potential new listings and sell them within your office or Sphere before they even hit the market, you think great....Great for you, Great for the Seller..Right? Not so fast.
Appraisers will likely NOT be using these sales, which could be great ones for an Appraisal they may be working on for YOUR next sale. Appraisers will never know about these off market sales except when they search courthouse records for them. But the Reality is Appraisers will first use and need to use FMLS/MLS sales or sales that they can get all the data they need from a party to the transaction and it has to be confirmed by a second source. This is per FANNIE MAE.
If the Appraiser does not have more than one source to confirm sales information they cannot use it. Also if the home is not exposed in the open market for a reasonable period (for that market) such as in FMLS/MLS they cannot be used as they are not considered typical sales.
Appraisers need FMLS/MLS Data, Realtor information or another party to the transaction, such as buyer or seller in order to confirm the data they need, such as quality and condition of the home (which is known when the home is listed in FMLS/MLS via photos and comments). Appraisers need to know about seller concessions, they need to know if there were any other special stips involved with the sale or personal property that may have been included in the sale (as we cannot include such property in the appraisal).
So if you have several sales in your Company that have closed without being exposed on the market in FMLS, you may be shooting yourself in the foot if Appraisers are not using those sales due to the above reasons.