What is a “POCKET LISTING” in Residential Real Estate? Is it bad? Is it good? #52

#realestatebrokerage #pocketlisting #realestate

Intro : A Washington Post article discusses the “rise” of pocket listings and the possible consequences.

A “Pocket Listing” or an “Exclusive Listing” or “Private Listing” is a home that is for sale but not marketed through cooperation with other brokerages. They are “exclusive” to the brokerage that has them.

A rise in pocket listings would be really hard to quantify. The article mentions a methodology that they used, and it does show an increase…but this might be confirmation bias. We certainly know that the term pocket listing has risen in popularity over the past few years within the industry.

Why would a seller want to list their home as a “pocket listing”?

It’s said that it provides some shield from potentially embarrassing issues, such as divorce, murder, bankruptcy, and some level of security.

Who would mainly benefit from this arrangement?

Real estate brokerages
a. They can advertise to buyers that they have homes available for sale that no one else does.
b. They will typically get both sides of the commission on the sale, the buyer and seller.

What are some of the negatives you think about this arraignment?

1. Discrimination. It’s the number one reason why we won’t take pocket listings at Deerwood Realty. When you can determine who buys a house and who doesn’t….you can determine who sees the house for sale and who doesn’t….that’s a problem. I can think of two ways discrimination could occur.
a. Underrepresented groups never even get the opportunity to see a home that is for sale in a particular neighborhood
b. Should they write an offer, who is to say that the seller can’t just say no, or ask for a higher selling price, solely because the characteristics of the buyer?

2. The house, especially in this market, will sell for the highest amount when it is exposed to the most people. When you artificially restrict the pool of available buyers, you never know what kind of offers you will get. In this article, a house sold for 130k over asking because it was on the market and after it stopped being restricted.

Why do sellers do “pocket listings?”

1. It sounds cool. So you are so important that you can’t just sell your house to anyone….it has to be sold to someone who knew something that everyone else didn’t.
2. There could be a legitimate “exclusivity” issue….as an example, you are a movie star…you don’t want 10,000 people walking through their house. I would counter though, that on high end listings, the listing agent usually is required to be at every showing, and buyers also have to prove they have the cash to buy.

Why do buyers look at “pocket listings?”
1. It seems pretty cool to buy a house no one knew was listed
2. It’s entirely possible that the house is priced to the low side…or a shrewd broker owning both sides of the deal makes it look like a discount versus the open market. But you aren’t going to know because no one else had the chance to make an offer on it…or limited exposure.

Are there ways to protect yourself when looking at a pocket listing?

a. If you are a buyer, try to find comparable sales. That’s going to be tough because you are represented by a buyer’s agent that may or may not be on your side.
b. If you are a seller, you really have to consider under what circumstance a pocket listing could actually benefit you. You already know the more exposure a house the best chance for a good offer. Limiting exposure is rarely a great choice.

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Source: https://www.washingtonpost.com/realestate/competition-is-getting-nasty-rise-in-private-home-listings-benefits-brokerages-hurts-buyers-and-sellers/2021/07/07/4ad6a0d6-ca00-11eb-81b1-34796c7393af_story.html