Who really benefits from a home sale that never hit the MLS?
We ponder this question all the time. Buying and selling a home is one of the most important decisions we make in our lifetimes and it is almost always an emotional one. The feeling of being able to get something that no one else has, can definitely trigger adrenaline and lead to making an emotional purchase. Is that really in a buyer’s best interest? And, sellers, stressed by the thought of keeping their house clean every day, would do almost anything to get their house sold before it ever hits the market. Are they really getting the most money?
With the presence of sites like Zillow & Redfin, the MLS is everywhere! In order to remain relevant, some agents and brokerages have found that it is to their advantage to hold listings off the market. There are even company apps that exist for the sole purpose of trading properties in-house without the public ever knowing about them. Is putting your home on one broker's private listing app really enough exposure to determine whether you are getting a market price for your home?
Buyers do come to us for listings that they can’t find online. This is why we go on broker tours every week and attend every office meeting…to get the scoop! There is nothing better than getting a client into a listing that no one else knows about, especially when they have been waiting for a particular style or feature and we have not been able to find it on the market. Then, there are also times when a home comes on the market as “sold before processing” and our buyers are upset (putting it mildly) that they didn’t have a chance to bid on the home. We totally understand their frustration, but as hard as we try, we can’t always be the first to know. One thing is for sure…to purchase a pocket listing means paying top dollar. There is very little negotiating when a home hasn’t been exposed to the market.
For sellers, we believe that by limiting your reach, you aren’t getting in front of the most people and risk selling your home for less than you potentially could sell it for on the open market. Our philosophy is to pre-market homes for a limited time in hopes that there is someone out there who is waiting for that exact home and willing to pay (or even over-pay) for it. Pre-marketing is a great way to test the market without accruing market time. If pre-marketing efforts do not result in a lot of activity, the price may need to be lowered before going on the market. The truth is, these pre-market deals often fall apart. Buyers in these circumstances make emotional decisions, go under contract on a purchase and end up backing out after the home inspection because they feel like they are overpaying or that they were rushed into making a quick decision. For most sellers, it’s still a risk worth taking.
The practice of “pocket listings” and private apps might not be allowed forever. According to Inman Select, government regulators were reportedly looking into this practice of “secret listings”. Our local MLS is trying to take a progressive approach with the creation of the Private Listing Network. According to our MLS rules, once a listing agreement is signed, the listing must be placed in the Private Listing Network before any marketing can be targeted to the public. The Private Listing Network is part of the MLS, but only agents have access to the information.
Overall, we have mixed feelings about the “pocket listing” concept. We recognize that sellers will never know if they got the most amount possible and buyers might sometimes be overpaying. We want our clients to feel completely confident in every aspect of our services and in the decisions they are making. The pocket listing concept doesn’t always create the level of comfort we strive for. We’d love to hear about your experiences with pocket listings and how you feel they are perceived in the marketplace. Please feel free to email us or leave comments on our Facebook page.