By Rick Hoffman October 19 at 9:00 AM
Rick Hoffman is regional vice president of Coldwell Banker Residential Brokerage in Washington.
There has been a lot of buzz lately about "pocket listings," sometimes called "private placements." This is a method of selling a residential property without putting it in the multiple listing service (locally, MRIS), holding open houses or otherwise publicly promoting the property for sale. Instead, the agent markets the listing directly to a small network of select individuals and agents.
On the surface, a pocket listing or private placement may seem appealing. Sellers believe they'll enjoy greater privacy and security by limiting the number of people touring their homes. And there's also a feeling of exclusivity, which some sellers believe correlates to a higher sales price.
Let's think about that last part for a second, though. How would reducing the number of prospective buyers seeing a home result in a higher price? Cartier doesn't open stores down back alleyways — they're in high-traffic locations designed to garner the most exposure and greatest number of customers. It's simple economics: Broader exposure generates more interest which results in a higher sales price with better terms for the seller.
The reality is that pocket listings don't benefit the seller — they benefit agents and their brokerage. The most notable aspect of a private listing is that the transaction typically remains completely within the listing brokerage, maximizing its commission. That alone should be enough to give any consumer pause.
You see, because they're not put in the MRIS or publicly marketed to consumers or other brokerages, pocket listings usually result in the listing brokerage also representing the buyer — which means double commission. If fully and properly disclosed, that's not illegal, but it does raise a red flag as to whose best interest is really being served.
When you sign a contract with an agent to sell your home, that agent is promising to represent your best interests in the transaction. In fact, Article 1 of the National Association of Realtors Code of Ethics requires agents to "promote and protect the best interests of the client." State laws typically require the same.
So what are a seller's best interests? Most sellers want to get the highest possible price for their home, in the shortest amount of time, with the best contract terms and a minimum of hassle. What makes that possible is appropriate pricing, maximum exposure and professional assistance.
When a home is positioned as a pocket listing, only a very select few people will even know it's for sale. And because those buyers know that competition for the property is small or non-existent, they're not incentivized to make their best offer. Some agents will tout that their pocket listings fetch full-price offers, but had that property been exposed to the largest possible pool of buyers, it may have resulted in multiple offers, a bidding competition or better terms.
A pocket listing can also take longer to sell, or might not sell at all, since the majority of potential buyers aren't even aware it's for sale. The first few weeks are crucial when selling a home — reaching the highest possible number of buyers during this window is the best way to achieve fast, optimal results. While the pocket-listing seller may get offers from local buyers known by their agent, they're missing potential offers from buyers throughout the D.C. metro, across the country and around the world. They are, quite simply, leaving money on the table.
In some cases, though, a seller might not care about getting the absolute highest price, with the best terms, in the shortest amount of time. For some sellers, the primary concern is privacy, whereas others may just want to avoid the hassle of keeping a house ready to show at a moment's notice for people who may or may not be qualified to buy.
These are issues regularly and efficiently addressed by experienced, professional agents. Showings can be strictly controlled and managed, with the listing agent present at each one and advance pre-qualification required. Having a pocket listing doesn't provide any greater protection, it simply dramatically reduces the pool of eligible buyers to whom your home is marketed.
An agent who is truly acting in your best interests will be able to successfully market your home to the largest possible number of qualified buyers worldwide to achieve the maximum sales price, while managing the process to ensure your complete privacy and convenience. Why would any knowledgeable seller settle for less?
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