David Rudd, Real Estate Pro in San Diego, CA

Pocket Listings: are they in the seller's best interest?

Asked by David Rudd, San Diego, CA Sat Jun 22, 2013

As inventory in San Diego has declined, the number of pocket listings have skyrocketed. While I understand the benefit to the listing agent, I have never taken a pocket listing approach to any of my listings. I accept a listing with the purpose of creating as much buzz as possible, with the most quality offers, resulting in the highest offer for my clients. When a listing is kept off of MLS, the house is not being properly advertised (my opinion).

So, for agents that utilize pocket listings, explain how doing so benefits your listing client?

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Answers

31
People throw around the term unethical a lot and don't really understand the term -

Here is your definition of unethical:
1. unwilling to adhere to proper rules of conduct.
2. not in accord with the standards of a profession:

In California (and New Jersey), dual agency is allowed by the rules/standards of the real estate profession, therefore, by definition, the basic practice of dual agency is ethical.

Pocket listings and dual agency do not promote unethical behavior. Unethical people promote unethical behavior.

Take the chip off your shoulder and go sell real estate.
3 votes Thank Flag Link Tue Jun 25, 2013
Not for the life of a listing. If a homeowner wants to do some work: get rid of clutter, minor repairs, re-paint, etc. before they are ready to show the home, I'll get a signed listing agreement starting that day and written permission from the seller to keep the home out of the MLS for 14-30 days, until the work is complete.

This gives the homeowner a deadline to work with and tests the waters as mentioned below and gives my marketing time to ramp up. If I haven't found a buyer in the time it takes to get the property ready it's just a crapshoot for me to try and find a buyer any way. Then it's off to the MLS and time to start marketing to agents and get that home shown as much as possible.

BTW, I usually don't do dual agency. I refer it out. The cost is cheap when compared with the alternative downside.

J.R. Thrasher
http://www.SanDiegoRealEstateVeterans.com
(619)929-0105
2 votes Thank Flag Link Thu Aug 29, 2013
The benefit is mostly to the seller. Often times a seller will want to use a pocket listing strategy to test the waters to see if there home will sell. Also if the event that it not sell there property will not be stigmatize as being listed and not selling.

In certain types of properties being off market is more attractive. It's weird but its true in some cases especially in the real estate investment and high net worth communities.

Another benefit to the seller is if they choose to refinance as a strategy to shore up their finances. If the property was listed on the market and didn't sell and they choose to refinance to hunker down and stay for the long haul they couldn't do it right away. The lenders would see that their property was listed recently and determine that they will not refinance a property that is going to be sold.
2 votes Thank Flag Link Thu Aug 29, 2013
Inventory is low, and buyers are asking for the "inside scoop!" Surprise!

I think we all know the difference between service and victimization.

I also think that going to the MLS and inputting your pocket sale as if it were an MLS-exposed listing is wrong.
2 votes Thank Flag Link Thu Aug 29, 2013
"If the seller's objective is the highest possible price and the best possible buyer, then a pocket listing is a terrible option. It's really that simple. "

The question does not provide the assumption that the seller's objective is to gain the highest possible price. In that circumstance, I totally agree with you Marc if highest possible price is the objective. BUT there are also circumstances in which a pocket listing is the best match with the seller's objectives or desires. And in some of these circumstances, the seller might not want to deal with the risk of a knucklehead agent sitting across the table and making the deal more difficult than it needs to be. Others prefer not to have strangers parading through their house and are willing to take a lower price to sell to avoid that charade. It's case by case.

As previously stated, the beauty of the RE Industry is that we all can practice our craft in the manner we wish.

There is no point in arguing over which is better. It is like flavors of ice cream. Variety and choices for the consumer are what are important in the marketplace.

The problem with the term "pocket listing" is that it implies I have something you don't have and won't get. Perhaps that is where all the emotion on the topic comes from. Also as pointed out, there isn't a single or clear definition of what a pocket listing actually is in the first place, making it even more futile of an argument. One might find their time better spent on a discussion on how to fix world problems. (Yes, that would be a sarcastic comment).
2 votes Thank Flag Link Tue Jun 25, 2013
Let's see if I've got this right.
Real estate professionals brow beat home owners to "price right' with tthe goal of selling quickly.
A rightly priced home, many of you attest, will sell within a week, often reported receiving multiple offers the same day.
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The 'special' buyer who really values the exotic mature foilage worth over $100,000 is two weeks away from a purchase decision. Do you really think the homeowner received the highest price for the home in the one day it was on the market? How are you certain one of the multiple offer buyers would not have resulted in a higher net for the selller because they would not have repair requirements or create a Fiat appriasal situation. You simply can not know. Just like you CAN NOT KNOW if a pocket listing will or will not benefit a seller.
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The home will be sold to one buyer and one buyer only.
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What are you actually calling a POCKET LISTING?
Pocket listing can mean simply a home that is not for sale.
A home that is possibly available for sale (bring a buyer and I'll think about it)
A home that is for sale but whishes to remain invisible.
A home this is for sale but sold via one agent only (an exclusive listing)
A FSBO that has a 'winkie' going with the agent down the street.
One could argues every FSBO is a pocket listing.
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EVERY post card an agent sends out that announces "I have BUYERS" or "Has the thought crossed your mind?" is trying to identify 'pocket listing,' they can convert to a listing. If conversion is unsuccessful, it becomes a secret home for sale, maybe even a pocket listing..what ever that may mean.
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What DOES 'benefit' a seller and buyer?
Have you asked a seller or buyer what is most important to them or are you relying on your 20 years of experence to answer that question FOR them?
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Right here on Trulia, an exceptional advertising playground, buyers and sellers are actually telling us what they want, what they value, what frustrates them and what creates for them the greatest fear.
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Just like door knocking, some real estate professionals are repulsed by certain practices and they are certainly entitled to cast judgement on what they do not understand. Just like the 'training, training, training" mantra so many believe and has statisticaly proven bankrupt, so will the sole reliance on single dimensional real estate sales practices that rewards those who practice PPP real estate with the added dimension of "REDUCE THE PRICE."
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Pocket Listing, done properyly, add excpetional value, as defined by the buyer and seller, to the resouces available to match a buyer to a seller as weil as present to those clients an exceptional resouce not availble except through the professional resources of area professionals....who participate.
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Without doubt a pocket listing can exceed all measures of success in real estate sales. But if you don't know, if you can not see, if the benefit to the buyer and seller excapes you, then this clearly is NOT the service you should attempt to offer a home seller. Such an agent will most certainly compromise the homeowners position.
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Isn't that what is so great about real estate? There are many, many ways available. If you don't like the one presented, you can choose whatever suits you. But those who can make it work, will make it work, and benefit from their vision. Have you forgotten the first impression of short sales? Well, we all figured out how to make it work...for a variety of reasons. Those list five words are important.

Best of success,
Annette Lawrence, Broker/Associate
Remax Realtec Group
Palm Harbor, FL
727.420.4031
http://RealEstateMadeEZ.us
2 votes Thank Flag Link Mon Jun 24, 2013
Sorry Annette,

This post is emotion, gobbledygook and equivocation. It also shows that you don't understand the basic principle of supply, demand, and efficiency of markets. I won't teach it to you here, but you need a basic course in economics and how prices are determined for any commodity. I won't even get into the ethics of a pocket listing. A pocket listing is an unethical listing if the sellers goal is to sell his home at the highest possible price to the most qualified buyer.
Flag Mon Jun 24, 2013
Great point.....

When is a "pocket listing" really a listing?

But what comes to mind is that not all customers want the sale of their home to be a public event. As we know this is counter productive to the sale process but when working with customers we often find that doing things "by the book" doesn't always meet the needs of the customer.

Bill
2 votes Thank Flag Link Sun Jun 23, 2013
Pocket listing are AWESOME!
They sell FASTER!
They sell for a MUCH higher price!
Both agents will rejoice. (yep, all you doulbe down accusers need to read that again.)
I understand many of you know only one way to sell a house.
Many of you are out of sync with what buyers and sellers really want.
Others are not.
Pocket Listing, as you think they are utilized may be as outdated as your 1992 Open House practice.
The secret to a successful pocket listing, and why they are extrememly beneficial to you BUYER and SELLER, is worth paying for.
2 votes Thank Flag Link Sun Jun 23, 2013
This is why I don't advocate imbibing in the late morning.
Flag Sun Jun 23, 2013
BeachBrokerBill -
"Who are we to define what is in any particular seller's best interest?"
That's an easy question...
- we are professionals who are supposed to know best how to market real estate
- we are the people being asked to invest in a potential transaction with no up-front compensation or guaranteed return on our investment
2 votes Thank Flag Link Sun Jun 23, 2013
I also do not believe in pocket listings. It promotes dual agency which is rarely perfect. I honestly don't think there's a benefit for my sellers. The only reason a seller should accept an offer from the buyer's agent is if it's the BEST OFFER.

Especially in this market environment, I don't for a minute believe pocket listings are in the best interest of the seller unless it's a celebrity client who is protecting their identity.
2 votes Thank Flag Link Sat Jun 22, 2013
John is right, (I say that a lot),
the Seller's reasoning is that they don't want it known that the house is for sale:
"What would people think?"
"I don't want the neighbors snooping around"
"I don't want to attract looky-loos and vandales."

Yes, some people are funny!
2 votes Thank Flag Link Sat Jun 22, 2013
David - I don't have to justify to my buyer why I'm doing a pocket listing, because I don't do them. Instead, the SELLER needs to justify to ME why I MUST do a pocket listing for them. If they insist and their reason isn't, in my opinion, in their best interest I pass on the listing.
2 votes Thank Flag Link Sat Jun 22, 2013
I agree with Marc P below. Pocket listings are not in the seller's interest if they want the true, fair, salable market value of their home. There are many, many variations of 'pocket listings', too.

There is the one where I know that I'm getting the listing in a day or two, I call my good buddy-agent that has clients looking in this area (or lives in the building) and offer it to him/her first. That agent has a buyer waiting, I put it on the MLS, click 'Enter' button, then I proceed to show it as SOLD a moment later, because I actually had it sold before I listed it. The seller never knew what happ'd but just got screwed out of a possible $40-100K price differential in the true market value of their home. Happens all the time. Happ'd to me last Sunday.

Now what do you do? Fight with every agent in your town? Start filing ethics complaints? Call the FBI? FREC? Attorney General's office?

GOOD LUCK.

Scott Miller
Realty Associates
Boca Raton, FL
1 vote Thank Flag Link Thu Aug 29, 2013
Ummm, seller sez, I want to sell for this price but I don't want every agent in the MLS walking through my home and I don't want to clean up and clear out for dozens of showings. The agent does their research and confirms through a detailed market analysis the seller's price is realistic and explains that the more agents who march through with buyers the better the odds for the highest possible price. The seller sez, I'm happy with your research, I don't want the inconvenience of multiple showings, please see if you can find a qualified buyer without all hullabaloo.

This is a case where the agent would follow the clients wishes and use a Pocket Listing marketing program to accomplish the mission - 1. Doing what the client wants. 2. Selling at current market. 3. Avoiding inconvenience for the seller.

As for the perception that the a Pocket Listing property is not properly advertised or positioned to attract the highest number of quality offers and therefore not being in the best interest of the seller I have question.

Suppose a property has been on MLS for only one day and has multiple offers. One could argue that there could be and probably is a qualified buyer or buyers who could not arrange their schedules to see the home the on that particular day. Buyers who could not see the home on day-one could be the buyer(s) who would have paid a higher price than the offers generated by day-one viewers. Would advising the seller to accept one the offers on the first day or wait till every possible buyer could see it?

The Pocket Listing concept is like the concept of a Hammer. It's a tool. If you use it wrong you break things or cause more harm than good. If you use it correctly it's a valuable tool. What's the big deal. Most Pros have lots of tools in their kit, they don't use them all all the time and the don't use them improperly. Use the tool correctly or don't use it. Simple.
1 vote Thank Flag Link Tue Aug 27, 2013
Bravo! - love the hammer analogy....problem is, so many people try to use one to pound screws.
Flag Wed Aug 28, 2013
Sorry to scare you. Not interested in a debate or your rejection. In CA like in your state, dual agency is acceptable by law and I find no reason to play the "holier than thou" role you seem to embrace. Life is too short and there is no peace in that mindset, always trying to prove to the world (or more like to yourself) that you are better than the rest and portraying yourself as something that you are not at the expense of belittling others. Find peace or a beach and relax.
1 vote Thank Flag Link Tue Jun 25, 2013
@ John - My point is that as professionals, we need to listen to what the seller's objectives are and provide them with options that can meet those objectives. A pocket listing may very well, in some cases, be one of those options.

Change the question to take the emotional component out: Foreclosure - when is it in a seller's best interest? There is no universal right answer. It is case by case, seller by seller - and in some cases, a seller may feel that foreclosure is their best alternative and that is the route they go. It is their decision to make. To universally state that a pocket listing is not in a seller's best interest or that they only benefit the agent is short sighted and one dimensional and fails to consider the seller's objectives. For me, I don't tell sellers what is in their best interest - that is for them to decide - I provide them with solutions and options from which they can choose.

@Marc - Actually, Annette is pretty darn sharp and knows her stuff. As they say, the finger you point at someone else points right back at you.

The application of generalities here makes many of the answers to this question just plain wrong in the world beyond Trulia. The experienced professional will look at the specific circumstances regarding the seller's situation and develop an appropriate sales strategy from there.
1 vote Thank Flag Link Tue Jun 25, 2013
Sorry Annette,

This post is emotion, gobbledygook and equivocation. It also shows that you don't understand the basic principle of supply, demand, and efficiency of markets. I won't teach it to you here, but you need a basic course in economics and how prices are determined for any commodity. I won't even get into the ethics of a pocket listing. A pocket listing is an unethical listing if the sellers goal is to sell his home at the highest possible price to the most qualified buyer. An agent who has been told that the goal of his seller is to achieve the highest possible price is acting unethically if he takes the listing as an exclusive. It's really very simple, but greedy agents who want to justify the good old time-honored "double dip" try to make it seem right, when it is obviously so wrong.
1 vote Thank Flag Link Mon Jun 24, 2013
The only person pocket listings might possibly benefit is the agent. They definitely don't benefit the seller who has permitted their property to essentially go un-marketed and in doing so has limited the number of potential buyers. Competition is what benefits sellers.
1 vote Thank Flag Link Sun Jun 23, 2013
Pocket listings not only hurt the home owner\seller by not getting the broadest exposure for their property but also hurts the industry and ultimately the buyer as they loose out on bidding on these properties

I understand why some brokers and agents are tempted to do pocket listings so they can double down on a deal but in my opinion you cannot have a fiduciary responsibility to two clients in the same deal with opposing objectives.

This practice damages the industry as a whole and is against MLS rules for a reason. To both protect the buyer seller as well as the reputation of our industry.

We have a strict policy regarding pocket listings as well as dual agency. We simply do not dot it.

While it is legal to do Dual agency in my opinion it is unethical and I would rather have my clients on either end of the deal get the full dedicated service that they deserve.

An educated seller would never agree or insist on keeping the property off the MLS.
1 vote Thank Flag Link Sat Jun 22, 2013
Ron is right about John being right.
But Cindy brings up an excellent point - pocket listings are breeding grounds for dual agency. Although dual agency is legal in California, 90% of the time either the buyer or seller is short changed in terms of aggressive and ethical representation. Unless buyer and seller have already worked out the terms of sale before calling a broker and just want someone to process the paperwork, dual agency is unethical and I'd be glad to debate that with anyone, anywhere, anytime.
I just received a solicitation letter in the mail from a Silicon Valley broker that included a list of about 20 deals he's done in one of the neighborhoods where I have a home (Los Altos Hills) and for half of them he noted that he represented both buyer and seller in the transaction. I ran about 10 of the addresses in the MLS, less than half were listed. This guy is the LAST broker I'd call to do a deal for me.
Pocket listings, dual agency... slippery slopes joined at the hip...
1 vote Thank Flag Link Sat Jun 22, 2013
Hi David,

Let's see, fewer homes to choose from, so low supply and high demand equals more buyers. That's great news for homeowners! More offers, right? No? How can that be in this market? Wait, what? My agent is holding on to my listing? Why would she do that? She's so nice, it must be because she's so selfless, she doesn't want me to be bothered by pesky buyers tramping through my home. And, her explanation of why it would be in my best interest that my home shouldn't be in the MLS makes so much sense! So caring.

Normally, I wouldn't answer so sarcastically, but the only reason agents keep pocket listings is to make more money off their sellers. It's so easy when buyers are fighting for properties; that's why it's increasing. Obviously they don't care about their fiduciary duty to their sellers, or they'd be marketing their property heavily, to get more and higher offers. They only do it to bring their own buyers so they can make double the commission, or take another agent's offer from their office for a broker financial incentive, or for brownie points from another agent they need in their business. Whatever the reason, it's self serving and unethical. The only way to protect sellers is to make dual agency illegal, as it is in many other states.

Warm Regards,

Cory La Scala, REALTOR
Independence Realty
Lic # 01443391
1 vote Thank Flag Link Sat Jun 22, 2013
I can't imagine why a seller would think this is to their advantage. They get limited exposure and the chances of their getting "true market value" decreases. In addition they permit the agent to work both sides of the transaction which while legal in every state should not be as it is clearly and unequivocally a conflict of interest despite any argument to the contrary. When we sign buyers and sellers up we assume a fiduciary responsibility and promise to do what is in their best inters ts when negotiating. Buyers and Sellers clearly have diametrically opposed positions, if on no other subject than price. How can one person in the middle (the "dual" agent) honestly work in the best interest of each client?

Sellers shoot themselves in the foot with pocket listings and it's business practices like this that foster the generally low opinion the public has of Realtors.
0 votes Thank Flag Link Thu Aug 29, 2013
Ron - let's go for pizza on this one.
0 votes Thank Flag Link Tue Jun 25, 2013
How did we get from "Pocket Listings" to "Dual Agency"?
Sounds like one of them "circle" things.
0 votes Thank Flag Link Tue Jun 25, 2013
Probably because pocket listings greatly increase the probability of a dual agency.
Flag Tue Jun 25, 2013
I reject the notion that the state provides ethical standards that meet the definition of truly ethical conduct. And I kind of think it is frightening that you allow the state to define what is ethical for you. But be that as it may. The state provided standards are a least common denominator, and someone who only rises to that level is scraping the bottom of the ethical barrel.

When the state allows the same person to represent the interests of both a seller and a buyer, both of whom are contemplating what is typically the largest purchase in their lives, then the ethical standards are WRONG, and need to be rewritten. When a buyer wants the lowest possible price and the best possible terms, and the seller wants the opposite, and a fiduciary attempts to serve contrary masters, the result is often the reason why the public thinks of agents as low level rug merchants. And often results in dissatisfied consumers, if not outright lawsuits. In fact, the most frequent cause of lawsuits in real estate is, of course, dual agency.

We need agents to stop looking at the minimum standards and move to much higher ground. Only then will the profession begin to achieve the level of respectability it deserves. But we will need better agents. Agents who are more concerned with advocating for their clients than hustling a two-for at the closing table.

So take the chip off your shoulder, and don't sell real estate. Instead, represent your clients best interests as a proper advocate and fiduciary. And guess what? You will actually make more money and get more referrals that a double dipping pocket agent who basically puts his interests above his clients - because the state says it's peachy.

Even the term "pocket" listing sounds unseemly and more like a hustle than anything else. "Pocket" listing. Listing "in the pocket". Out of view. Off the radar. Private and unseen. Oh but the state said all of this is cool, so we're good to go. Come on in to the pool for a double-dip kiddies! The water is fine!
0 votes Thank Flag Link Tue Jun 25, 2013
And sometimes the seller's objectives are wrong and need to be corrected by professionals who know better. The same as is seen with lawyers and accountants. When a seller is irrational, we should teach him what is in his best interests. Just because a seller has an objective does not make that objective correct or good. We are the pros, it is up to us to teach the public how to properly sell their real estate.

Honestly, not wanting people to "parade through their house" is stupid. That is precisely what they want, whether they like it or not, whether they know it or not. Parades yield offers and accomplish the basic objective, selling the house, quickly and efficiently and without dual agency.

Pocket listings lead to unethical behavior in most cases. Unethical dual agencies where the pocket agent misleads the seller and a hapless buyer that he or she is representing both of them, when in reality he is representing nobody but himself, and carefully guiding the transaction through the swamp to achieve the real objective: DOUBLE DIPPING!
0 votes Thank Flag Link Tue Jun 25, 2013
If the seller's objective is the highest possible price and the best possible buyer, then a pocket listing is a terrible option. It's really that simple.

If the objective is irrational, such as hiding the sale of the asset, then a pocket listing might be chosen. If the seller wants to discriminate and not sell the asset to a particular group, then a pocket listing might be chosen to hide the selling process from the public.

Actually, many reasons for choosing a pocket listing are irrational, or even evil. I didn't say all, but I did say many. Which is logical. If a seller chooses a route that is guaranteed not to provide the highest price and the best buyer, there is usually a reason behind it, and that reason is usually going to be problematical, or worse.
0 votes Thank Flag Link Tue Jun 25, 2013
David, I agree with you!

The goal of the listing agent should be to get the home sold for the highest possible amount in the least amount of time. Hiding the listing in his/her pocket does not seem in accord with the goal they should be aiming for.

Pocket listings do NOT benefit the seller ( in my humble opinion).

Best Regards,
Kawain Payne, Realtor
0 votes Thank Flag Link Sun Jun 23, 2013
Pocket listings are a consumer rip-off. And so, for that matter, is dual agency. The fact agents are willing to defend one or both is proof of the low ethical standards of this industry. Which is why the public treats real estate agents like they do rug merchants and used car hustlers. We need to change that. Pocket listings and dual agencies should be last resorts, and should always be avoided by any agent interested in promoting ethical standards for themselves and the industry at large.
0 votes Thank Flag Link Sun Jun 23, 2013
I'd go a step further, David - how is a "pocket listing" a listing? You have a seller that "says" they'd sell, under "certain conditions," but they won't put that commitment on paper. Meanwhile, the market is hot and you have sellers who are willing to fill out MLS paperwork . . .
0 votes Thank Flag Link Sun Jun 23, 2013
Who are we to define what is in any particular seller's best interest?
0 votes Thank Flag Link Sat Jun 22, 2013
It is our duty as industry professionals to advise the seller on the best course of action for them based on our experience and knowledge of the market. Thats what they pay us for thats part of our value.
Flag Sun Jun 23, 2013
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