Quick and quiet: What to know about pocket listings

You won’t always find every for-sale home on the MLS. Here are the pros and cons — for seller and buyers — of off-market listings.

By Erik J. Martin CTW Features

Contrary to popular belief, not every home sold through an agent or broker has to be posted on the Multiple Listing Service. Some sellers and their representatives choose a more unconventional option: the pocket listing.

A pocket listing is a property for sale, usually involving a listing agreement signed with an agent or broker, that is not advertised or entered into the MLS. Essentially, the agent has the deal in his or her “pocket.”

Also referred to as “quiet listings” and “off-market” properties, pocket listings have been around practically since the inception of real estate sales, but they have grown increasingly popular in the last few years in many markets where housing inventory has tightened.

In five northern California markets, for instance, off-market listings increased from 12 percent in 2011 to 15 percent in 2012 to 26 percent in the first quarter of 2013, according to MLS Listings Inc., a NorCal MLS.

John Barrentine, CEO of RED Real Estate Group at Keller Williams Realty in Los Angeles, says there are advantages to selling off-market.

“The seller often feels more in control of the process and often receives more concessions from the buyer. The property may be seen as more exclusive, and the seller may have an opportunity to sell at a higher-than-average market value because the buyer may be willing to pay a premium for the opportunity,” Barrentine says. Pocket listings also provide more privacy to sellers who desire limited showings and access to their property. Hence, good candidates for pocket listings include high-profile and public figures like celebrities and politicians, people who need to move quickly, those who already have a buyer lined up, and sellers who wish to sell under the radar due to private issues.

“A family member who must sell a home because of a recent death in the family may not want strangers going through the home during this time, or a couple who must sell as part of a divorce decree may just want to get the sale over with,” says Sandy Neumann, marketing director and agent with Neumann Realty Corp., Jacksonville, Fla.

Buyers also may benefit from pocket listings because they don’t have to compete with multiple offers, which can drive up the sales.

The disadvantages of pocket listings, however, can be strong enough to dissuade sellers and agents from taking this route.

“When you don’t put your property on the MLS, it’s not available for the world to see,” says Melissa Zavala, broker with Broadpoint Properties in Encinitas, California. “Other agents cannot bring buyers, so the buyer pool is very small.” Consequently, the home may take longer to sell.

Also, “you’re at the greater mercy of your agent to locate a buyer, since no other agents will know the property is for sale,” says Glenn S. Phillips, CEO of Lake Homes Realty in Birmingham, Alabama.

Perhaps the biggest reason why many sellers forego pocket listings is that — despite the seller’s hope that the property will be seen as a unique and limited opportunity for a buyer — this strategy can often result in a lower sales price.

“If there were competing offers, that could bring a higher sales price for the seller,” Neumann says. “For buyers (of pocket-listed properties), they have less negotiating power. If the buyer really wants a property without competing, he may have to give in to some of the seller’s terms to secure the deal.

“Negotiating the sale of a pocket listing requires a delicate balance to please both parties,” Neumann says.

© CTW Features