This post is about “pocket listings” or “off-MLS” listings. At first glance it may not make sense to the average observer as to why a seller would want to sell their property and then request that their real estate professional not put it on the MLS (multi-list service). After all, having your property listed on the MLS gives it great exposure. What would the benefits be to a seller if they decided to sell their home as a pocket listing?
With competition high for the low inventory we are experiencing right now, you’ll be hearing a lot more about these “off-market” listings. As with any decision, there are pros and cons for both buyers and sellers that you need to know about. In this post, I will explore things from the seller’s perspective. When a REALTOR® is hired to sell a property, a listing agreement is signed by the owner. The REALTOR® or real estate agent that was hired then displays their new listing on the MLS. This allows the hired professional to share the newly listed property with their own office and other brokerages, giving the property a broad base of viewers.
The NAR [National Association of REALTORS®] policy of allowing brokers to exchange content or to display one another’s listing on their website is known by several names. The most common one is IDX [Internet Data Exchange] or Broker Reciprocity ℠. It’s a powerful tool to attract more clients. Prior to this policy, there were three basic ways to share information.
1) List only the properties the brokerage represented directly.
2) Offer a link on their website to realtor.com or other third party site.
3) Offer a link on their website to the local MLS or association site if it had consumer-searchable property listings.
Some of the larger firms would also pool all of their branch listings into one searchable database.
So, what are some of the reasons a seller would want their listing unlisted, or to “stay in their agent’s pocket”? There is no agreement so their agent has no agreement to share the property with other agents or to pay other agents to bring buyers in.
Seller’s Reasons
• Don’t list their property because of privacy reasons; politicians, celebrity-types, persons in the middle of a divorce, and others.
• Don’t want people coming through their home.
• Have a particular buyer in mind and therefore feels they don’t need to list or shop their property.
• Some use it to “preview” the market with the intention of listing on the MLS later.
• Some sellers don’t realize that just because the property is listed, it is not mandatory to put a sign in the yard. Some sellers feel that if they list, there will be a sign.
• Sellers want their agent to work hard within a certain intimate network (especially if the agent is in a large brokerage). The seller feels that his/her property will sell quicker and with less hassle.
• The seller usually negotiates a lower commission because they are not utilizing the MLS. The seller thinks they will save money.
I’m sure you can quickly see that there are mostly cons to this option for sellers. Keep in mind, this practice is not legal everywhere, but it is here in Florida as long as the seller’s agent explains all of the pros and cons. Then our MLS needs a standard seller exclusion form (Seller Instruction to Exclude Listing from the MLS) signed and on record. If you are a seller, be sure you fully understand what you are signing and the adverse consequences outlined in the form of not listing your property on the MLS.
These off-market listings may negatively impact real estate values; mortgage lenders need appraisals before deciding whether or not to lend to a buyer to buy your house. Appraisers research available local comps. Not all off-market listings are entered into the MLS database once the sale is complete. This makes it a real challenge for appraisers to find really good comps to determine the current market value of a property on the lender’s behalf. Without this vital information, especially if there are a lot of off-market sales in a given area, it’s also more difficult for home sellers and their real estate professional to determine an appropriate listing price.
According to the NAR, 90% of homebuyers start their search online. All MLS Members can take advantage of the data brokers have contributed to the system. Third party sites are notorious for slanting data and not updating their information in a timely manner. Some have an “agenda” all their own. This can mislead or confuse buyers. The MLS data can often display more data fields than many current popular sites. When consumers visit the web sites of reciprocal brokers, they will stay longer because the brokers have more listing data to offer. To decide not to list your property on the MLS will take serious consideration by you, the seller, and your agent on a case-by-case basis.
The bottom line is that home sellers should be wary of any hard sell tactics by brokerages to offer their home as a pocket listing. This potentially gives one broker control over both sides of the transaction and a good shot at what’s known in the real estate business as a “double” commission. If you are experiencing this, here are some questions you need to ask your broker or agent:
What are your intentions? Are you going to offer compensation, commission, to another agent if they bring a buyer? Are we going to sign a listing agreement?
If they want to say, ‘If I find you a buyer, will you pay me this amount and not sign anything?’ Then you should see red flags everywhere! Watch out.
My next post will explore pocket listings from a buyer’s perspective.