Real Estate Madness brings The Return of the Pocket Listing

Once upon a time in the Land of Realty, real estate brokers regularly gathered to share information about properties they were trying to sell. They agreed to compensate other brokers who helped sell those properties, and the first MLS was born, based on a fundamental principle: Help me sell my inventory and I'll help you sell yours. Some realtors however, kept a few listings to themselves, in their pockets, so to speak.

A Pocket Listing, also known as an Exempt Listing, is a listing that wasn't on the MLS. Instead it was essentially through word of mouth. Let's watch former CN blogger and TV celebrity Jenny Milkowski explains the advantages of a pocket listing:

http://youtu.be/An_BpHzCMXw?t=12s

These off-market listings have always been around though they were usually only for the rich and Famous. They were meant to be rare exceptions intended to keep your neighbors out of your business or provide a semblance of privacy during a during a divorce or after a death.

This type of sale has become more prevalent lately and is growing in popularity though some agents and brokers don't think that's good for buyers or sellers. And if agents and brokers are against something, you can be sure that something has some merit worth investigating further.

There's one really good reason to do a Pocket Listing that no one is really advocating and it goes back to how Relators, for good or bad, have gamed the industry to their advantage. Let me explain.

Since the bust, Sellers have been waiting for a good time to sell. You'd think that the improved housing market would encourage sellers to take advantage of the first good time to sell in many years.

Unfortunately, some would-be sellers, like my wife, bought at the peak of the market. Many bought with little or no cash down, or they pulled equity out of their home (my wife actually did put 20% down which seems foolish in retrospect). In many cases, sellers today will have still have to sell at a lower price than they could have realized had they sold before the bubble burst. Prices may never be that high again, at least not in the next decade or so -- much to our chagrin. In other words people like my wife who bought during the height of the boom are still screwed.

But there is another group of sellers who, while they did somewhat overpay for their properties, they didn't pay an extreme premium for their property. Perhaps some lucky combination of circumstances has put them in a position to unload their property today. Maybe they paid off their HELOC instead of borrowing against. Maybe they managed some extra principal payments here and there. These would-be sellers might actually have a shot at getting rid of their property and on with their lives without bringing money to the table. People like me, for instance.

Unfortunately, you really cannot get a clear picture until you put your place on the market. Yes you can run comps but that doesn't always give you the complete story. You really don't know what your place will sell for until you get a buyer to make an offer.

And that's where the PL comes in. I think the benefit of a Pocket Listing in this current post-Boom era is that it gives sellers a chance to test the waters and see if they really can sell their property for enough to free them from their mortgage. By having a Pocket Listing you can feel out the market to see if there actually is anyone out there interested in your home. If you get some nibbles, you negotiate a deal and list and sell the same day. If you don't get any hits, no harm no foul.

Realtors don't like that because they fear your property won't get maximum market exposure there's even less guarantee they will get paid than with a traditional listing in a down market.

it's really about leverage. Once you list your place on the MLS you're part of the game. Your agent can keep pressuring you to lower your price to get a sale. Even if you de-list, the record is still out there like a Scarlet Letter on it for many years.  A topic I will blather about on a future post.


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