We have noticed that several homes have sold lately before they have hit the MLS. Are these “pocket listings” a good way to sell your home?
If a home sells before it hits the MLS, as a “pocket listing” as they are often called, it is highly likely that the seller could have sold the home for significantly more money. The MLS exposes a home to a large number of prospective buyers in a very short amount of time. This widespread exposure is what has the potential to drive the price up for the seller.
A “pocket listing” is more like a secret sale. The agent you are dealing with may have a buyer that is willing to buy your home, but if it’s that easy, chances are you could have received more money if the general public had a chance at your home, and a bidding war could have possibly ensued. If an agent is being straightforward with the seller and discusses the strategies involved with using the market pressure of the MLS to drive in a higher price, it’s a rare seller who will willingly leave money on the table.
So why do we occasionally see these seemingly “secret sales” taking place? Some sellers perceive these pocket listings as a good thing – some don’t want to be hassled with multiple showings, some don’t want the general public to know their home is available for sale. Some agents choose this strategy because they want to keep all of the commission for themselves and that only happens if their own buyer is the successful bidder. If a seller’s goal is to maximize financial return, however, a pocket listing, or accepting an agreement of sale before the home is marketed in the MLS, is rarely the best strategy.
So no, my 17 years experience indicates that a pocket listing is usually not in a seller’s best interests. The highest returns I have seen sellers achieve occur in scenarios when they have used strategies to maximize the excitement within the buying community through proper pricing, excellent conditioning and staging and full MLS exposure.
Dear Kathe: We will be selling our home within the next year. We are telling our friends with the hope that we can find our own buyer and sell our home ourselves. Do you see any pitfalls with our strategy?
I am a real estate broker. What do you think the answer will be? You absolutely should not try to FSBO your home! But why not? Because it is not in your best interests. You will be better off if you hire an experienced, full-time agent to represent you. Here’s why:
- You will not end up with more money if you sell your home yourself. If its that easy to sell yourself, chances are you underpriced your home. And if that’s the case, you would have been better off with it listed in the MLS – with the incredible amount of marketing we bring instantly to your home, if you are willing to price it that reasonably, we could have likely generated a bidding war.
- The buyer will negotiate a price that gives him the full benefit of the fact that no commission is being paid. In other words, if your home could have sold for $500,000 through an agent, your buyer will expect to only pay 94% of that or $470,000. You may be thinking “that’s ok – I am no worse off than if I had hired an agent.” But why put yourself through the hassle when for the same net, you can have our expert marketing and negotiating working for you?
- You have no one looking out for you. How do you know if the price they are offering is fair? How do you know if the terms are appropriate – is the hand money high enough, for example. How can you be certain that they are really qualified to perform? How will you respond when the inspector produces a laundry list of deficiencies, as they always do?
- FSBO homes have no urgency. The way we generate bidding wars and nice realizations for our sellers is to create a sense of urgency by marketing your home everywhere instantly. FSBOs simply don’t have the same urgency and the longer a buyer can think about your home without worrying that someone else will snap it up, the less likely they are to buy it.
Just like you wouldn’t operate on yourself to try to save a few bucks, it is unwise to try to sell your own home. Even trying will “burn your market” and make it difficult for us to put into place an effective plan once you decide you have had enough. Start with a well thought out strategic plan—every house is different – every seller’s needs and motivations are different – there is no one size fits all when it comes to selling a home. Buying and selling homes is far more complex than we make it look. Don’t skimp when it comes to professional advice.
As the market has improved this spring, Sellers are occasionally considering selling their homes themselves, without the advocacy of their trusted agent. The rationale seems the same – save the commission. And yet, while a commission is in fact not paid, it is paid in reduced realizations. You see, buyers are very savvy – they know what the market will bear and if you, the seller, do not have to pay an agent, they expect to realize the benefit of a reduced purchase price. Buyers also know that if they can get you to start to walk down the FSBO road with them, you will be unlikely to back out even if they are less than reasonable because you will fear losing the deal you appear to have happening and will be very unsure about whether there will be another buyer. It is a rare day that we see FSBOs actually achieve a net sales price greater than what we, agents with the power of big advertising dollars and years and years of strong negotiating experience, can achieve. So in the end, your net sales price is the same, and yet you have to deal with all of the tricky little details yourself. Details like making sure you actually have a valid contract (not as simple as it might seem), to working your way through financing and inspection issues, to working to make sure you close on time. All of the jobs that we, the agents do – attending to every last detail to make your transaction smooth sailing – you must now handle on your own – and yet you are getting nothing for your effort because your net is no higher, and may be lower, than we agents could have achieved. If your house is “hot” enough to bring a FSBO buyer to the table with minimal or no advertising, imagine how much excitement we could generate with the power of our advertising behind your home – these days, a bidding war is even possible!
Statistically, FSBO transactions also fail to close more often than brokered transactions. So if it is important to you to close (and you are not just fishing for an offer if someone happens to come along), consider this as you decide how to proceed.
I can cut my own hair to save a few bucks – but it wont look as nice as it would if I went to the salon – I can paint my own walls (try to ignore the messy spots) – I can invest my own money (and watch it stagnate) – I can suture my own wounds (and end up in the ER with an infection). I can do almost anything – but not as well nor to as successful an end as someone with years of experience. The same is true for real estate. Years of transactions and we, the trained professionals, make it look easy. Before you don your real estate cap, take the time to think it through and ask yourself whether you are absolutely certain that you will actually come out ahead on your own. Statistics are clear that you will not.