'Pocket listings' surge in popularity
WASHINGTON — The housing market is crazy hot: Some houses sell within days, sometimes within hours, of listing. Then there are the growing numbers that sell even before they hit the market — sold through a technique known as "pocket listings."
What's a pocket listing? Essentially it's a private, "off-market" listing, often of short duration. Instead of putting the house on the local multiple listing service — which exposes it to a vast number of shoppers and agents — agents restrict access to information about the house to their own buyer clients or colleagues in the same brokerage, hoping for a quick, full-price sale.
Pocket listings are surging, real estate experts say, because of low inventories of homes for sale in major metropolitan areas, strong buyer demand and low mortgage rates. This combination has made control of upcoming new listings a powerful, highly profitable asset for agents in the most competitive sellers' markets.
If agents can sell their off-market listing to a buyer they bring in on their own, they can collect the entire commission rather than split it with another agent. If they can sell it through colleagues in their own firm — even at a slight discount to regular commission rates — the full commission remains inside the brokerage.
Top brokers in some highly competitive markets say pocket listings are becoming a significant factor in the business. David Howell, executive vice president of McEnearney Associates, a large brokerage in the Washington, D.C., area, says he heard a recent estimate that such listings may now run as high as 20 percent nationally. Glenn Kelman, CEO of Redfin, an online real estate firm, said "we are seeing more pocket listings across the U.S. In Boston and Los Angeles, we also see listing agents refuse to allow any showings of the home until the weekend open house."
Real estate executives are critical of pocket listings. They argue that by restricting access to information about homes available for sale to small numbers of potential buyers, agents who engage in the practice are not fulfilling their core duties to their seller clients and not obtaining the highest possible prices.
Some agents, however, argue that there is a good case for keeping things private: Sellers may not want hundreds of strangers tramping through their homes. Others just want to get the transaction done quickly at an agreeable price — not a bonanza — and don't see the need for Internet exposure. Still others say large brokerages that are prominent in the upper brackets of their local markets have agents who know hundreds of potentially interested buyers.
Tom Heatherman, communications director for Michael Saunders & Co., a Sarasota brokerage with 600 agents, says his firm conducts weekly "caravans" for its agents to view homes not yet on the MLS but scheduled for listing by the company later in the week.
In this spring's atmosphere of "feverish" buyer demand, he said, the firm's agents often are able to sell these houses "before they even make it to the market." In fact, the company's ability to market first to its own large pool of agents is a key reason sellers choose Michael Saunders & Co., Heatherman said.
Bottom line: If you are thinking about selling, be aware that pocket listings restrict the audience for your property, and possibly your maximum price. If that's fine with you, and you understand the potential conflicts of interest when brokerages represent both the seller and the buyer in a real estate transaction, then go for it.