Off-market,
private, or pocket listings are becoming more and more commonplace as sellers
are somehow being persuaded to keep their properties off of the Multiple
Listing Service during this hot real estate.
Generally, they are being told that by keeping their property listing ‘private’
their privacy will not be invaded by troops of public gawkers traipsing through
their homes, and that they will not have to hassle with signs, lock-boxes, and agents
showing their homes, etc. Whatever the
rationale that is being sold to sellers it is unfortunate because they are
actually unknowingly leaving large percentages of potential profits on the
table.
In the real
property market, today's victims of secret or private sales are homeowners that
are letting their property be marketed at least 10% under real market value. Dishonest brokers/agents who are playing coy
first gain the sellers' confidence then encourage them that it would be most
effective to keep their property off the Multiple List Service
("MLS"); to maintain personal privacy and stay away from potential fraud;
and limit the inconvenience that comes with marketing one's home like signage,
broker tours, lock-boxes, etc.
The claim
that some brokers and agents are using to convince sellers to have a “private”
or “pocket” listing/sale is to guarantee buyers to their clients. However, in a
lot of instances those guaranteed buyers are coming from the broker’s and agent’s
own offices or circles of close net friends which dramatically reduces exposure
to the marketplace, but allows for the brokers and agents to possibly
double-end the transaction, or “keep the whole deal in the office.”
What they also
fail to tell unsuspecting sellers is that exposing the property on the MLS
places it in front of over 14,500 local networked broker and agent members, all
of whom then have the possibility to work with the property. Limiting exposure to the MLS is by definition
limiting the marketability of the property.
And coincidentally these “private” or “pocket” listings are common when
the real estate market heats up and there is limited inventory.
It is
estimated that in Santa Clara county residential properties on the MLS sold for
13% more than “private” or "pocket" or “off-market” listings in 2012.
It is a
violation of a listing broker's fiduciary duty to the seller to keep the home off
the MLS unless the homeowner, after being fully and faithfully informed, has a
legitimate reason for not marketing the property to all brokers and agents in
the MLS. It is always in a seller's best
interest to have a massive advertising of a home, which encourages and promotes
bidding wars and greater sales prices. Sellers who are convinced to have an
“off-market” listing probably do not recognize the concomitant advantages of
placing their home on the MLS, so they acquiesce and go along with their broker
or agent’s recommendation based on guarantees from their broker/agent that they
will get either equally as good a sale price by doing so; all without the
hassles of signs, tours, brochures, lock-boxes, etc.
Broker and agents
have the duty to exercise care, integrity, fair-dealing, and loyalty for their
customers. This task consists of performing
their best possible acts and conduct to acquire the greatest sales price for
the home. Recommending “private” or
“pocket” listings is typically NOT in a seller’s best interests. There are however exceptions or rare occasions
where these type sales make sense for sellers, but they are extremely rare; not
10-15% of the active marketplace.
It is
estimated that as the local real estate market began warming back up,
exclusions from the MLS raised considerably, almost doubling for the first
quarter of 2013 as compared to the same timeframe in previous years. In 2012, homes not put on the MLS amounted to approximately
15 % of the market or $340 billion in sales volume. Incredibly, at a conservative 10 % decrease
in fair market value (due to private or off-market listings), that would equate
to $340 million in potential lost seller net proceeds – all “cloaked” in the
name of privacy and/or hassle free transactions.
The MLS was designed
to subject properties to maximum exposure leading to a maximum sales price for
the specific timeframe. Leaving a
property off of the MLS dramatically limits exposure – doing exactly opposite
of what a seller should be doing.
The brokers
and agents who recommend “private” or “pocket” or “off-market” listings should
be held to answer with specific reasons and factual details for this
recommendation and be asked to provide verifiable proof that their
recommendation will lead to a maximum sales price for the seller. The bottom line is that a broker or agent
will never be able to prove that limiting exposure of a home by preventing the
listing on the MLS will maximize the sales price.
Shelly Roberson
Alain Pinel Realtors, Palo Alto, CA
23 Years Experience, 600+ Closed
Transactions
1-650-464-3797
