Pocket Listings Are Bad
Pocket Listings have been getting quite a bit of talk lately in the REALTOR community. What was once considered shameful and unscrupulous has now become an Advanced Marketing Technique.
What Is A Pocket Listing?
A Pocket Listing is a new listing that has not been put into the MLS for other REALTORS to be able to bring a willing and able buyer to purchase. This means that the REALTOR gets a chance to market the property to their sphere of influence in an effort to supposedly “get the home seller a higher net” by not paying the cooperating commission. From the buyers perspective, in theory, they could reap the benefits of the “saved commission” if the seller were to still end up selling the home for the price it would have sold for through the MLS.
Why Does Being Listed In The MLS Matter?
One of the main purposes of the Multiple Listing Service (MLS) is that it opens agents and brokers up to sell other agents and broker’s listings with the guarantee of being compensated. In the old days, if you worked with a particular real estate broker, you had to choose between that broker’s listings. The MLS is an agreement between real estate brokers that say “if you sell one of my listings, you will be paid X”. The commission offered to the agent that would bring the buyer is written out and advertised. The MLS is responsible for holding the listing broker to pay the agent or broker that brings a ready, willing and able buyer.
This worked out smashingly for the general public because if you were a seller, your home could now be sold by ANY real estate agent or broker (who participated in the MLS). From the buyers’ perspective, you could choose an agent that you like and trust and they would have the ability to sell all listed properties. Because the MLS is a formal agreement between real estate brokers and the agents that work under their umbrella, all listings they take must be listed for sale—with a cooperating commission.
Today, discount real estate brokers are changing the landscape of listing homes for sale. They are offering a competitive commission to the real estate agent that brings the buyer, they just charge less on the listing side of the transaction. They claim to be able to do this by trimming many of the traditional but less effective real estate marketing techniques such as open houses, in lue of digital marketing and Facebook advertising. In many markets such as Savannah GA, the agents use lockboxes so the listing agent does not need to be present for the home showing. This lets the buyer’s agent show the home to their client and relieves the listing agent of a lot of time. If you look at a popular REALTOR team in Savannah, the Heather Murphy Real Estate Group – they are showing all of the home for sale in Savannah on their website.
So a discount listing broker’s listing would be there too. The agent that brings the buyer still gets their standard commission, so they have no reason not to show the property.
So What’s Wrong With A Pocket Listing?
Let’s be real here. Statistics prove, pretty much overwhelmingly that when a listing gets listed by a specific agent, it is very seldom ever actually SOLD by that agent. The MLS facilitates other agents to be able to show the home. If the listing agent does happen to find the buyer, that is known as “Dual Agency”. In that instance, the listing agent gets paid BOTH the “buyer side commission” and the “seller side commission”. Dual Agency works differently in different states and is even illegal in some. With thousands of real estate agents and brokers in every market, the odds are that another agent will bring the buyer.
When a homeowner chooses a real estate agent to list their home, most of them anticipate their agent to do everything they can to sell their home. The listing agent even has a “fiduciary responsibility” to their seller, which means they should look out for their clients’ interests BEFORE their own. If the homeowner is expecting their agent of choice to do everything in their power to get them the highest fair market value for their home….how is it even fathomable to not let another agent show the home? How can a real estate agent (with a clear conscience) not open the property up to ALL potential buyers—not just the ones they personally know? Pocket Listings Represent Everything That Is Wrong With REALTORS.
I Thought You Said All Listings HAD To Be In Put In The MLS?
This is where it gets tricky. When the real estate market was on fire and buyers were lining up to put in multiple offers on a property, sometimes over the list price…agents got used to “holding the listing” out of the MLS to try to get “both sides” of the deal. That means make the buyer side and the listing side of the commission. Even though it was against the MLS policies, it was done on a regular basis. It became such a common thing that it was brought to the National Association of Realtors to allow pocket listings. They make the rules for the majority of the MLS’s across the country.
It was argued that if a seller didn’t want their listing in the MLS, they should have the right to not have their home listed in the MLS. Most people can’t argue with that. I would personally argue that if the seller (for whatever reason) doesn’t want their home listed in the MLS…find an agent that isn’t a member…or simply attempt to sell it yourself. Nonetheless, it was agreed that if a seller puts in writing that they explicitly do not want their listing to be in the MLS, they now have that right.
So What’s Wrong With That?
What is wrong with that is at the heart of why real estate agents are considered only one notch above car salesmen. That means that an agent had to sit down with their seller and somehow explain that it was in THEIR best interest to NOT open their home up to be sold by the thousands of other agents out there. The listing estate agent had to convince the homeowner that somehow it’s an “advanced marketing tactic” to not let 99.9% of the buyers in the marketplace have the ability to make an offer on their home. All so they would have the opportunity to possibly get both sides of the commission. In most instances, if the home doesn’t get sold in what is now called “pre-marketing” where it’s not listed, but the listing agent can get paid—-it still ends up in the MLS, offered to all agents. But ONLY after the greedy listing agent has a shot of getting paid double.
Are There Any Exceptions?
Real Estate transactions are always unique. I’m sure that there are some possible reasons that holding a listing out of the MLS for a couple of weeks (but giving YOU the opportunity to sell it) can be in the best interest of the seller…but I can’t think of any.
If you are one of those pre-marketing, pocket listing, greedy agents….you should be ashamed of yourself.
Far and large, real estate agents truly do their best to do their clients right. Most agents work hard, take shit and are unappreciated most of the time…only to be called one step above a used car salesman.
That is why Pocket Listings Represent Everything That Is Wrong With REALTORS!