January 18, 2021 Breaking News, Latest News, and Videos

Is a “Pocket Listing” a Good Idea?:

MICHAEL EDLEN

REAL ESTATE CONSULTANT

“We recently received a letter from an agent that included: ‘I am proud to announce that I just represented both the buyer and seller for a home before I listed it to the open public. If you want to sell your home quietly, please call me.’ This seems like a highly questionable suggestion to me. Isn’t this an unethical tactic?”

— A long-time homeowner

I was interviewed by a homeowner who had just been offered the opportunity to sell her home for about $1.5 million “without any hassles, doing any preparation, and not having strangers walking through.” The agent also offered an inducement of a reduced 4.5 percent commission. Her neighbor had advised her to get a second opinion before going ahead with this proposed “quiet sale.” The owner told me it sounded very appealing to her, but wondered if there were any disadvantages.

I posed this question: “How would you really benefit from a ‘pocket listing’ (which is the term often used to categorize that type of sale)?” I also asked her how much money she would choose to “leave on the table” in exchange for no preparations and hopefully no hassles. While it is relatively easy to sell a home, especially in a strong market, getting the best price and the most favorable terms and conditions is another thing entirely! It is always in the seller’s best interest to get the best price with the most favorable terms and conditions. Thus, it would always be in the seller’s best interest to fully expose the house to the largest possible number of qualified buyers before negotiating with one prospect.

Obviously the buyer would benefit by “quietly” purchasing the home he has been looking for without any competition from other buyers. And clearly the agent will benefit by being paid to sell a home without any advertising, other marketing activities, or showings of the home.

Many agents have observed that homes sold without any market exposure have had three to 10 percent lower prices than would have been probable if given full exposure through normal and vigorous marketing. In fact, during a strong “seller’s market” if there are multiple offers on the property, the eventual sales value may increase by over 10 percent!

Though it is not technically “unethical” to do a “quiet sale” or have a “pocket listing”, the homeowner will never know how much more he could have sold his home for with the benefit of effective marketing and skillful negotiating. The lady mentioned above decided to take the time to neaten her home up a bit, allow a highly active promotion of the listing, and we sold it in less than two weeks for over $1.6 million.

Perhaps if the homeowner is ill or very sensitive to having strangers in their home, a low-key marketing program may be more comfortable. However, even in those types of circumstances, the seller could benefit by allowing at least several highly motivated and qualified prospective buyers to see the home before signing a sale contract. There may be two or more buyers waiting for a house just like the seller’s house to come on the market, and we all know what can happen to the value if more than one buyer wants to buy the same exact thing at the same time!

In addition to the issue of value, when more than one buyer wants to purchase the home, it increases the prospect of negotiating better terms and conditions in the contract. A shorter escrow, fewer contingencies, and lower costs can be as important to many sellers as receiving more money from the sale. If the seller wants to sell their property for as much as possible, the seller will appreciate the full value of as much marketing, promotion, and service as is available to achieve that result.

Even if there is an inducement of one to two percent reduction in commission cost when a “quiet” or “pocket” listing is proposed, that difference can be greatly offset by the probable three to 10 percent higher price using conventional home sales methods. By hiring an agent who is willing to provide a vigorous custom marketing plan, the owner will succeed in obtaining the best contract for the sale of his property.

Michael Edlen earned his B.A. degree in Psychology and MBA from UCLA. He and his team help more than 50 clients move each year. Please visit MichaelEdlen.com, email him at Michael@michaeledlen.com, or call direct at 310.230.7373.

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