4 Problems with Pocket Listings

Most people have never heard the term “pocket listing,” but the concept is common knowledge. Pocket listings are those listings that a Realtor plays close to the vest and never lists on MLS. These listings are presented to a small group of buyers and/or investors without mass publication. The results can have a large impact on sellers, buyers, Realtors and the housing market in general.

1. Sellers may not get the best price.

Since the market for pocket listed homes is very tightly controlled, sellers have a limited opportunity to get the best price. Homes on these lists may not get the usual exposure provided by website virtual tours, open houses, and other opportunities for the buyer to view their home. What is more; mass marketing is out of the question for these sellers. They have effectively cut down their visibility on the market.

2. Buyers may not receive full disclosure on the properties.

A realtor who keeps a listing for a select group of buyers or investors can limit the availability of certain data related to the house. Buyers and investors miss out on information that can alter their decisions. For example, a home’s time on the market can be an indicator of whether there is something wrong with the house or the neighborhood. This knowledge can also help buyers in negotiating prices. Yet, Realtors have no obligation to provide this information when they are not using MLS listing.

3. Prices are usually predetermined.

Prices for Realtors’ pocket listing homes are usually set in concrete before the limited marketing begins. A seller may have a home that they are so eager to sell that they set an overly generous low price. This may work to get the home sold quickly, but it does not allow for the possibility that the home might sell quickly at a better price. A better solution is to work with your Realtor to find and negotiate the best deal by combining both mass MLS marketing and more personal methods such as emails to select investors.

4. Pocket listing may affect the general market in the neighborhood.

When a home is put through the MLS system, the asking price is open to the public. This allows buyers and sellers to gauge the proper price for a home within the neighborhood. With pocket listings, this information is withheld from the public. The result is that people buying and selling homes in that area may lean on rumor and speculation to assess how appropriate a selling price may be. This misinformation can lead to devaluation or elevation of other homes in the vicinity.

Pocket listings may have certain advantages for everyone involved. The seller is almost guaranteed to make a quick sale. The Realtor has the ability to keep down marketing costs and increase their commissions. However, with competitive pricing, heavy exposure and housing market advantages, MLS listings are usually the best bet.

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