A trend in home sales is coming back among real estate agents that, while advantageous for some sellers, has the potential to create dangerous conflicts of interest for others.
‘Pocket listings’ are trending upward as the housing market moves back to boom territory. They are properties that are held off the public market and MLS. This is a marketing strategy that can have many advantages in a hot market, but lacked popularity in the recent downturn. Home buyers were scarce and more exposure was required to move inventory. Pocket listings did little to appeal to prospective buyers.
High-end buyers and real estate investors are often attracted to pocket listings for their perceived value and lack of competition. However, it is important to recognize the difference in motivation for their status.
Affluent property owners frequently prefer pocket listings to ensure privacy. Others do it because they are in a distressed situation and don’t want everyone to know about it. In fact, at one point, foreclosures were virtually always pocket listings in the previous bubble.
When the market is hot, real estate agents know that everything is going to sell quickly, especially if they have an established database of clients. Keeping listings off the MLS allows them to double dip on commissions. That’s great for selling homes fast and if a fair price is met. However, there is a dark side to pocket listings too. If there isn’t the right action, clients are not being served effectively and that raises concerns about conflicts of interest.
This can get tricky and agents must make sure they don’t cross any lines.
It is also a lesson for real estate investors on the advantages of keeping properties they are flipping private and leveraging their exclusiveness to increase appeal and profit.
