The buyer of a Newport Beach, Calif., mansion that recently sold for $27 million didn’t find the 18,000-square-foot property by poring over the Multiple Listing Service.
The house was a pocket listing, discreetly marketed by a real estate agent to a select group of buyers.
Long favored by celebrities and high-end homeowners, word-of-mouth listings have become more prevalent among all types of sellers in today’s revitalized real estate market. Spurred by a shortage of homes for sale and rapidly rising prices, many sellers turned to pocket listings to test the market.
Some simply want privacy, preferring low-key deals over mass marketing to a parade of Internet lookie-loos. Others use the so-called whisper listings to create an air of exclusivity. Pocket listings also help a seller avoid the MLS tally of how long a home has been languishing on the market unsold.
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Pocket listings run the gamut, from informal agreements with a neighborhood agent, to signed contracts, to blind listings on online networks.
“They are so popular now that brokers and agents have been forming private groups and clubs to market these off-MLS properties,” says broker Al Ricci of Orange, Calif., president of the Pacific West Association of Realtors. He recently shot a YouTube video advising would-be home sellers to steer clear of pocket listings. He stressed that putting a home on the MLS for maximum exposure — and, along with that, to get the best price — should outweigh a home seller’s preference for privacy.
“A real estate agent should advise their client that the decision to exclude their home from the MLS may have a significant downside,” he says.
A spokesman for a pocket-listing website, however, contends that a lack of widespread exposure for a property can be a welcome plus in the intrusive Internet age, and that exclusively marketed listings shouldn’t be available only to hotshots and top agents.
“They don’t have to have a $5 million house,” says Chuck Dorfman, a real-estate agent and spokesman for MarketPocketPro.com. He adds, “If your property is priced to sell, it will sell, whether it’s privately or on the MLS.”
Pocket listings can come at a cost. A smaller pool of potential buyers could mean losing out at a higher sale price.
The California Association of Realtors this summer led a campaign against the listings, urging sellers to “think twice” before going that route.
“A property listed on the MLS has the advantage of being actively marketed to a vast network of potential buyers,” association President Don Faught says. “This type of broad market exposure creates the potential for multiple offers above the asking price.”
The association cites a survey by a San Francisco Bay Area MLS showing that 74 percent of real estate agents stated an off-MLS listing decreases the chance sellers will get the best prices.
Real-estate agents have also suggested that an unscrupulous agent can steer a client toward a pocket listing so the agent can limit who gets in on the deal and double-end the commission, meaning a single agent pockets the commission paid on both sides of a deal. Some agents, though, say they discount the fee in pocket deals, especially if they aren’t spending their time and money on open houses or marketing.
Chris Pollinger, senior vice president for sales at First Team in Irvine, Calif., says he has no problem with marketing a home before putting it on the MLS, for instance, to generate buzz.
He also is fine with limiting a listing to word-of-mouth if the seller is a celebrity or the home is being offered for upward of $10 million and the agent has an extensive network.
“There is a legitimate place for pocket listings and private sales,” Pollinger says. “But for most of your readers, it’s probably a bad idea.”