Sellers Beware of Pocket Listing

Posted: July 23, 2014 in Buyers, Sellers
Tags: , , , , , , , ,
This is not the place to find a Realtor!

This is not the place to find a Realtor!

We always encourage Sellers to do their homework when hiring an agent and many do but there are those who just can’t seem to grasp the idea that the agent’s fiduciary duty is to represent the Seller and not himself. With increasing home prices in the KW region some have used  “Pocket Listing” as a mean to sell homes. This is an american term which Wikipedia explains as a property where a broker holds a signed listing agreement (or contract) with the seller, whether that be an “Exclusive Right to Sell” or “Exclusive Agency” agreement or contract, but where it is never advertised nor entered into a multiple listing system (MLS), or where advertising is limited for an agreed-upon period of time.

A ‘pocket listing’ gives that agent exclusive rights to sell the home and does not expose it to multiple buyers other than his own. This really raises questions about the value and role of the Realtor who cuts off the exposure to the MLS system. The promises by an agent that the sellers home will be sold right away is misleading and unscrupulous in the sense that the home might sell right away but will the sellers interest be looked after.

Even though a seller might be getting full asking price as established by the listing agreement he might not be given fair exposure to other buyers who would be willing to pay more. So on one hand the seller might look at that agent and think that he did well because he listed and sold his property and didn’t have to split the commission with another broker, and he got full price for it. But did he give himself the best exposure to get the best price?

The best way to get the highest price and best value for a property is with market exposure.

In the state it has been proven that pocket listed homes sold for less than those which had MLS exposure – in some cases significantly less.

The pocket listings are introduced to a small group – like members of a team – and kept hush, hush until a buyer is found. This could be a limited time agreement (2 weeks) where the agent has to find a buyer from his list of contacts. The marketing restrictions to such a small group poses the questions of discrimination and anti-trust that can emerge. This could become a price fixing arrangement which is violation of antitrust laws, subjecting all participants to potential liability.

Pocket listings can have undeniable attractions but sellers should beware of agents who offer them for their own gain and not for the sellers best interests.

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