Exploding the Myths About Pocket Listings
A pocket listing is a colloquial term for real estate properties that are marketed without being entered into the Greater Las Vegas Association of Realtors® MLS (multiple listing service). Rather than expose the property to as wide an audience as possible, the selling agent will only show the home to the people they think will buy it. While not a market “best practice”, pocket listings are not unlawful in Nevada. Handled properly, they are not unethical either, although they do receive bad press in the media from time to time. For a seller looking for a fast, unobtrusive way to sell his home in a hot seller’s market, a pocket listing is worth considering. Here are some of the facts you need to know before listing your property off-MLS.
- A pocket listing does not always mean a conflict of interest
Usually with a pocket listing, the seller’s real estate agent actively seeks a buyer and connects the buyer with the seller, thus collecting a commission from both parties – a situation that is defined by law as dual agency representation (which is legal in Nevada). Dual agency has its downsides. Part of an agent’s responsibility is to get the best possible deal for her client: for a seller’s agent, that usually means negotiating the highest price for the property; for a buyer’s agent, the lowest. An agent who acts for both parties has an obvious conflict of interest. In Nevada, when the agent represents both sides, she is required by law to have the buyer and seller sign a dual agency (consent to act) form.
Many states ban dual agency, regardless of whether a property is listed on the MLS or not. Where dual agency is banned, the seller’s agent must advise the buyer to find his own agent and cannot take a commission. In other states, like Nevada, dual agency is a common business practice. Invariably, the agent must disclose his dual agency status, and it’s up to the parties whether they wish to engage in a dual agency transaction. If either party to the transaction refuses dual agency, the agent cannot collect a commission from both parties.
- Agents often charge a lower commission
Many agents will charge a flat rate for pocket sales, which is often much less than a full-percent commission, to reflect the reduced marketing effort required. Regardless of whether the agent acts solely for the seller or as a dual agent, the reduced commission can often result in a win-win for both parties. Commission is not “standard”. It is completely up to negotiation between the buyer or sellers and the Las Vegas Real Estate Agent.
- Exposing the property to a limited audience does not mean that the seller will not achieve the best price
MLS listings are exposed to the widest possible audience. The business case for a public listing is obvious: the more buyers who see your home, the greater your chances of receiving an acceptable offer. But in a hot seller’s market, where there are more waiting buyers than available homes for sale, it often takes very little exposure to get the best offer.
The longer a home hangs around on the market, the more its value declines. Thus, marketing efforts – on or off the MLS – are concentrated in the first two weeks after listing. In that time, a seller is just as likely to get an offer from someone who already lives close to the property and saw a for-sale sign as he is from someone searching the internet for possible homes. In fact, in a seller’s market, a few phone calls to buyers who are known to be interested in acquiring a home in the area may be all that it takes to sell a home at the desired price. Homes only sell for as much as they are worth. This is a fact of life, whether the property is listed on the MLS or not.
- Pocket listings are always the seller’s choice
An agent may recommend a pocket listing as an innovative way to overcome a problem the seller has with listing his home for sale. For example, a seller might not want his neighbors to know that he is moving, or might not want people parading through his house every evening and weekend. Celebrities often engage in pocket listings to avoid large numbers of fans invading their home. For some sellers, these concerns are more important that seeking the widest marketing reach via the MLS.
Real estate agents are bound by a code of ethics. They must always seek the best deal for their clients. A good agent will caution the sellers that excluding a large pool of buyers from knowledge of the sale might reduce the final sale price. If, despite this advice, the seller still wishes to proceed with a pocket listing, the real estate agent has a duty to honor that request. If a home does not sell quickly as a pocket listing, a good agent will advise her client to readjust the price and list the home publicly on the MLS.
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