Selling Off Market

What is a pocket listing, and why would anyone consider it?


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Photo Illustration by Brian Breneman

Last year, Oakland real estate agent Diedre Joyner represented the seller of a property in Montclair — a “major fixer,” she said, with nearly 60 steep, irregular steps to the front entrance.

Concerned about the tripping hazard and other issues, she and the seller decided to list it “off-market” — keeping it off the Multiple Listing Service, or MLS, and sites like Zillow and Redfin, and marketing it only to a small circle of buyers.

“I knew it wasn’t a candidate for regular buyers because we didn’t want all the foot traffic we’d get if it went on MLS,” said Joyner, an agent with Red Oak Realty. “My client didn’t want a ton of people potentially tripping or falling.”

Off-MLS or “pocket” listings may seem a bit mysterious — maybe even sneaky — yet they’re nothing new. Sellers and brokers have been using them for years for myriad reasons. They’re often associated with high-end properties in which sellers want privacy protection, but — as with the case of Joyner’s listing — pocket listings might also be employed for safety reasons or because of young children in the home, pets, or illness in the family. Some may hope to avoid the expense of upgrades and repairs.

Such homes are offered to buyers and brokers through connections or word-of-mouth. Some agents suggest the practice to test a certain price, and then open it up to a wider market.

But there are definite downsides. The California Association of Realtors frowns on the practice because limited exposure can result in lower sale prices for the seller and can also lead to fair-housing issues. In 2013, the association added a section to its residential listing agreement with a warning against opting out of the MLS.

“You want the most people possible to see that your home is for sale,” said Andrew Greenwell, CEO of Venture Sotheby’s International Realty in Pleasanton, who has appeared on Bravo’s Million Dollar Listing San Francisco. “Without competing offers, there’s no guarantee you’ll get the highest price. An off-market deal can sometimes result in a higher price, but it typically favors the buyer who thinks he’s getting a better deal. [A pocket listing] is basically like going to Vegas and playing the craps table. It’s a gamble.”

There’s also potential for conflict of interest. When keeping the listing “in-house,” an agent is more likely to end up representing both the seller and buyer, thereby keeping both sides of the commission.

High-volume Silicon Valley agent Michael Repka of DeLeon Realty is very much against the practice, even instituting a policy that his firm will never take commission from both sides of the transaction. Also a real estate attorney, Repka recently wrote a blog post titled, “The perils of pocket listings,” which cautioned sellers about traveling down the “quiet sale” road.

“Occasionally there’s a valid reason a client wants a discreetly marketed home,” he said in an interview. “But so often the seller doesn’t know how much the house is worth without the transparency of full-market dissemination and must take his agent’s word for it.”

He often sees pocket listings promoted by certain agents because “it helps the agent get buyers,” Repka said. “It’s like, ‘Hey, if you work with me on the buy side, too, I can show you these secret listings that you can get for less money.’

“That’s a problem because it gives the agent or their office the best chance of getting the commission from both sides,” he said. “I’m strongly against it.”

Another concern in a red-hot market like the Bay Area is that pocket listings may impact available inventory for the general public, though statistics are hard to come by. According to Realtor.com, pocket listings account for fewer than 10 percent of home sales nationwide.

“It is happening, but it’s definitely not the norm or the majority in the Bay Area and I don’t think it’s contributing to low inventory,” Greenwell said. “I do think it’s contributing to some skews in the data because of lower sales prices.

“The main question is, are you really serving your seller this way? Are you really exposing the property to enough people?” he said. “It’s such a touchy subject. Pocket listings can be so good, and they could be so bad.”

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