Pocket listings in Charlottesville

My buyer clients know about pocket listings; they rightfully expect me to find them, and I do everything I can to track them down.

I was talking to an agent the other day, trying to find a house in the City of Charlottesville for buyer clients. Her response? “I don’t have anything; I’m selling everything before I can put it on the market.”

I’ve seen more pocket listings this year than I can remember. “Pocket Listings” = a listing that a real estate agent markets quietly without putting it into the MLS. (I’m also seeing escalation clauses, bidding wars, offers within hours (no longer available) … and a lot of houses are sitting.)

Good? Bad? For whom? It certainly devalues the MLS for the public and Realtors, but does it enhance the value of a good, connected Realtor?

I asked for feedback from readers in last month’s note, and got some outstanding responses. This one is highly relevant –

Questions regarding pocket listings…

Who does it benefit the most and least?

The most? To me, it seems to benefit the agent who holds the pocket listings the most because then they can market themselves as having exclusive access to some of the best listings. This, thereby increases their clients and increase the number of pocket listings and on it goes to the benefit of that agent.

The least? To me, it seems to benefit the seller the least. I am sure the agent who convinces the seller of the pocket listing has their benefits they tout to the seller, but pocket listings result in fewer showings, which result in fewer buyers having an opportunity, which equals fewer offers. Fewer offers is a smaller pool to get a great offer and less chance of a bidding war.

I have admittedly limited experience in the area having only bought 2 homes and sold one. On our sale, I dealt with an agent I had a great deal of respect for and she indicated (during our evaluation phase) that she never does pocket listings and convinced me they weren’t good for sellers.

My gut reaction is that pocket listings are a questionable practice and borderline unethical and am surprised the licensing entities haven’t prevented them. But, that is just my gut reaction and I have an open mind and am willing to entertain counter points.

Curious on your thoughts.

I know this – as a function of the market and the growth of Zillow since the last nutty market, I’m showing more houses listed by unrepresented sellers on Zillow (note that none of the sellers would accept an offer in line with their zestimates).

What drives pocket listings?

I wrote about pocket listings in last year’s monthly note; (this is why I started posting the monthly note here on the blog many months after posting in the note – search and find-ability) –

“Under contract prior to going on the market”
“Under contract with multiple offers before we hit the MLS”
“Entered for comp purposes only”

Few things frustrate as much as these phrases. There remains a dearth of quality inventory on the market in the Charlottesville area, and market knowledge and awareness bring value to my clients. But. It’s getting harder and harder to know what’s actually on the market. I’m showing (or have shown by the time I publish this) at least three homes before they are activated in the MLS. At least one of those had more than one offer before hitting the market. Who benefits? Who’s harmed? Right now, there are 18 homes in the Charlottesville MLS that aren’t new construction that have zero days on market; many of these have the phrases listed above. Who benefits from pocket listings?

– I benefit because I’m more valuable to my clients because I know about these homes.

– The listing agents benefit because they may be trying to get both sides of the commission

– Sellers may benefit because they a) have greater control over the process and b) don’t have to go through the full-on invasive-by-definition listing process.

– Sellers may benefit because those buyers who get in early know and perceive that they have to offer a darn near perfect offer if they want the house before it goes on the open market.

– Sellers may not benefit as the open, efficient market tends to bring better prices.

– Buyers who know about these homes benefit because they know about them.

– Buyers who don’t know about them until after they’re sold suffer – and this suffering leads to a justified fundamental mistrust of organized real estate.

Nothing in life is fair.

Many times a week I get emails from agents describing homes that are coming soon to the MLS and an equal number from agents looking for homes to show their buyers. There’s a definite shadow market in the Charlottesville area, and it’s frustrating. Unless there are extenuating circumstances, such as the listing is signed but photos are still being taken, or painting and other prep work are being done, my belief is that everyone – agents, brokerages, buyers, sellers – benefit when the market is open and efficient. That said, I do my damnedest to be on the inside of these conversations for the benefit of my clients.