- The Washington Times - Thursday, September 30, 2004

A property came on the market in my neighborhood the other day with an interesting rider:

“For sale soon.” At first, I thought that was a unique marketing spin. The Realtor seemed to be on the ball and was able to get a sign in the yard before the property was really ready for showing.

It’s actually not a bad ploy. It adds excitement, draws the neighbors’ interest and gets the public ready to view the property once it’s available.

However, almost two days later, the rider was replaced with a second rider, stating, “Under contract.”

I immediately suspected that this was a pocket listing and that the initial rider seemed to be a delay tactic to ensure that the agent would receive payment from both sides of the transaction.

My suspicions could be misguided. Maybe another agent saw the sign and called the listing agent with a buyer who wanted to purchase immediately without allowing a full-market showing.

It smacked of a “pocket listing,” though, and there are several reasons why a homeowner shouldn’t look to a pocket listing when he or she wants to sell a house.

A pocket listing is a property that doesn’t come onto the Realtor-funded Multiple Listing Service system until it’s already sold, a practice that’s rarely defendable. In fact, it’s looked down upon so much that your local MLS may have rules against it.

Metropolitan Regional Information Systems Inc., one of the largest MLS systems in the country, serves nearly 50,000 Realtors in the Mid-Atlantic region.

According to its rules, agents who fail to enter listings into MRIS as “active status” or fail to allow property to be shown within 48 hours will be assessed a “delinquent entry/inaccessible property” fine of $500 for the first offense and $1,000 for subsequent offenses.

As far as Realtor-imposed fines go, that’s pretty serious fine and one that doesn’t go unnoticed. Realtors pay millions of dollars per year to maintain a cooperative MLS. Violate those rules, and you’ll be reprimanded and/or fined. Keep doing it, and you’ll be disciplined and ousted — well, at least suspended — which can nearly put an agent out of business.

Nevertheless, some agents like to bend the rules and will take a listing on a Friday to give the seller the weekend to clean up and get in the final touches, then start hitting the streets for their own buyer before they place the listing in the system within the required 48 hours. These are business-day hours, mind you. Thus, they’ve been able to market the property for four days without bringing in the competition.

The pocket listing rarely benefits the seller, at least not an informed seller.

It fails to provide the full market to the seller’s disposal to receive the best possible price, meaning the largest bottom line.

And pocket listings rarely create multiple contract offers. They close out true competition for the property through open bidding.

Is there ever a good reason for a pocket listing? I’ve never seen a good one in a hot market.

Pocket listings might work to a seller’s advantage in a buyer’s market in which it takes months rather than hours to sell a home.

Many home sellers in a buyer’s market are hesitant to place their property on the market and their lives on hold while waiting to sell the house. In this situation, they may be willing to sell “when you have a buyer who wants to purchase my house.”

A seller with an unusual situation in which he cannot open the house to hordes of people trampling through — such as when a sick family member resides in the dwelling — may benefit from a limited showing of the home.

What I have found in these situations, however, is that it’s in the seller’s best interest to continue to put the home on the market through the MLS and instruct other agents to “call listing agent before showing to disarm burglar alarm,” or “show by appointment only.” That works well enough to make sure that the house is only being shown to serious buyers who are willing to be sensitive to your seller’s unique needs.

• • •

M. Anthony Carr will appear as a guest on the CNN Financial Network program “Open House” on Oct. 6 at noon, with a rebroadcast at 3 p.m. He will discuss how small real estate investors can get involved in land investing, a topic from his just-published book, “Real Estate Investing Made Simple: A Commonsense Approach to Building Wealth.” For information about the book, visit www.fetchbook.info/Investing_in_Fixer_Uppers.html.

Mr. Carr has written about real estate for more than 15 years. Contact him by e-mail (manthonycarr@erols.com).

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