By Ann Brenoff for real estate at aol.com Posted May 9th 2011 1:55PM
A real estate practice that continues to cling to life support despite the recession -- and some say common sense -- is the pocket listing, which presumes that it's somehow a good idea to list your house for sale but keep it a secret.
In a pocket listing, a homeowner tips off an agent -- or six -- that they would consider selling their home if the price was right. They don't want the home publicly marketed or put in the MLS, they don't want open houses held and they certainly don't want a "for sale" sign decorating the front lawn.
While it's a marketing stance that may make sense for Brad and Angelina, it really doesn't for anyone else seriously hoping to sell their house.
Pocket listings serve the interests of a select few homeowners who, for various reasons, would prefer to not let their neighbors, business colleagues or the world-at-large know they intend to sell their houses and move. Why would they feel that way? Bravo "Million Dollar Listing" star Josh Altman offers this theory on the pocket listing: He says that in the places where he sells -- Beverly Hills and the other high-end markets in greater Los Angeles -- image is everything. "People like to paint a picture of themselves as successful and wealthy," Altman says. Listing your house for sale might suggest that you need to sell, that your job is on the line, or that you have an adjustable rate mortgage that is about to reset into the stratosphere and you can't pay the piper.
Altman says that he's actually seen an uptick in the number of pocket listings. During down economic times, he says, people want to test the market before listing, so they offer their home as a pocket listing for two or three months before deciding to let it go into the MLS. It also helps get them used to the idea that their home is for sale, emotionally speaking.
If a seller has a well-connected agent who knows the high-end community, a pocket listing can work. For for those in the mid-market range, this is neither the time nor the market, says Paul Ferra, a Coldwell Banker agent who sells in Topanga Canyon, Calif., where the homes are more modestly priced and the inventory flush.
Agents privately admit they dislike pocket listings but accept that they are a part of the business landscape. Jeffrey Hyland, a principal of the boutique Beverly Hills firm of Hilton & Hyland, calls the practice a bad deal all around.
"If the house sells quickly or to the first person who looked at it," Hyland says, "the seller always winds up feeling that he gave the house away." Full exposure to the market gives the buyer the most comfort that he got market value.
Hyland also says that buyers who jump into something because they are afraid it will soon be listed often suffer buyer's remorse and back out of the deal.
Plus, unless there is a contract signed, the agent who brings in a buyer may be relying on a handshake to get his commission. "There are no protections with pockets and this creates problems for the agent," Hyland says. "There may be several agents working with the buyer at the same time." It's a recipe for messiness, if not outright disaster.
Manhattan brokers also report that these deals have become more prevalent these days. In New York, where desirable inventory is said to be low -- having shrunk in last spring's buying flurry -- sellers perceive the market to have recovered and thus think they can command higher prices than may be the actual case.
Pamela Liebman, president of The Corcoran Group, frowns on the pocket listing practice as well. Quoted in The New York Times, Liebman said that people who declare their interest in selling an apartment without listing it may not be serious about selling it. Plus, she added, "ultimately the sellers hurt themselves."
The California Association of Realtors has a form for single-party compensation, and smart agents ask the seller to sign it before they bring a potential buyer over to see the house. But pocket listings have this implicit trust about them, making it hard sometimes for an agent to even broach the notion that the seller's word may not be good enough.
Agent Altman notes that because real estate is so competitive, agents with pocket listings may call around to other agents to see if they have potential buyers for the property, but are careful not to give away the address until they set up a specific showing for a prequalified buyer. His agency has an intranet system where pocket listings are posted just for Hilton & Hyland agents.
But how secret can a listing really be kept if there is to be a prayer of selling the property?
Not very. There's even a website where, for a $4.95 registration fee, real estate agents from around the country can post their pockets.
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