The real estate market has heated up so much in certain regions that brokers are taking transactions into their own hands—or, rather, their pockets. With increasing prices and, seemingly, more buyers willing to pay an amount that’s leaving sellers with nice profits, the question these sellers keep asking is, “Why bother with the MLS?”
While the answer to that question varies greatly depending on who is asked, more and more brokers are saying don’t list on the MLS, or even Zillow, for that matter.
“It’s an opportunity for a savvy agent, who uses his or her network properly, to make more money for their client,” says Jon Paul Molfetta, a broker with Keller Williams Realty in New York and New Jersey.
There are many ways to handle pocket listings, ranging from the “double-secret” listing that no one can know about except the most preferred buyers, to the “not-so-secret” listing that brokers blast on their social media accounts. Either way, brokers get to curtail listing fees and retain more control of the process. Increasingly, brokerages are heading toward an independent listing model where properties are marketed exclusively within the company.
Ultimately, it comes down to what arrangement makes the seller the most comfortable. Some clients, such as celebrities or prominent business people, might demand the privacy or exclusivity, but others might not want to limit the buyer pool for any reason. Either way, the burden is on the broker to fully educate their clients on all the options and set the proper expectations, explains Molfetta.
“If sellers aren’t familiar with the concept of a pocket listing, I would expect that their area/location doesn’t warrant it. Savvy sellers know when they live in a hot market. They understand the value of having a strong broker with a large network. If they contract with the right agent, they can realize top dollar without the hassle of having every nosy neighbor or unqualified buyer through their home,” says Molfetta.
The key for brokers, he adds, is to fully engage their networks and stay in regular contact. “This business is all about contact management. Certain sellers only go to top agents because they know they have the right buyer pool.”
One effective way to cultivate your database is to communicate consistently with buyers after a deal is missed.
“Agents who lose touch will lose deals (and) miss opportunities,” says Molfetta. “When someone misses out on a property, they might be willing to overpay for the next one. Regardless, people will not underpay for a pocket listing. If you’re a strong listing agent who controls a portion of the inventory, you provide added value to both the buyer and seller. For the buyer who wants into the neighborhood, you offer the unique opportunity of finding a home before it hits the market. For the seller who is ready to list, you provide a pool of qualified buyers from months of successful marketing and proper lead capture. It’s a win-win.”
California seems to be a haven for pocket listings, where sellers are coming to their brokers and demanding it. Lori Steele is a specialist with Beverly Hills, Calif.-based The Agency, which launched a private national off-market platform last summer called The Pocket Listing Service (PLS). Steele says it’s been incredibly popular among sellers who value privacy and speed, and it helps all the agents under The Agency roof generate business for clients and cultivate their networks.
Steele is involved with The Agency’s expansion through Orange County, Calif., and she says The PLS is a big part of the appeal.
“About 40 percent of all of our deals are done off-market,” she says. “It’s important for seller discretion, and some buyers don’t want photos of the home they’re purchasing on the internet.”
One strategy that Steele recommends for selling deep-pocket listings (where no digital footprint is allowed) is for brokers to research the areas where new buyers in the client’s neighborhood tend to come from—and connect with those local brokers to find the next potential transplant. Since it’s all done out of town, Steele says it’s an effective way to keep any word-of-mouth from traveling around the client’s circle.
Pacific Union International, another luxury real estate brand in the San Francisco Bay Area and Los Angeles, Calif., recently launched a different kind of pocket-listing marketplace called Private View, which allows buyers and sellers to privately view exclusively signed listings before they’re widely marketed to the public. Nick Segal, Pacific Union International president in Southern California, expects much of the inventory to come from developers who want to pocket-list their projects during different stages of construction.
Of his company’s approximately $16 billion in annual sales, Segal says there’s already about $200 million of inventory listed in Private View—and the time on market has fluctuated from 10 days to three weeks. Soon, he expects the model will be rolled out in Northern California, where there’s strong demand for such off-market services.
According to Segal, the growing demand for off-market sales is fueling a new kind of real estate economy. The winners of this trend, he says, will be the ones with consumer protections that structure the marketplace with contracts and allow for recourse if buyers change their minds.
“Pocket listings are more casual, but the problem with casual is that it ends up hurting the consumer,” says Segal. “Our pocket listings are commission-defined, pricing-defined and more credible.”
Andrew King is an RISMedia contributing editor.
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