Whether you plan to buy or sell a home in 2016, you can expect to hear the terms “pocket listing”or “off-MLS listing” bantered about. Those are properties that are for sale but not posted on the Multiple Listing Service.
In most off-MLS cases, the seller is choosing to market the property more privately. In other cases, the agent is recommending an off-MLS strategy because she believes she can secure a buyer and top selling price through her networks.
Pocket listings are becoming less of an insider’s game, and with inventory of available properties still an issue for interested buyers, data shows it pays for both buyers and sellers to understand the pros and cons of this industry practice.
What are the advantages of listing a home off the MLS? Sellers of high-end properties, high-profile individuals and the elderly are typically the ones who favor the privacy afforded by off-MLS listing strategies. The property is only shown to screened, qualified buyers and the sale of a home is kept private.
Other sellers simply want to avoid being inconvenienced by a parade of “lookers” who may not actually be qualified buyers.
For buyers, pocket listings may mean reduced competition on a property. With inventories still tight in many areas, it may mean a bonanza for those frustrated with losing bidding wars.
At first glance off-MLS listings may seem like an acceptable strategy, but the approach can mask very real financial disadvantages. Off-MLS property marketing by nature restricts the listing’s exposure. A broker or agent shows the listing to a select group of other agents or private listing sites, hoping there is a qualified, interested buyer for the property. With less exposure, the potential for finding the right buyer is diminished.
Moreover, there are typically fewer offers, and the value of those offers may be less than what other buyers might generate. The actual numbers are startling: across several California counties, in 2015, properties listed on the MLS on average sold for nearly 30 percent more than those listed off-MLS.
Total volume of sales for homes listed on the MLS averaged nearly four times the number sold off-MLS.
Statistics aside, there are noteworthy concerns about off-MLS listing practices. Brokers or agents may push a seller to list his property in this manner because they already have a buyer that they represent who is looking for a home, and they can orchestrate a quick sale. While the prospect of a quick sale can be enticing, remember that it means your property may not command the same offer price as if it were broadly exposed on the MLS.
On the flip side, if you’re the buyer, how confident would you be in the price your agent is suggesting you offer?
Brokers and agents may offer to charge less commission if you agree to list your property off the MLS, but commissions are always negotiable. Before you get too tempted by the promise of paying a lower commission, make sure it won’t be to the detriment of your sales price.
State law does not require agents to list properties on the MLS, nor does it prohibit brokers from earning a commission from both the seller and buyer in a real estate transaction. It does, however require “informed consent.” In fact, there is a section in the California Association of Realtors residential listing agreement emphasizing the benefits of listing on the MLS and warning about opting out.
Real estate professionals have a fiduciary responsibility to serve the best interests of their clients. The agent or broker must seek out and present all offers to sellers, and identify all possible listings that meet a buyer’s criteria. In fact, California law states that listing agents must use the “utmost care, integrity, honesty, and loyalty” when dealing with their seller and they cannot use their position for individual advantage.
At the end of the day, the decision to list off-MLS is up to the seller. Off-MLS listing practices may drastically reduce exposure to the full pool of potential buyers and discourage multiple offers, which could dramatically reduce your chance to get the best price for your property.
Selling a home is a big deal. Even if you have a strong real estate professional at your side, it’s important to know the right questions to ask at every step of the process.
Michael Blower is president of the Central Valley Association of Realtors and an agent with Grupe Real Estate. You can reach him at [email protected]