The Trouble With Pocket Listings in Costa Mesa Real Estate

Time to sell your house? Great! Do you want the most money for your home? Great. Then don’t do a pocket listing. The trouble with pocket listings in Costa Mesa real estate is that most times, homeowners are leaving money on the table.

 

 

In my experience, most people want to get as much as they can for their home. And I will tell you from my experience, selling your home privately won’t get you the most money in a seller’s market. Let’s take half a step back – what is a pocket listing? Or as it is sometimes called a “private sale” or an “off-market listing”? This is typically a homeowner who contacts a Realtor or vice versa, and wants to sell their home. Oftentimes the same Realtor might know of a client who would be interested in possibly buying their home, and they will suggest letting them see the home. One thing leads to another, and boom! the house is sold to the first buyer who sees it.

 

So what’s wrong with that? I wanted to sell the house after all, you say, right? The trouble with pocket listings in Costa Mesa real estate right now is that we are squarely in a seller’s market. Putting your home online with the MLS will expose your home to not only 1 buyer, but typically thousands of buyers. Will you have a thousand buyers come look at your home? No, unlikely. You will get thousands of looks online, because that is the power of the MLS. Typically right now, in Costa Mesa, I would not be surprised to see more than 20 showings of people who actually come inside the home over the course of 3 to 4 weeks if your home is priced less than $750,000, which is close to our average price in Costa Mesa.

 

With those facts, why would anyone really want to do a pocket listing? Why would you only empower one Realtor to bring in only the buyers that they know? Why not have the power of the MLS working for you, and leverage the hundreds of Realtors who might know of a buyer in your price category? Every time I have worked with sellers, they have always loved a bidding war which will bounce the price of the home higher than listed.

 

I guess I am on a bit of a rant, but I still don’t see the benefit to a seller. I suppose if you are a celebrity, preferring privacy and you don’t want a lot of people in your home, than the pocket listing thing will work for you. As a seller, putting all your trust into a single agent can be dangerous. Let’s look at the Realtor’s upside: The Realtor is the only one aware of the availability, and they have time to find a buyer. They produce a buyer, at a protected price, with no market competition, and they can earn two commissions rather than one. As a Realtor, this makes a lot of sense. Think about the commissions – on a typical $750,000 home, there is about a $37,500 commission that is normally split between agents. If I was the only agent working on the pocket listing, it makes a lot of sense not to share this commission, right? So yes, there is Realtor greed playing a factor here. But here is the real trouble with pocket listings in Costa Mesa real estate – you are relying on the agent who you give the pocket listing to to let you know the true market value of the home.

 

If the Realtor tells you their perception of the market value, with no true completion for the home in the MLS, then you are not only paying the agent two commissions, then you are leaving a lot of money on the table. I have seen many instances of this practice in the past year. The Realtors even add in the sale to the MLS after the deal is done and mark it as “Sold before processing. For Comp purposes only”. As a Realtor myself, I see some of the prices these sales record at and I feel sorry for the seller. I know they have left money on the table in this market. How much money? I have seen instances this year of $50,000 and up. Yes, you read that right…..More than $50,000 in lost money.

 

 

I simply can’t understand in today’s day and age why a seller won’t see that if your neighbor’s home just sold for $700,000, why would you sell your home for $629,000? That’s just one example. But unfortunately there are many, many more. I am talking in generalities, because I don’t know the inner workings of every one of these pocket listing sales. Maybe these numbers I am looking at are not 100% accurate, but that is sure how it looks from this side. Let me finish with this bit of advice: if you are contemplating selling your home, connect with at least a couple of realtors who can give you their opinion about value of the home and who will tell you the benefits of putting your home on the MLS. That way you ensure not leaving any money on the table.

 

Colin Delaney is a Costa Mesa real estate expert, with more than $125,000,000 million in sales. Connect with him at (714) 743-9882 or via email.