Rain City Guide

1. Comment from Leanne
Time June 23, 2008 at 8:51 pm

I’ve always thought pocket listings were unethical…

2. Comment from Dustin
Time June 23, 2008 at 9:00 pm

Leanne: Interesting… and well worth a follow up.

My experience traveling between many different offices in many different brokerages is that pocket listings are a reality and that there could be a number of reasons that a potential seller doesn’t want to list their home publicly.

I would think they were unethical if agents didn’t list them publicly in order to capture the listing, but what if it is the seller’s choice?

3. Comment from Leanne
Time June 23, 2008 at 9:09 pm

Hi Dustin, they are a reality, but are a disservice to a seller. A true pocket listing is more than just a seller saying, ‘hey, maybe I’d sell, bring me a buyer and I’ll pay you a commission’. I don’t think that casual relationship is really a pocket listing, that’s just a FSBO … but when you advertise something that is for sale, addresses or not, or even have a signed letter, you create an agency relationship of more than just casualness, and I think you get into trouble there ….

I’m not sure if there is a NWMLS rule or not, I’ll go look!

4. Comment from Leanne
Time June 23, 2008 at 9:12 pm

Dustin, there is a lot of info, you’ll find it. I would recommend against this … big time!

5. Comment from ARDELL
Time June 23, 2008 at 9:15 pm

A pocket listing is simply someone who is going to sell their house but isn’t on market yet. Every agent has pocket listings. It’s what they do or don’t do WITH them that concerns ethics.

If one is a member of an MLS, they basically promise via that membership not to try to sell their listings outside of the mls system. In fact I think someone was just fined $5,000 grand for pre-marketing a listing.

Membership has it’s priveleges…but also it’s duties. One of those duties is to share you listings with the other members and not try to sell them “out of pocket”.

As to “seller’s choice”? Seller can’t tell the agent to get a $5,000 fine. The SELLER can pre-market their own home…but they can’t ask an agent who is a member of an mls system to do that for them.

Still…many homes sell QUIETLY out of pocket…but don’t expect the agents who are doing it to say so on a blog, or tell you about their pocket listings on a blog.

Once they appear, they are no longer “in the pocket” LOL!

6. Comment from Dustin
Time June 23, 2008 at 9:20 pm

Ardell… Do you think it is just a different culture in LA or why do you think someone has been able to amass a decent size list in the Bev Hills area? Is it just because some people in LA, and I’m thinking celebrities here, have more of an incentive to not list their home publicly?

If nothing else it’s a fascinating conversation… and I’m still not convinced it couldn’t work.

7. Comment from ARDELL
Time June 23, 2008 at 9:27 pm

Hey…the pocket King of L.A. is a good friend of mine. But I ain’t namin’ names, and he’s not telling anyone but his good friends about his pocket listings The mls services there are not as fine happy as ours is here in Seattle. These are the highest fines anyone has ever heard of…and by FAR! Fines are usually cheap and worth going around at times…but not here in NWMLS-Land. I have more than a few pockets…and they are staying in my pocket

8. Comment from ARDELL
Time June 23, 2008 at 9:35 pm

Dustin,

Every MLS has a rule that an agent must put their listing in the mls within X hours of taking the listing. Here it’s 24 hours! That rule is to make sure that an agent (or an office) doesn’t try to sell their own listing, and every mls has a rule like that. Enforcing it is another story and all mls’s are not created equal in that regard.

When I was in L.A., The Westside had their own mls system. Pretty sure that’s changed by now. Many mls systems are still very territorial. NYC has no mls and Philly doesn’t use lockboxes last I heard. Even here I have heard tell of some heavy hitters and their offices touring their listings before they go on the mls.

Even those who are largely responsible for their being such a rule are known to be the worst offenders around these parts. Almost as if the rules was made for everyone else.

You’d have more success inviting owners to FSBO here than to get agents to post pocket listings. Unless they are too green to understand the rules and fines involved.

9. Comment from Dustin
Time June 23, 2008 at 10:14 pm

Ardell:

I won’t name names either!

In terms of MLS rules, none of what you’re saying really surprises me, although you and Leanne certainly put a damper on this idea… My guess was that we would be bypassing the rules in this case because these were not listings that the agent ever planned to put on the MLS… At least in So Cal it’s so common, (it seems every agent I talk to has at least 2 or 3 pocket listings they never plan on listing in the MLS), that I figured there must be some other rules for this type of listing.

With that said, I’m definitely aware that the MLS wouldn’t want agents to announce their pocket listings, but still, I assumed their must be a way around it considering I’d seen it done elsewhere. Anyway, I’m not interested in creating a new FSBO site, there are already plenty of them out there, and would only want to take this on if I thought I could create something unique that would be of value to the community.

10. Comment from ARDELL
Time June 23, 2008 at 11:46 pm

The reason you see it a lot inL.A. is the original mls system only included few brokers who knew each other. The others weren’t allowed in. Some of those original guys are still around those parts, and in a lot of ways it truly is “the wild, wild west”. They say the minute anyone prevents them from doing business, be it MLS or NAR, they’ll just go back to “the good old days”. In fact one of the major local brokerages even opted out when they couldn’t “outst” “the new discounter”, but they compromised all (including “the discounter”) and it blew over.

Everyone plays by the rules. Some just don’t agree on who gets to MAKE the rules

11. Comment from ARDELL
Time June 23, 2008 at 11:50 pm

Leanne,

You still looking for the rule (comment #3) LOL! Try #25. How many rules are we up to now? I know it’s over 190. Are we up to 200 yet?

12. Comment from Reuben Moore
Time June 24, 2008 at 5:59 am

FWIW, our MLS does allow members to withhold listings from the service, provided the seller signs a “Certification to Withhold Listing” and this form is delivered (faxed) to the MLS within 48 hours of signing the listing agreement.

I think it would be interesting to do this for high-end properties, and then place them behind a firewall. Call it something smart, super-exclusive, etc. You see this all the time in other industries, even here in the social networking world (ASW comes to mind). The broker would need better connections than I, but many have them….

Exclusivity sells. This is an idea worth pursuing….

13. Comment from Michelle DeRepentigny
Time June 24, 2008 at 7:18 am

Thanks to you guys, I just spent time re-reading our MLS rules & bylaws - something I admit to not having done in a few years. We have 48 hours to input our listings and they can be excluded from having to participate with a signed statement (or special stipulation in the listing contract) from our seller. The pocket listings behind a veil intrigues me, but I’m all about popping listings all over the place to gain the most exposure for my sellers.

14. Comment from Leanne
Time June 24, 2008 at 7:51 am

Ardell, I went to bed after about 6 paragraphs of those rules!!

Exclusivity sells, but invisibility doesn’t. I can’t really imagine a large collection of sellers who choose not to be listed for sale in the local MLS system, unless that MLS system is very weak.

Ours isn’t weak. I don’t like all the rules, but I agree with many, if not most of them. There isn’t an organization with rules though that I’d like all of them … I think agents especially like to try to find ‘a way’ that works for them and their clients, but forget sometimes to think about ‘if everyone did this’ how the impact would be.

Now maybe if average market times grow longer and longer, we might have a rebellion of sellers who do not want to be listed in the NWMLS and have their DOM Days On Market listed on every website out there … Dustin might well have something there.

I personally think DOM are important, but getting buyers into the properties for sale is more important, so they can see first hand what’s going on, and that long DOM stigmatize a listing, and reduce the number of bodies going inside that front door. I can’t see that as a good thing. I think information is great, but ‘too much’ upfront, before the committment of actual interest in the property is a negative give-away.

Buyers want to see ‘everything’, but someday when they are sellers, they may realize ‘everything’ isn’t always needed at first glimpse. Just like a first date!

… but I digress on the rules thing!

15. Comment from Mike N
Time June 24, 2008 at 8:29 am

As a seller, I would insist that my agent list my house in the MLS and market it aggressively. An agent with pocket listings is an agent who is failing in his duty to his seller. The only person who benefits from pocket listings is the listing agent…at the expense of the seller. This violates the principal of agency.

16. Comment from Mel C.
Time June 24, 2008 at 9:32 am

I’m thinking of selling three properties here in Snohomish County. One is my primary home, another is a 5 bd. 3 ba rental and my mother’s house. I’m very interested in pocket listings and would like to learn more about this. This is one way to find the serious buyers out there.

17. Comment from Gordon
Time June 24, 2008 at 9:48 am

Commercial brokers do this constantly and couch it as in the seller’s best interest — control the showings, less distruption for the tenants, qualify the buyers (CBA rules are more relaxed on this issue than NWMLS). All they’re really doing is trying to double-side the deals, which is the whole reason pocket listings exist. Does your L.A. guy publish his pockets immediately to his “good friends” cohort, or does he shop to his personal buyer base first? If you’re going to co-broker anyway, why not just list the properties and for fullest exposure, avoiding any ethical issue? The only reason I can see not to list is if the seller is really reluctant to go to market and is really one of those “if you can get me my number just bring it to me and I’ll pay you” kind of sellers.

18. Comment from ARDELL
Time June 24, 2008 at 9:52 am

Mike N.

Once in a blue moon a seller gets more for a house by selling it out of pocket rather than putting it on the mls and proving to the prospective buyer that no one else is willing to pay the price he was.

Say someone offers you $950,000. You insist on going in the MLS and later have to reduce the price to $899,950 before it sells at $885,000.

Sometimes a person in the room with a special interest in the property will pay more than the open market, but NOT once you have proven by your actions that it is worth less.

The real answer is that if you have an offer, whether it is listed in the mls or not, you need to evaluate that offer on its individual merits and not assume that it is not the highest offer you will get in the long run.

Many if not most times when we happen upon a listing that we need to sell for more than the owner paid for it, the price the owner paid for it was MORE and not less…if they bought it outside of the mls system. In my experience For Sale By Owner properties are likely to ask more than an agent would list it for, and there are no savings past through to the buyer.

19. Comment from ARDELL
Time June 24, 2008 at 9:58 am

Reuben,

While that is true in most, if not all mls systems, the member is not allowed to encourage or be the instigator for that decision. If one agent is found to have an inordinate amount of those “letters to withold from the mls”, they would still be in violation even with the letters.

A member is permitted to send out a mailer offering a low commission, and putting the listings in the mls with low BA offerings as a result of the low commission. An agent is NOTpermitted to send out a mailer offering a low commission with the caveat that it won’t be “in the mls”.

The decision to not put it in the mls cannot have member involvement and no agent should have an inordinate number of those types of listings. Though enforcement of this concept is different from one mls service to another, they most all have this provision and understanding among members.

20. Comment from Debra
Time June 24, 2008 at 10:02 am

Great conversation! Mike N, you are on the right track. In the Seattle/NWMLS area, pocket listings do a great disservice to the majority of sellers. The MLS exists for a reason. It gives all listed properties exposure to all buyers. In this market, or any market for that matter, isn’t that what sellers need to get the highest price the market will bear?

California seems to operate differently in a lot of places besides LA. In the California desert, there are real estate signs posted in front of homes that are pocket listings and, unless you happen to know the listing agent or drive by the sign, you would not know about the house. It makes me wonder if the seller is really looking to sell or just test the waters.

Dustin, I vote “no” for the pocket listing idea. I don’t think it is a good idea. If the property is truly an exclusive, rarified home or is owned by a celebrity, there are ways to market the home while keeping the identity of the owner private.

I do find it amusing while many people in the LA/California world are looking for anonomity when selling, there are just as many who use their celebrity to advertise homes. It’s common to advertise a former celebrity owner when marketing a home there. It’s a very different marketing style than in the northwest.

21. Comment from Mel C.
Time June 24, 2008 at 10:03 am

With my rental property, I have good relationship with my tenant and I want less disruption during the selling process. This is also another way to weed out the looky loos and less serious buyers out there.

22. Comment from ARDELL
Time June 24, 2008 at 10:15 am

“Does your L.A. guy publish his pockets immediately to his “good friends” cohort, or does he shop to his personal buyer base first?”

Generally a “pocket listing” is someone who indicates they are going to sell at a later date. Often in a bar or at a party In a hot market, and for unique properties, these become immediate “pocket listings”. The agent isn’t doing anything wrong, the seller is just not willing to sign anything. It’s more like an “open listing” in that sense. So sure, the guy’s going to try to find a buyer and ONLY tell the agents he trusts implicitly not to go and try to take the listing.

Remember the agent has no guarantee that he will GET the listing, so in that sense it functions like an “open listing” meaning “he who finds buyer gets paid”. If one of his buyers is not interested, then the agent he finds with a buyer agrees to split whatever they get, which is less than a full listing fee, 50/50. That’s a true pocket listing. Seller saves some commission, agents get a little less, buyer gets first shot at it and often an exclusive shot at it.

Usually it is not a “run of the mill” property. In L.A. it was often a great ocean view property and somewhat one of a kind. I saw one go for $4 million over “value” that way, and buyer was happy to have it. It was quite unique in that it was a double lot with unobstructable ocean views. Worth $7M. Sold for $11M. It’s hard to get two lots side by side in a location like that. So separately they were worth $3M each. On a combined basis they were almost “priceless”.

23. Comment from Debra
Time June 24, 2008 at 10:19 am

Mel,

Tenants can ask for a 24 hour notice to view a home and no key box, which will cut down on any of those looky loos. Most buyers who make an appointment to look at a home are not looky loos. You would get looky loos at an open house. I would not do any open houses for a tenant occupied property to help minimize the disruptions.

Of course, sometimes landlords, who have a good relationship with tenants, work out something by giving a discount in the rent while the home is being shown. The tenant feels like they are also getting something for being inconvenienced.

24. Comment from Debra
Time June 24, 2008 at 10:32 am

Ardell,

Your example is a good one. The exclusivity issue may ok for a truly special property for a very small subset of buyers.

I was thinking of a specific property that’s a pocket listing in the California desert. This home had been on the market for a long time about a year ago. It’s a pocket listing with the same agent at the same price. This home falls within the average range of pricing for the area and is not a unique property, although the seller is the son of a Hollywood producer, so maybe they think they are unique! I am not sure what they are gaining by trying to sell this way, other than the days on market issue that Leanne brought up earlier. By the way, this is not the first time I’ve seen something like this in that area.

I wonder if all the sun in California and the gray up here that makes us behave differently!

25. Comment from Leanne Finlay
Time June 24, 2008 at 12:36 pm

I think the reason pocket listings are considered unethical is due to many agents not disclosing properly to those prospective sellers that the seller simply will not get the benefit of the full exposure of the marketplace that the NWMLS offers.

An exclusive subset sounds cool, but if only 10% of the available buyers see that property information, that seller hasn’t been served well at all, which as Mike N says, violates the law of agency regarding sellers.

In any market, I cannot imagine fewer buyers being aware of a property for sale is a good thing for that seller. A fine thing perhaps for the agent trying to control ‘who’ (ie, himself) sells that property, but not a fine thing for the seller.

26. Comment from Leanne Finlay
Time June 24, 2008 at 12:37 pm

Debra, it is a well known fact that our grey skies are what keeps us calm, cool and collected!

27. Comment from ARDELL
Time June 24, 2008 at 12:52 pm

Debra,

Every property that has ever been for sale and was taken off market is technically “a pocket listing”. There are many people who came off market in November, who are still interested in selling and are not “back on market” yet because the market is “soft”.

Any agent with access to expired or cancelled listings has a whole database of “pocket listings”. He who wanted to sell in past and didn’t = potential seller and pocket listing.

28. Comment from Debra
Time June 24, 2008 at 1:57 pm

I agree Ardell.

Although some sellers decide not to sell and do take their homes off the market because they cannot get their price, the home they hoped to buy has sold, the job transfer has gone away, they decide to work the marriage out, etc, etc.

The home I was referring to has a real estate sign in front of it and is not getting the exposure it deserves. It’s hidden in a cul-de-sac and hidden from most of the buying public. My guess is the seller is really not ready to meet market pricing, since the home is still priced at a price from over a year ago

A pocket listing could also mean a seller is not being very realistic and tells the agent if they can bring a buyer for the price they want, then they will sell. Maybe these sellers should use the “Make Me Move” site on Zillow!

29. Comment from John Sabia
Time June 24, 2008 at 9:19 pm

Not to go off topic, but why do you have a photo of Chateau Frontenac & Petit Champlain/Vieux Quebec in a Seattle Blog?

30. Comment from Dustin
Time June 24, 2008 at 9:27 pm

@John I just loved the photo… I didn’t even know where it was from. Just stole it from my mother’s collection and cropped it. But thanks for the background!

31. Comment from Mack
Time June 25, 2008 at 12:39 am

I’d be interested in discussing *any* reason a seller would prefer to have one agent, rather than the entire MLS, find a buyer for their property.

Of course, if the Listing Broker isn’t offering any SOC, it cannot be input into the NWMLS. However, it is my understanding that such a listing can be input into some MLSes. I’m being lazy, but what’s the time requirement for submitting listings to CBA?

32. Comment from john sabia
Time June 25, 2008 at 7:29 am

@Dustin - too funny. I saw the photo and thought the post was about Quebec City/ Quebec’s 400th anniversary this year.

Back on topic- in this market, especially in Ft Lauderdale, a pocket listing can also be a property that is rented, where the owner still wants to sell, but has taken the property off the market during the lease period.

33. Comment from ARDELL
Time June 25, 2008 at 9:39 am

“The home I was referring to has a real estate sign in front of it and is not getting the exposure it deserves.”

I have two I’m working on like that. One I have the buyer for and it is in escrow. The other is my listing that I had to cancel, but the sign is still up.

There are some safety issues with regard to viewing these properties and putting it in the mls and throwing on a lockbox, that may not be in the seller’s best interest either. Seller’s best interest has many facets, and back seat driver’s always think they know what is best. Part of our job is to know when to use the everyday run of the mill methods, and when to alter them to fit a given situation.

There are always going to be a few situations in this business that fall outside of the norm.

34. Comment from ARDELL
Time June 25, 2008 at 9:42 am

Leanne,

“Ardell, I went to bed after about 6 paragraphs of those rules!!”

I really do think it is time for someone to revamp them and simplify then. When you get to 196 of them, it’s time to cut it down to size so people can actually read, understand and remember them.

35. Comment from Wondering
Time June 25, 2008 at 12:53 pm

Slightly related question…

Is it ethical for an agent who owns a property to let the MLS listing lapse and leave his / his broker’s For Sale signs up? It’s clearly not an oversight, because it’s been several months now.

This is an attempted flip. Now it’s an eyesore in the neighborhood with grass over 2 feet tall.

(When the property was on the MLS there was no disclosure that it was agent owned.)

36. Comment from Mack
Time June 25, 2008 at 3:55 pm

Not necessarily. Properties may only be listed with the NWMLS if there is a co-brokerage fee offered; it is perfectly legal for a seller - licensed or not - to post a “For Sale” sign or enter into a brokerage agreement without offering a co-brokerage fee. Should that be the case, it would be ethical for a Realtor(r) to maintain the signage (and the overgrown grass).

As to whether it’s legal, well, I don’t know; the law states that a licensee must disclose that they have an ownership interest in the property; many seem to think that placing that under “Agent Remarks” and in print advertising suffices. I recently drove by a sign in Shoreline with a tag reading, “Agent is Owner.”

37. Comment from Gordon
Time June 26, 2008 at 3:46 pm

Mack — 10 business days is the CBA deadline for listing submission. 10 days to scoop the full fee

38. Comment from Mack
Time June 27, 2008 at 3:33 pm

Thanks, Gordon!

39. Comment from Riley Smith | Realtor Coconut Grove, FL
Time June 28, 2008 at 9:02 am

I am surprised to see such a negative opinion of pocket listings. I would think there would be more demand for service like this. I am a realtor in Miami, and when I have a client who can’t find what they’re looking for, I call up all the top agents and ask for their list of pocket listings. We all have them, why not compile them in some sort of database strictly for realtors?
Have you heard of the foreclosure bus? I even thought of doing a similar thing for pocket listings. Taking a group of people around in a rented luxury limo/bus and showing them what’s available but not on the market. After reading your post and its comments, maybe my idea is unethical and illegal.

40. Comment from ARDELL
Time June 28, 2008 at 7:19 pm

Riley,

Some mls governing bodies are more strict than others. Most have the same rule, but many don’t enforce that rule. This rule is usually not in the ethics section nor is it a law, it is in your mls membership rules. Basically as a member you are supposed to support the mls generally, and not work toward methods that could make the mls defunct, such as a separate website for non-listed property.

The mls is a “you put yours in and I’ll put mine in and we’ll sell each others” agreement. Many don’t understand this. Some will sell everyone else’s that are in the mls, and keep theirs out. That’s not keeping up their end of the bargain. It’s not a place where you choose or choose not to advertise, like Craig’s List. It’s a membership and rule driven body. Even if you don’t have a rule, as a member you have a duty to support it best you can.

Check with your mls office, which in your area is probably the same as the local Board of Realtors. In our area they are not one in the same, but in most they are one in the same, and I’m pretty sure in all of Florida the mls is part of the Board.

When I was in Florida (Lake Mary/Longwood) the problem was that many owners did not have enough to pay a commission, and yet it was not “short” as to lienholders. So there wasn’t much choice. How can you put it in the mls, if you can’t promise the agent showing the property that they can get paid. So sometimes you are limited by the factors involved. First and foremost you have to do what is best for the seller, and maximum exposure via the mls is what is best for the seller most times.

It’s not just about “how can I make some money off this house”. It’s about “how can the seller make the MOST money off this house”. More buyers seeing it is usually what is best for the seller…though not always.

41. Comment from Riley Smith | Realtor Coconut Grove, FL
Time June 29, 2008 at 11:40 am

Agreed. I am not knocking the MLS either. By far the MLS is the best way to promote a property, at least here in South Florida. And I also believe that it is the best way for a seller to make the most money off his house (more people will view the house which will create more demand and the seller will get paid more). Assuming, of course, that you have a property in demand and that my college economics teacher was correct. But the MLS is also the best way for Realtors to make money because we have access to so many more properties. In the current market, the chances of a realtor finding his own buyer is slim. Therefore, we need the MLS to give our properties maximum exposure.
As far as showing pocket listings, I don’t feel that it should be against the MLS rules because the potential seller does not want their house listed. As simple as that. They know that they could put it on the MLS, but they are choosing not to. Typically, a pocket listing comes about by speaking to someone who doesn’t want to publicly announce that they are moving, doesn’t want the hassle of showing the property all the time or simply thinks of it as a “let’s see” proposition, and “might” be interested in selling it if a realtor could find a buyer. I don’t see any harm in that.
Thank you for the response.
Riley

42. Comment from ARDELL
Time June 29, 2008 at 3:18 pm

“I don’t feel that it should be against the MLS rules because the potential seller does not want their house listed. As simple as that.”

True Riley, very true. As long as the agent doesn’t encourage them to think that way in the first place by offering to sell it for 4% instead of 6% IF they don’t put it in the mls. The idea has to emanate from the seller, not the agent.

Also, once the seller makes that decision, helping them to not be in the mls by providing a website for them to do it on, is not usually against a rule, but clearly “frowned upon”.

The simplist way here to have a “pocket listing” is to make it a “make me move” listing on Zillow. In fact why would any agent or blog need to set up a place “for pocket listings” when there is Craig’s List and Zillow?

43. Comment from Leanne Finlay
Time June 29, 2008 at 4:20 pm

The point against pocket listings is that largely they are held out of a MLS system not at sellers request, but by an agent hoping to sell it himself. That clearly is not in the sellers best interests.

I agree with Ardell’s Craigslist and Zillow points.