Portland Pocket Listings – Bad for the real estate market
The phenomenon has been around for as long as real estate agents: When inventory is low and buyers aren’t finding what they’re looking for on the market, some Realtors will go door to door in the target neighborhood to find a home that the owners are willing to sell, or they will make a “secret” pact with home sellers they know. The practice is known as “pocket listing”, because the seller never lists their home on the public MLS. Instead, they sell to the buyer that the real estate agent has in mind, often for less than they might have if they had advertised to the entire public market.
In the Portland real estate market last month, according to the most recent RMLS Market Action Report, inventory dipped to 2.8 months, and it will probably go lower before the summer’s over (by comparison, Portland started out the year in January with 4.1 months of inventory). That means the pocket listers are out, calling on home owners who might be on the verge of putting their home up for sale but hadn’t quite gotten around to it. In fact, Oregonlive.com ran a feel-good story on Portland pocket listings at this time last year.
This year, things have gone more digital than ever before, and pocket listing has caught on with the mega-national real estate site, Zillow. They call it the “coming-soon” feature, and while it doesn’t replace the MLS, it does put homes up on the site 30 days before they are listed on the MLS.
What’s wrong with that? The National Association of Realtors explains: “Some ‘coming soon’ advertisements involve unlisted properties that may or will be listed with a real estate agent in the near future, while others relate to properties that are subject to listing agreements where property is available to potential purchasers only through the listing broker and not available, temporarily or indefinitely, for showing or purchase through other MLS participants. In either case, ‘coming soon’ properties are commonly withheld from the MLS” (emphasis added).
As a home buyer, you want a buyer’s real estate agent working on your behalf. If the pocket listing you find on Zillow is not yet listed on the MLS, you may have to work through the listing broker instead of with your own agent. When that agent is receiving both the buyers’ and the sellers’ agent commission and setting the price (instead of the public market setting the price), how can you be sure the transaction is a fair one?
As a home seller, you want the best price possible for your home and believe me, that is the market price. In Portland our internet marketing program is reaching 1,000 buyers or more per day on average! When you have that sort of exposure, doesn’t it make sense that you can be confident you will receive top market dollar? (FYI Zillow alone does not have that kind of marketing power, there are thousands of real estate websites that I list your home on.) It makes no sense for a Portland real estate agent to reach out to the few hundred potential buyers he or she might have access to, when I can reach 1,000 buyers each and every day in Portland.
In certain states, pocket listings and especially the “coming-soon” feature have gained the attention of real estate regulators, and agents could face fines for using it. Oregon has no laws in place yet preventing use of the feature, but maybe that’s because the market is not so tight this year to bring out online-pocket listers in mass. In the Portland real estate market, while inventory may be low, there are still plenty of properties out there. The RMLS reported that nearly 4200 new homes came on the market this May 2014, making it the strongest May since 2008.
Hopefully, this means that the “coming-soon” feature won’t catch on among Portland’s real estate buyers, and that real estate agents won’t pressure home owners who aren’t ready to sell into offering an “exclusive” deal to their buyer. Buyer be aware – and always have a Portland real estate agent on your side! Seller be aware – the public market will sell your home faster and for more!
All that being said, there is a potential positive place for coming soon listings. Our goal in using this feature is a little different though. Our goal is not to get an off-market offer and represent both sides – not at all! Our goal is to generate interest in the listing in advance, letting potential buyers know when the home is coming on the market so that we have the best possible opening weekend (when the home is on the multiple listing service and on thousands of public websites). Our goal in using this feature is to match our client’s goal of getting the highest and best price for their home while it is on the public market, whereas most Portland real estate agents who use pocket listings have a potentially contrary goal to “double-end” the listing and control market inventory for their own realty firm.July 1, 2014