Private, pocket listings surge during housing recovery

luxury real estateThe recovering housing market has brought to light the controversial practice of the pocket listing. Although pocket listings are more common in the upper bracket and luxury real estate market, pocket listings tend to increase during hot markets when there are few available listings and increased home buyer competition.

by Dan Krell © 2013

Sometimes called “off-market” listings, or “private” listings, the pocket listing is a home sale that is not openly marketed in the multiple list service. The listing is kept “quiet” and is only known to the listing agent and/or broker who typically market the home to a select network of contacts and clients.

Pocket listings are common among the utra-wealthy because of privacy concerns; anonymity is an often cited reason for a home seller to choose to have a pocket listing, typically because the seller has some celebrity status. Private listings may also be promoted as a way to limit home viewings to those who are financially qualified to purchase the home; the focused buyer pool reduces the number of showings, which may be less disruptive to the seller’s daily schedule.

However, critics of pocket listings often point to MLS concerns, dual agency issues, and housing laws as reasons to be wary of the practice. Agents are not the only ones who have access to an MLS listing; MLS listings are often syndicated throughout the internet and available for anyone with internet access to see. Clearly, one of the obvious issues of a pocket listing is the reduction of marketing exposure that is lost from not having an MLS entry. Another issue that arises from a pocket listing is that it skews home sale and price data that appraisers use for valuations.

Consumer Advocates in American Real Estate (caare.org) cites the possibility of dual agency (where the buyer and seller’s agent is from the same real estate company) as a major concern for pocket listings. Because dual agents do not act exclusively in the interests of either the seller or buyer, the possibility of a conflict of interest may arise. Additionally, CAARE states that a seller who agrees to a pocket listing may exclude 70% or more of qualified buyers who are actively searching for homes.

A recent Maryland Real Estate Commission newsletter (The Commission Check; Summer/Fall 2013), reprinted an article from the August 2013 ARELLO® Boundaries discussing pocket listings, that stated; “pocket listings may run afoul of federal fair housing laws that not only prohibit readily apparent or intentional housing discrimination against protected classes, but also practices that have a “discriminatory effect” that “… actually or predictably results in a disparate impact on a group of persons or creates, increases, reinforces, or perpetuates segregated housing patterns because of race, color, religion, sex, handicap, familial status, or national origin…”

Unbeknownst to some home sellers, their home sale may be marketed as a pocket listing during the period between the signing of listing paperwork and when the home is entered into the MLS. Although this time is often used to prepare a home for sale; it may also be privately marketed by the listing.

Although the National Association of Realtors® has “not defined what constitutes a pocket listing, nor do they have an official policy regarding the practice” (“What is a Pocket Listing”; Realtor Magazine, May 2013); potential housing law issues and ethical concerns of pocket listings should be addressed with your real estate agent/broker.

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Disclaimer.  This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice.  Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction.  This article was originally published the week of October 28, 2013 (Montgomery County Sentinel). Using this article without permission is a violation of copyright laws. Copyright © 2013 Dan Krell.

Amazon and real estate – will Bezos’ vision change marketing of home listings

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homesThe big news this week is of course Jeff Bezos’ purchase of the Washington Post. Why would the man who predicted the demise print media pay $250 million for a regional newspaper and a handful of associated local papers?

If the real estate business is a window into how media plays a role in the daily lives of the average American, then Bezos’ purchase might be a head scratcher. Over the last five years, the National Association of Realtors® annual Profile of Home Buyers and Sellers (realtor.org) has demonstrated how the internet has increasingly played a role in how home buyers actively searched for homes. In 2007, the Profile of Home Buyers and Sellers indicated that about 60% of home buyers completely relied on the internet to search for their home, while about 21% did not use the internet at all in their search. Compare those statistics to the 2012 Profile, which reported that 90% of home buyers used the internet to search for homes; and home buyers who were younger than 44 years of age, the use of the internet is reported to be 96%!

It seems as if home buyers relied on the weekend real estate sections of the paper for a leg up on new home listings and open houses. Real estate agents and brokers happily paid to have their listings included in what seemed to be the weekly catalog of homes for sale. In addition to the home listings, print real estate sections also included other related information (such as decorating, renovation, and buying/selling tips).

However, as the NAR’s Profile of Home Buyers and Sellers indicated, there was a sharp increase in the reliance of the internet to search for homes from 2007 -2012. The time frame is no coincidence; besides the exponential increase in technology and computing power during this period, it also covers the housing bust and subsequent foreclosure crisis. This was a time of tight advertising budgets and the search for efficient advertising modes; the internet offered a bigger bang for the advertising dollar, offering a more robust real estate platform than print could ever offer.

And although there was a colossal increase in the reliance of the internet for real estate listing information in the last five years, there was a consolidation and reorganization of online real estate content during that time frame as well. As the housing market declined in 2007, many sites stopped syndicating their own content and instead partnered with one of the high profile, well organized real estate portals.

It might seem as if the purchase of the Washington Post by an internet visionary who had once foretold the death of printed news might be confusing. But if you understand the Amazon.com business model and how it revolutionized the purchase and delivery of print and recorded media, you would not speculate that the purchase of the venerable news organization was to expand an internet empire to the newsstand – but rather you might believe that the purchase was to acquire a widely recognized brand that generates a considerable amount of content that can be packaged and sold through Bezos’ established model.

Just as the internet revolutionized real estate content and home listings, you might imagine how Bezos’ novel news paradigm could increase the robustness of content and distribution of home and open house listings.

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This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

By Dan Krell
Copyright © 2013