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Why Your “Pocket Listing” might just Empty your Pockets!

Posted by Keith Pushor on 6 April 2022
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You may have heard the term “pocket listing”. A pocket listing refers to a property that isn’t on the open market, and certainly isn’t listed with a real estate professional, but could be sold to a buyer under the right circumstances. This is different from an exclusive listing where a property is formally listed with a seller’s agent/real estate company, may be promoted with signage and advertising, but is not posted on the full MLS (multiple listing service).

In a market where inventory is low, and appropriate homes for buyers are scarce, buyer’s agents can start searching more and more for pocket listings. A typical scenario could be that Bob-Buyer’s Agent is talking in a sales meeting about finding the right home for his clients. Sally-Seller’s Agent says that she has some clients who were thinking of selling, have not listed yet, but the home could be a perfect fit for Bob’s clients. A price is suggested, a showing happens, an offer is made, an impromptu fee agreement is struck, and the property is sold as a pocket listing without ever being visible to the rest of the agents and buyers working in that market.

The advantage to the sellers can be that there is less preparation/staging needed, fewer showings to endure, and a discreet and low-key transaction is completed. The advantage to the buyers is that they get first dibs on a suitable home before the rest of the buyers in the market step in to possibly compete for that purchase. This situation may seem like the best of all worlds at first, but in actuality can end up costing the sellers money in terms a potential lesser price being accepted than what the open market could bear. And there lies the crux of the potential mistake of the sellers.

In a seller’s market where inventory is low, and there are more and more buyers competing for listings, it can be difficult to establish what market value is. Quite often in “rising market” the current price buyers are prepared to pay can be significantly higher than what similar properties have sold for only a month ago. So what may seem like an attractive sale price to a seller, historically, may actually be less than current market value. Thus the irony is that the seller may in fact have inadvertently left money on the table when he/she thought that they were getting top dollar by selling their home as a pocket listing.

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True market value is only discovered when a property is exposed to the open market and all interested and qualified buyers have had a chance to consider the property. It is very hard for a seller to predict, and quantify with sales data, what a fair price is for a home in an extremely active market. The phrase, “value is in the eye of the buyer”, holds true-to-form in a competing offer situation when multiple buyers are going after the same property. How do you start to guess the motivation of a buyer, for example, who has been “transferred into town” and has lost out on 2 or 3 competing offer scenarios already? There have been many cases where the ultimate price a buyer was prepared to pay for a listing far exceeded what the seller, seller’s agent, or even appraiser predicted.

The current market that sellers find themselves in across Canada today certainly presents many challenges. What may seem like a seller’s dream can also be a missed opportunity if not played right. But with the right agent and the right strategy you can rest assured that your Adventure in Real Estate will be a successful one!

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