Imagine getting the inside scoop on a great home deal — finding a seller who hasn’t put a sign in the yard, hasn’t publicly listed the home and isn’t even thinking about holding an open house. Such opportunities are more common than you might think.
A pocket of hot properties
Unlisted homes are called “pocket listings.” Rona Fischman, an exclusive buyer’s agent in Cambridge, Massachusetts, is familiar with this real estate sales technique and isn’t a big fan.
“An agent who is doing pocket listings is basically one whose mother didn’t teach them how to share,” Fischman tells NerdWallet. “What they’re doing is trying to get both sides of the transaction.” By keeping a listing off of the Multiple Listing Service (MLS), agents can attempt to broker a deal on their own — and earn both the buyer’s and seller’s commission.
“It doesn’t get the seller the best price, necessarily, because [the house] hasn’t been fully marketed,” Fischman says.
But Fischman admits pocket listings have grown in popularity, particularly in seller’s markets where there just aren’t enough properties to meet demand. Agents often keep listings to themselves, confident they can find a buyer. The National Association of Realtors estimates that in markets such as Northern California, 30% of all inventory is believed to be held in pocket listings.
“An agent who is doing pocket listings is basically one whose mother didn’t teach them how to share.”
— Rona Fischman, exclusive buyer’s agent in Cambridge, Mass.
Among NAR members, there is some discussion regarding the legal risks and ethical boundaries of pocket listings, though the organization has taken no official stance on the practice.
“Legal risk concerning pocket listings arises when agents or brokers keep listings off the MLS for reasons that are not in the best interest of the client,” writes Lesley M. Walker, associate council of NAR, in a blog post. “For example, unlike MLS listings, pocket listings are more likely to result in the agent representing the seller and the buyer, and the outcome would be a higher commission for the agent. This in itself is not illegal or unethical, but if the prospect of a double commission is the reason an agent suggests a pocket listing to the client, then this could violate the Code of Ethics, MLS rules, and laws in most states.”
Still, the prospect of gaining an inside opportunity to snag a prime property is appealing to anxious buyers. How to gain a peek at a pocket listing? Fischman says you’ll have to seek out a real estate agent who is well connected in a community, but remember that the agent holding the “office exclusive” listing represents the seller, not you. That agent’s job is to get the highest price possible from buyers just like you.
Inside tips and ‘coming soon’
There are other hidden listings at play in real estate — “inside tips” of homes that are “coming soon.” Seller’s agents may give a heads-up on forthcoming listings to buyer’s agents, allowing a bit of a head start on the rest of the market. Fischman says that’s another good reason to have a well-connected agent on your side.
For sale by owner (FSBO) homes can also be hard-to-find bargains. FSBOs aren’t usually shown by typical real estate agents — unless the property is registered with the local MLS. If it is, the commission is built in to the listing, and agents just might put it on their showing list.
‘Make Me Move’
And what about a Zillow “Make Me Move” listing, in which a homeowner posts a price that might encourage them to sell?
“I haven’t had any luck with it whatsoever,” Fischman says. Buyers looking for an off-market edge sometimes bring these properties to her attention, but her typical reaction to “Make Me Move” offering prices are, “They’ve got to be kidding! They want $50,000 more than it’s worth. Nobody’s going to make them move; they can stay there!”
Finding hidden listings
Fischman says one way to tap into the hidden home listings in a market is to leverage the networking theory of “six degrees of separation.” You know someone who knows someone else — and on down the line until eventually a contact knows someone with a place you’d be interested in.
“You should have it out on Facebook what you’re looking for,” Fischman says. She recommends a full social network blitz. “If you’ve got a listserve in your office, you put it out: ‘I want a three-bedroom condo in Belmont.’ And when the next-door neighbor of the guy in shipping comes in to borrow a tool and says ‘By the way, I’m selling my condo and it’s three bedrooms in Belmont’ — that’s how you do it.”
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Appendix: What is an exclusive buyer’s agent?
The typical real estate firm employs agents who work both sides of a sale. Although a buyer’s agent can work in such a dual-agency firm, they are fighting to earn the best price for a buyer while working in an environment “where rising prices are celebrated,” Fischman says.
An exclusive buyer’s brokerage is a firm where every agent in the office represents buyers.
“They are duty-bound by law to get the best price and terms for the buyer,” says Fischman. In fact, such an agency has no seller’s listings — but they often research MLS listings, as well as newspaper ads, online services and through networking to find listed and unlisted properties for their clients.
Exclusive buyer’s agents can be hard to find. One big reason why?
“We don’t make as much money,” Fischman admits.