There’s been a debate going on between agents, clients and market watchers about the off-market/pocket/private listing phenomenon hitting San Francisco’s hot real estate market (which shows signs of holding steady this week).
A pocket listing — also known as an off-market or private listing — is a method of listing a property where it is never publicly distributed. Or it is otherwise embargoed for a period of time. To me, it’s a less-preferred method because you never get mass exposure. But in some cases, that may be a good thing.
There are pros and cons of course. Here are some:
Less Exposure, Fewer Buyers vs. Exclusive Buyers looking for an elite class of properties. Unlike an ordinary listing that is advertised on the MLS, pocket listing are only advertised to select networks. Sometimes no one but an agent’s own client base even. On the one hand, the listing would be advertised agents with active and serious clients. But on the other hand, not every agent would be get an opportunity to consider the property. A seller may miss out on a higher dollar buyer because the MLS listing data is syndicated to a variety of outlets that reach far more people including those who haven’t hired an agent. On the other hand, not having to do open houses, dictating showing terms or maintaining discretion may counsel toward a private listing.
Preparation costs maybe lower, but the ultimate sale price lower. In today’s market, people are willing to pay top dollar for properties in given neighborhoods. But as we know, certain expectations must be met in order for people to justify a high-level of spending. Some folks have that perfect confluence of factors where a buyer recognizes value and is willing to pay for a property regardless. But sometimes, sellers cannot or do not want to make an Investment in painting, repairs, staging, or landscaping. If resources are limited, then allocating them should be done carefully. For example, if you only had $20,000 to spend on preparing property instead of spending for new bathroom, you may just invest in a new paint. Also, tree trimming or landscaping may be more affordable, faster and effective than a new kitchen. After all, unless the seller improved a property when they first occupy it, remodeling for a sale may be a dicy proposition as it may not comport to prevailing buyer taste of the moment.
Exigent Circumstances. There are times where a new job (with its new salary) or the need to buy a new home elsewhere dictate a quick sale. Other issues related to capital gains may make it a wash to improve and sell higher at a later date rather then selling cheaper sooner. After all, if your property gained in value in excess of $250,000 (for single filers) or $500,000 (for joint filers) but only just (say $275,000 and $525,000) respectively but it cost you an extra $15,000 to get that higher amount, it may be worth the time and money savings because any excess capital gains not covered by IRS § 121, will be taxed at nearly 37% in most cases. So why bother when it’ll be taxed.
In the end, a seller and their agent will end up doing doing all the paperwork otherwise required for an on-MLS listing (i.e., preparing required disclosures, pulling necessary reports, and spending the time to fill these documents out completely) so unless it really makes sense for a seller to forgo more money if it were up to me, I’d take the chances on letting the market decide.