The term "Pocket Listing" comes to us, through a somewhat tortuous route, from the Latin, "Populi, domum pro vobis habebo!" - "Folks, do I have a deal for you!" Family, friends, co-workers, people on the street - all will advise you that in this hot market you've got to hook up with the agent who has the pocket listing that just matches your dream home. Competence, loyalty, professionalism are fine, but expendable. Go for the pocket listing! This primer teaches you how to do just that.
Let me set the stage. Sellers most often use real estate brokers to market their homes, agreeing to pay a commission in an amount that is negotiable. For this essay let's call them "agents". If the seller interviews three listing agents, then there's at least three agents in town who know this home is going on the market, before anyone else does. The "winning" agent will market the home for sale, including adding it to the local directory (Multiple Listing Service, MLS) which is shared with other member agents. By MLS Rules, the listing agent offers to share (usually, 50-50) the commission with any other agent bringing a buyer to the table. In a heated market many buyers may be interested in the same home. Hence, competitive bidding, which of course benefits the seller.
You're gonna be looking for a variation on this theme.
You need to hook up with the "winning" agent, have that agent prepare your offer, and get the seller to sign it - before the home is placed on MLS! This avoids multiple bids. This second step is critical. If you go with an agent who's getting a listing no one else knows about, but he/she then places the listing on MLS, what have you gained?
What about the seller? Why would the seller ever agree to forfeit the exposure of an MLS listing? Well, there's a number of possibilities. Perhaps the Federal Witness Protection folks say it's time to go, pronto. Perhaps the seller has joined a religious cult and is required to convert real property into cash, pronto. Perhaps the seller is growing some mystical plants and can't afford to have a lot of foot traffic. Perhaps the seller doesn't know any better. I've read some forms called "Consent to Withhold from MLS". I don't know of any local [San Francisco Bay Area] publishers of real estate forms that carry it. I doubt many sellers would sign such a disclosure after reading it. So it's better not to bring these forms to the seller's attention.
What about the agent? Why would the agent agree to such a thing? Let's assume that the seller agreed to a commission equal to 5% of the purchase price. By avoiding MLS the home will probably sell for less, in a hot market. But hey, 5% of 95 is a lot better than 2.5% of 105.
The toughest part of this dream scenario is finding the right agent. Pocket listing, pocket listing, who's got my pocket listing. Currently there's over three thousand members of the San Francisco Association of Realtors®. Heaven knows how many more non-Realtors® are out there. Since 95% of agents would never tell you that they have a pocket listing matching your dream home, let's pass on them. We're down to 5%. But that's still a large number. So you might as well go with the first agent who promises you the pocket listing that matches your dream home. What have you got to lose?
Remember meeting Bob at last Sunday's Open? You told him you weren't seriously working with an agent, and were wondering whether he had a pocket listing matching your dream home: three bedroom minimum, 2 bathrooms, fireplace, level lot. "Folks," he responded, "You've just described my new listing. I can't give you an address yet. It'll take a week to firm up the deal. You let me represent you on that deal and I won't share the listing with anyone. Not even the guys at the office. It's yours!" In this hot market, Bob's the answer to your mother's prayer.
Two weeks go by.
Finally, Bob meets you at the dream home. It's not bad. But you've seen better. The third bedroom has no window or closet so it's not legally a bedroom. Bob notes, somewhat facetiously, that your five year old won't care whether the room complies with the Uniform Building Code. Also, there's no fireplace, although there is an outdoor barbecue. A little TLC and you'll have the benefits of a fireplace - albeit outdoors. The yard is level. But it's tiny. All in all, this just won't do Which is just as well, since this particular seller is demanding that the home be marketed on MLS.
The bad news is that you've got to start all over. The good news is that there's a lot of Bobs around - especially in this market. No law says that you can't start all over with another "Bob". If you don't know any more "Bobs", ask around. Everyone knows at least one "Bob" and will be happy to volunteer that he's just what you need in this hot market: "I mean, this guy has listings that no one else even know about! He's amazing. You gotta call him."
If you're into hi-tech, try this option. Prepare a simple flyer, have Kinkos make copies, and mail one to every agent listed in the Yellow Pages, Third Class. Pledge your unswerving loyalty to every agent who has a pocket listing that matches your dream home, as therein described, and who will share it with you, and only with you. You could even add a clause telling each agent that if he has no pocket listing, to pass the flyer along to anyone in the office not listed in the Yellow Pages as you would be willing to transfer your unswerving loyalty to that individual - provided of course that he or she has a pocket listing that matched .....