When the Web Search Doesn’t Turn Up the Perfect Property

Your real estate broker may know of an off-market opportunity that is just right for you.  A “pocket listing” refers to a situation where a broker has a signed listing agreement with a seller but agrees not to publicly advertise the property for sale or enter it in the multiple listing service (MLS).  This may be used for celebrities who do not want the public to know about their homes or sellers that want an above market price for their properties but do not want them in the MLS accumulating Days on Market (DOM) and looking stale. It is also sometimes used by agents to avoid sharing commissions although the growth of this practice has led the National Association of Realtors to impose rules against it.

Off Market Properties vs. Pocket Listings

Often agents use the term ‘pocket-listing’ interchangeably with an ‘off-market’ opportunity.  An off-market opportunity is a property that a seller would like to sell, but they have not entered into a listing agreement with a broker.  The seller may know multiple real estate agents and not want to choose one to represent him, or he may want to gauge interest in the market before committing to selling.  In commercial real estate off-market sales often occur because sellers don’t want their tenants to find out and move, or their employees to find out and quit. Buyers often like these properties because there is less competition to buy them and the seller may be willing to give them more time for due diligence or to secure financing.

How do Buyers find out about off-market deals?

Finding off-market properties can be done by contacting property owners, looking through public records of vacated properties, direct mail, and networking with other investors and property owners.  Since these are activities agents and brokers do every day, they often have a list of properties they know sellers would like to sell, that are not currently being marketed.  The seller often tells the agent that they will pay the agent a commission if the agent brings them a buyer.  If another agent brings a buyer to the seller or the buyer talks directly to the seller, the agent will not be compensated.  Because of this, agents only tell their most trusted buyers about these opportunities.

Build Trust

If a buyer has a long-standing relationship with an agent, the agent will often call him and tell him about off-market opportunities.  However, agents will not call a buyer with a history of working with multiple agents or directly with sellers, even if they know the buyer would be interested in the property.  A buyer who enters into a written commitment with an agent to work with him, such as a buyer’s agency agreement, gives the agent the ability to disclose all available properties to the buyer knowing the agent will negotiate a commission with the seller without fear of being cut out of the deal.  These agreements can be very specific to a neighborhood, or exclude properties the buyer is already considering, but create confidence that the parties will work together.

Are there many off-market deals?

The Traverse City assessor’s department tracked 515 arms-length property sales in 2019.  Only 431 sales were reported in the MLS and of those, 47 sales were created after they sold.  That means 131 properties sold, that were never advertised for sale in the MLS.  That is 25% of all the sales within the city limits.   If we look at commercial properties, the assessor tracked 69 sales, but only 35 sales were reported as sold in Traverse City in the MLS. That is almost 50% of the commercial transactions.   Currently, I have no pocket listings but know of a handful of off-market opportunities where the seller would sell to anybody who brings him a buyer.  These include downtown buildings, investment properties, and development sites. Last week I closed on an 8-unit apartment building that was not listed for sale and the parties did not want to have it entered in the MLS.

If you are thinking about selling but not ready to list, or thinking about buying, but don’t see the right property listed on the MLS, call a real estate agent actively working the market you are looking for and there is a good chance they will be able to help facilitate a deal.

– Dan Stiebel, CCIM

(231) 633-0432 or dan@realestateTC.com