Finding Pocket Listings: Homes for Sale Not Listed on MLS

The ratio of home buyers to homes for sale continues to rise. With more buyers looking and fewer homes available, many buyers are wondering about homes that aren’t widely advertised.

But it becomes something of a Zen question for the times: If a home is for sale in the woods, is it still really “for sale” when most buyers don’t know about it?

In other words, if a home is for sale, and it isn’t on the MLS, how does it attract a buyer?

To some extent, there have always been “pocket listings” – homes for sale that are advertised exclusively via word of mouth by the listing agent and/or the seller.

Although it sounds counter-intuitive, there are some circumstances when a pocket listing makes sense. “It depends on how one defines a Ã?¯Ã?¿Ã?½pocket listing’,” explains Fremont-based realtor Ginger Ikuno.

“When you get a listing, there are different ways it can be presented. It can be presented as an Ã?¯Ã?¿Ã?½as-is, fixer-upper’. Or, it can be presented as needing some cosmetic changes, such as painting and carpet. Or, it can be presented in a ready-to-move-in condition.”

The difference, Ikuno explains, is that home sellers will get more money for the ready-to-move-in home, yet often don’t have the time to handle repairs or cosmetic upgrades. They may also be wary of dealing with contractors, and not certain what to look for when hiring others to do the work.

“Sellers often want top dollar, but have a home that is not in top condition,” she notes. “So as a full service agency, we will arrange for the necessary people to come in and do the work to bring the home up to the ready-to-move-in standard.”
While that home is being upgraded, Ikuno says that the home might be thought of as a pocket listing. “A buyer may say, Ã?¯Ã?¿Ã?½Can I go see it now? The condition doesn’t make any difference’,” she says.

That may work well for the buyer, but Ikuno says they need to think seriously about whether they would be comfortable purchasing such a home. “Buyers need to have vision to see beyond the immediate condition.”

If they can do that, she says, then staying in touch with their agent, and asking about properties coming up or being repaired, might provide more opportunities. “Such a home would be listed with an agent, but not formally on the MLS,” she explains.

While most real estate agents work through the MLS, Help-U-Sell agents encourage buyers to use the company’s own listings. Anthony Wright, President and CEO of Help-U-Sell in Oakland, says buyers are more likely to find what they are looking for by searching his company’s list. His office places open house notices online, in the newspaper, and mails lists of open homes weekly to buyers who request it.

“We only charge $6,950 for most homes selling for $400,000 and under,” Wright explains. Receiving a limited, fixed-fee commission means that Wright is careful about the homes that make his list. “That means the homes we sell are the best homes in the $300,000 range, the $400,000 range, the $500,000 range, and so on,” he explains.

Wright says that in many instances, the agency acts as a dual agent for both buyer and seller, saving additional money for both parties. But buyers with agents are welcome, too. “That’s important, being a part of the real estate community,” he explains.

Of course, if you are planning to sell to your friend, your neighbor or your children, listing the home is a non-issue. Yet these arrangements can slow down the financing process.

“The lender is going to want an explanation as to why it wasn’t on the MLS,” says mortgage broker Kevin Casey about most pocket listings. “I don’t think it’s normally too big of an issue. But most of the time, I think the seller is getting cheated, because they aren’t getting the full value of what the home is worth.”

“For instance,” he explains, “neighbors will often sell to neighbors. In that case, they will often come up with a fair price. But in the back of the seller’s mind, they may wonder. And they’ll never know. On the other hand, the buyer may overpay the seller, because it’s his neighbor and he’s trying to be fair.”

Homes that never reach the MLS or other publicity are looked at very closely by lenders, Casey says. “Any non-arm’s length agreement, such as between relatives — lenders will scrutinize that.”

Selling the family home to your kids is a common reason homes don’t appear on the open market, but the numbers involved can make the difference between approval and rejection of the financing. Casey cites a recent example: “The parents were selling a home to their children. The home was worth $600,000, but the parents were selling it for $500,000. The parents wanted to help their kids out and give them this gift. And of course, the kids were thrilled, because they’re getting a $600,00 home for less. But if the appraisal had been $700,000 and not $600,000, there would have been a problem.”

Nor are lenders merely trying to prevent parents from sharing gifts with their children. “Whenever you have two parties who know each other, the potential for abuse and fraud increase, so lenders scrutinize such a deal much more closely,” he explains.

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