When I was in 8th grade, I loved trading baseball cards. I remember the day I decided I was going to try to sell one of my favorite cards, the “1995 Fleer Ultra Ken Griffey Jr Top 30.” My first thought was, “how much can I get for this?”
First, I went to the kids in my neighborhood. They all loved baseball cards too, but I only received one offer for a measly $10. Even as an 8th grader, I knew that to earn top dollar, I needed more exposure. I declined the $10 offer and brought the card to school with me. In my homeroom, I received a second offer, this time for $15.
Finally, I decided the best plan to drive the price higher was to make sure every kid in every homeroom knew the card was for sale. I secured a sales representative for each homeroom and offered a reward to whoever could get the best offer. Sure enough, I sold that Griffey card for $30 (200% more than the initial offer). After I paid my sales rep $5, I still took home $25 or $15 more than my initial offer.
It was a simple but important lesson – marketing drives sales. People need to know about your idea, product, or commodity, or it will not sell for top dollar. Intuitive, right?
I still remember the first time I heard about “pocket listings.” Real estate agents love them because it grants the listing agent exclusive access to find buyers. That means the agent will earn commission on both the listing and buying side of the transaction – in essence doubling the agent’s commission.
Imagine for a moment you are selling your home. The first thing most people do is try to determine the home’s value. There are hundreds of sites out there that will aggregate historical sales data and provide an “estimated value.” But the truth is that the home’s value is simply determined by what an individual buyer is willing to pay. The key to capturing top dollar is to ensure as many buyers as possible are both aware and excited about your home. The absolute last thing a seller wants is limited exposure, but in some instances, that is exactly what they get. The following language was taken directly from a listing agreement for a residential home valued at less than $300,000 in the Lehigh Valley. It reads:
“Seller hereby agrees that property will be advertised in conjunction with terms listed in paragraph 24(a) for a period of no longer than 14 days prior to being entered on the MLS. Within the … pre-MLS marketing period the seller agrees that only Members of (BROKERAGE NAME) will be permitted to show and or make an offer to purchase the property…”
Suppose you have signed an agreement with the language mentioned above; your home won’t even hit the MLS for 14 days. Further, if you receive an offer from one of the few real estate agents who happen to work for the same brokerage as your listing agent, how do you know if it is a fair offer? The property has not been marketed to the masses, and it hasn’t even been made viewable on the MLS, Zillow, or Realtor.com. In short, it is almost impossible to know the quality of the offer because the general public has not had the opportunity to make offers and establish the baseline value. Even worse, the seller did not even know he signed an exclusive agency listing agreement that creates a pocket listing. He trusted the agent, and the agent failed him.
Before you sign a listing agreement, I encourage you to check for exclusive agency provisions the create a “pocket listing.” From my vantage, accepting a pocket listing provision when selling your home is like agreeing to sell your Ken Griffey Jr. to only the kids who live in your neighborhood. It just doesn’t make sense.