In this blog I am going to talk about pocket listings, and how they are a real estate occurrence that can be mutually beneficial to both buyers and sellers, but particularly buyers (as we will see later).
A “pocket” listing, in the simplest layman terms, is when we have a client that wants to sell but DOES NOT want to list their house on MLS. Now, at this point it would be totally reasonable (and expected) to ask why the hell somebody wouldn’t want to list their house on MLS, and go to the open market in the hottest real estate market ever. All I can say in response is that it happens, and sellers have their reasons:
- Some people might be hoarders and can’t bear the thought of disposing of all of their old Playboys from the 70’s
- Some people have kids and they don’t want to disturb their day to day routine with prospective buyers coming through the house at all hours of the day.
- And some people simply have a sale number in their mind, and they are happy to achieve that without taking on the hassle and hard work that inherently comes with getting a house ready for market.
A recent pocket listing I had is an extremely informative real life example, and it illustrates a significant swing in value that would have greatly benefitted the eventual buyer.
Whenever I start working with new buyers I always ask them to provide me with a list of their “dream” streets. This is mandatory, because I then either knock on every door or call each address on the streets in an attempt to find somebody that is willing to sell off MLS or exclusively with our team. The advantage to a buyer in this approach is obvious, as it allows them to avoid getting into a bidding war and they can negotiate one on one (presumably more pleasant) with the seller.
Last Fall I had buyers that narrowly lost in a bidding war (less than $3k) on a 3 bedroom semi in the West end on the subway line. Coming so close really stung for them – the disappointment was palpable and I can still remember the extended pause on the phone when I told them what the house sold for. Rather than cry in our beer I of course went back to the area where we lost and knocked on every door to tell our story. After about 5 days of doing this I finally hit paydirt.
On a bitterly cold Thursday afternoon I knocked on Frank’s door, and eventually he answered (step 1 in door knocking success). I told him why I was there, and he was kind enough to invite me in out of the cold. The first thing that struck me was how similar his house was to the one that sold in the Fall, albeit somewhat cluttered and in need of a paint job (no big deal). The second thing that struck me was when he told me he would sell his house today for the right number. So, (drumroll for effect) what was that number?
A lot of times when pocket sellers tell you their number it is completely ludicrous, and the listing stays in your pocket for good reason. They want $1 million when the house is barely worth $600k. But in this instance Frank was totally realistic, in fact he was low. He told me he simply wanted to “clear” $700k, which would put the sale price at $739,550 when you factor in realtor fees and HST. I liked Frank, and I told him he could get more. Frank thought for a minute and told me that was fine and dandy, but at the end of the day that was what he wanted and if he could get that without the bother of going to MLS he would be happy. I shook his hand and quickly pitched it to my buyers.
Unfortunately for my buyers, their life situation had changed dramatically and their search was now on hold indefinitely. They would have to let this one pass. I pitched it to other buyers I had, and ultimately they all passed as well. Too bad but all part of the game. I went and saw Frank again in person, and told him that at this point in time I didn’t have the right buyer. Frank thanked me for my efforts and told me to keep in touch. As Frank said, “you never know…”
A couple of months later Frank came back into my life. He had been keeping his eye on the unbelievable sale prices, and he had now softened his stance about going to MLS. In fact he now wanted to go to MLS, and he wanted our full service package! So a few weeks later (and with a bit of de-cluttering, staging and painting) we went to MLS with a list price of $699k. A week later the house attracted multiple bids and sold for $826k, or $127k over the list price. Or to think about this another way (buyers pay attention), the same house that could have been purchased for $739,550 two months earlier ultimately ended up costing $826k!!
If you do the math this represents a swing in value of $86,450, or about a year’s worth of salary for most folks. This sale certainly demonstrates the fluidity of the real estate market, without a doubt. A month or two is a lifetime. But for buyers, more than anything, it shows the value of tenacity and hard work from their realtor, and the need to seize an opportunity and run with it. This market demands nothing less, unless you feel like paying more…