This question came to me from Sophie, a very avid reader of both theFrontSteps and the sfnewsletter. I’m hoping we can provide some insight.
Dear Alex,
I’m very puzzled by something that happens more often than I can understand in the SF market.
Why would ANY party agree to an off-market deal? (VIP houses put aside.)
I dont get why the seller would agree to sell to the first [buyer], without trying to get more? And of course, the trick question of “one agent, or two agents in the deal?” If there is only one agent, you could badmouth that the agent gets the whole 6% without having to work? But if there are 2 agents, why would they agree not to put the sale out? Or is an off market deal hiding some % [of the] commission “arrangements”?
And to [expand on the topic]- are some properties sold FSBO in a deal with NO agents at all? Who would even consider to do so? [Taken out to keep the flow of this question.]
Anyway. WHY? I can understand the part of fixing/painting/staging yourself. I could understand the part of FSBO in some market out of San Francisco. But I can’t figure out the off-market deals.
Further more – do your ‘pocket listings’ cover this? If not – what is a pocket listing, and why should a seller learn about the option, and why should a buyer keep his ears open?
Holy hell Sophie, great questions. Lost me on a few of the tangents, but I think I got the gist. I’m hoping some other Stammtisch members will add their take in the comments. Me, I’ll do it here.
“Why would any party agree to an off-market deal?”
-The list of reasons for this could stretch a mile long. Some of the biggies for a seller: They might have to sell; They might like to sell to a friend/family member; The seller might have an amount they’d be willing to accept regardless of whether the home is on the market or not, and if they get it, they’re happy; The seller might not want to deal with marketing, painting, staging, open houses, hundreds of people walking through their door, moving to a rental in order to sell, renting storage for “clutter”, etc..
Some of the biggies for a buyer: Not having to compete with other buyers; Ending their house hunt and moving on; Feeling like they get a deal that is not available to anyone else; Getting a good price; buying from a friend; etc..
“If there is only one agent, you could badmouth that the agent gets the whole 6% without having to work?”
-Often one of the biggest reasons and something many people tend to forget with all transactions, COMMISSIONS ARE TOTALLY NEGOTIABLE. If an agent is representing both sides, they might do it for 4%..or less depending on many circumstances. To say there is no work involved is ludicrous. Often representing both sides is more work than representing one side and certainly much more “legally challenging”…meaning you have to protect the interest of both the buyer and seller and that can get tricky. Typically, if I represent both sides, I’ll often do it for 4-5%, and trust me, I earn every penny…IMO.
“Or is an off market deal hiding some % [of the] commission “arrangements”?
-It could, and this could be at the request of the buyer and seller.
“And to [expand on the topic]- are some properties sold FSBO in a deal with NO agents at all? Who would even consider to do so?”
-Many are. See reasons above for seller and buyer, and add to that saving on paying a commission.
“Furthermore – do your ‘pocket listings’ cover this? If not – what is a pocket listing, and why should a seller learn about the option, and why should a buyer keep his ears open?”
-Yes and no. Pocket listings are properties that an agent usually has an agreement with a seller to sell off the market. That usually means the property will not be in MLS, but it may be on agent or broker websites, and the agent is certainly trying to procure a ready and willing buyer. That often means telling other agents at other offices. It’s often a type of “Sure, you can sell my house if you get this price.” The seller is not willing to commit to an active listing, or doesn’t need/want to sell, but is willing to give an agent a shot at selling it, and would be happy to sell it should the opportunity present itself.
-A seller should learn about this option to satisfy any of the reasons stated above and know that typically great deals can be had as pocket listings. Some money could be left on the table, but a handsome profit could also be gained that might not happen on the open market.
-Buyers should keep their eyes out for these as they are not advertised or known on such a large scale as it would be on MLS, and they might just find the home of their dreams and satisfy any of the reasons stated previously, and usually that means not having to compete for the property with other buyers.
-We’re currently working on getting more agents to post pocket listings in one place (either here or on sfnewsletter) , but it ain’t easy, so tell the other agents you know to get in touch with us if they have one.
Hope this helps. I’m sure I missed a few things, but maybe my colleagues can add some insight.