Pocket Listings: Buying Chicago Property From Secret Sources
It's a phenom. Secret property listings are available to a selection of top agents. So scarce and competitive is the inventory in some areas that to get an edge agents use this back door before a hot condo or single-family home hits the MLS. We asked one of our real estate pros to walk us through these "pocket listings" and how it works in the Chicago market.
“Essentially, a pocket listing is a property for sale that's not active on the MLS,” said Kathleen Malone of Related Realty, the new brokerage division of Chicago developer Related Midwest. These secret lists have always been around, but there’s been a noticeable uptick in the last two years. Malone, who has a sales record placing her in the top 1 percent of agents, according to the Chicago Association of Realtors, believes the improving market conditions play a role.
“People are anxious to get in now, with the interest rates so low,” she said. “A lot of brokers are taking advantage of that and listing on our terms.” In other words, the market has flipped. At one time, sellers were at the mercy of buyers. Now, “the gears have shifted.”
Keep in mind that you can’t go online and search for a list of properties that have yet to be placed on the MLS. Most websites making such claims are usually pure scam. You can't crack this from the sidelines; you need insider access. For buyers and sellers, that translates to a well-connected broker with a list of clients and reps. Celebrities, actors, athletes and various persuasions of the famous and rich have used this "unlisted" technique. You just hear about it after the fact.
The process starts with a hot property that an agent suspects will move. Photos and descriptions are submitted to the pool of contacts and it's prepped for a showing. With a strong market and the right price, Malone says a house can close at a breakneck pace. “I did an open house on a Friday and twelve people showed up [ready to buy].” It's but one example of the sonic speed of news and the hunger of buyers. “If you pocket it for a week and it doesn’t sell, the price is too high.”
Appropriately priced does not mean discount, or that the seller is giving the property away. Even with this upswing, people are sensitive to pricing and a pocket listing has to “appraise out.” Malone says it’s a little less competitive with condo inventory; with single-family homes you can get a higher ask price. In Chicago, first pickings are in the very desirable neighborhoods of Lincoln Park, Lakeview, Bucktown and the dense Gold Coast.
There’s another interesting advantage for secret listings in that agents can show property during any day of the week — and still bring in the sale. Open houses are no longer relegated to a big weekend push. That’s old school. A pocket listing could show on a Tuesday, with nary a slack in attendance. Buyers come out, sometimes on the same day the list is blasted. It’s just that fast, says Malone.
But every house doesn’t sell like a rocket during this private party. Eventually, an agent will have to dump this strategy and post to the MLS. “If you don’t get a buyer, you might need greater reach.” It’s after this period of market testing when Average Joe Buyer will see the property for the first time.
And a word of caution about hunting online for deals: Malone says the housing recovery has dimmed the lights in cyberspace. The halcyon days of a buyer finding too-good-to-be-true foreclosures and short sales at real estate sites or snaring a 5-bedroom, 4,000-square-foot Colonial for $8,000 — all online! — that market is a thing of the past. Here's the sobering reality: “If it’s already been listed for 60 days, it’s pretty much over,” says Malone. Unless you’re in the loop, by the time a property shows up on the MLS it will already be under contract.