Pocket Listings: What Real Estate Commission to Charge

Renae | June 4, 2015 | Industry Commentary

real estate commission on pocket listingsFor many reasons, clients choose not to list their homes on the MLS and feel pretty confident that they will find just as good, if not better, offers compared to not listing their house on the market publicly. So where does that leave you, as the selling agent, in regards to real estate commission when dealing with this type of pocket listing?

Given the real estate market’s low inventory, pocket listings are not the favored route in the industry as a whole, but it’s an inevitable practice of the real estate industry today. So while we don’t endorse exclusive pocket listings, you may run into the occasional client who opts to sell their home this way.

Pocket listings, when done legally (i.e. the CLIENT makes the call and you, as the agent, act on that call in the best interest of the client), pose an issue for some agents when it comes to commission. Should you charge the full fees as the selling and the buying agent? Or charge a real estate commission on only the sale end of the transaction?

Most will tell you that they charge both when dealing with a pocket listing. It’s not illegal, when done as mentioned above. You did, in fact, rustle up both the seller and the buyer, bringing them together to make the sale. So, considering these factors, it makes sense to take the full real estate commission. However, if you feel that it will benefit the transaction more and/or make a difference in you getting the listing or not, then lowering the commission can be a sound route to go.

In addition to considering the financial implication of fees and choosing how you will approach the topic, it’s important to make note and to be clear with the seller the pros and cons of selling off the market. Giving them a clear picture of how you intend to promote their property as a pocket listing is also necessary in order to mitigate any misunderstandings, even if the client makes the choice.

A couple of the conversational points to have with your client about what they potentially give up or need to consider with their pocket listing:

  • Listing on the MLS will make the property available to every agent.
  • Third party sites will also have access to the listed property.
  • Are you allowed to share their pocket listing with other agents in the office? In networking groups?
  • If you do bring the buyer, who do you represent? The buyer, the seller, or no one? This depends on state laws of course, so make sure your client understands how agency works.
  • Since their pocket listing is being kept a secret, it may take longer to sell than a standard MLS listing.

Of course, the seller may need to maintain privacy with their property in which case it makes total sense to keep it off the MLS. High-profile sellers may not want attention drawn to it or maybe they prefer not to have tons of people walking through their home.

Whatever the reason, the most important thing for you as an agent is to ensure that you are clear with the client, that you communicate the commission structure, and that the client understands the pros and cons of their pocket listing. You also need to be clear that doing a pocket listing is at their direction, and you may want to get this in writing to cover your legal bases. By doing so, you will adhere to the highest ethical standards set forth by the industry, abide by regional and national laws and, of course, have the best interest of your client at heart.

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Renae

Renae Virata is the Director and Founder of the strategic marketing firm revXmarketing, based in Dallas, Texas. A native of Houston and a graduate of Vanderbilt University, Renae has always been an avid writer. You can learn more about her and her work at www.revXmarketing.com. Want to guest post on Home Value Leads? Find out how!