Do Private Listings Hurt Senior Home Sellers?

Once a home is listed on the market, it shows up for sale on the popular real estate websites. That’s almost always best for home sellers and buyers alike.

Are there times when a “pocket listing” makes sense? Yes, but that’s the rare case. We’ll explore that in a moment. The main thing is to go into your deal with open eyes. Here are the key considerations to explore with your adviser.

An Older Generation Is Losing Money Through Private Listings.

According to recent economic research:

• Older adults, overall, get lower returns on their sales than younger home sellers.

• Homes sold by older adults need renovations more than homes sold by younger deed holders.

• Older adults are more likely to sell with private listings and more likely to sell to businesses, which leads to lower sale prices.

Note that older adults lose out when brokers aim to maximize fees, rather than get the best price for an individual seller. If you are an older adult, or if you care about an older adult, know the realities. Is a real estate professional suggesting that the senior will get a better deal by a private sale? Find out precisely why this suggestion is being made.

Your House Needs Work? That’s No Reason to Keep It Off-Market.

To sell for the highest price possible, a home should be visibly available to all potential buyers. In one study reported by Axios, public listings fetched sellers ~17% more than comparable pocket listings did.

But, you might ask, what if the home’s not in show-ready condition? What if I’m not in the position to put in that kind of work, or deal with showings?

Would it be simpler to let a house flipper deal with the issues?

Quite commonly, a home flipping business won’t want the “before” images of the home blasted through the internet. That could turn potential buyers off from considering the home when it’s fixed and updated.

And there are some circumstances in which selling to a home flipper could make sense. For example, a home flipper could be a relative, and the deal could benefit both parties. A situation like this makes it less likely that the flipper is looking to maximize their commissions by working for both the seller and the next deed holder. Even here, the seller must go into the deal with open eyes, and take care to sell the home for its true value. Best seller practices include hiring an independent appraiser to know a home’s actual market value.

In the case of a home that could be made market-ready with just a little professional help, know that services exist to make this happen.

Some real estate companies offer concierge services. They put the funds up front to fix up the home, and receive their costs back at closing. The seller maximizes returns, while spared from all the prep work.

Know When and Why a Private Listing Does Make Sense.

Only in rare circumstances would keeping a sale apart from the broader market be prudent. Here are the typical reasons people use pocket listings to a good effect:

• The senior is planning an intergenerational sale. The buyer is in the family and the elder deed holder wants to offer a gift of equity to the younger buyer.  

• Uniqueness is the key to the sale. A trustee for a large institution may want the real estate, and be ready to pay top dollar. Or maybe the home’s uniqueness means an “exclusive” pitch could become a rare opportunity — and a buyer will therefore pay more. By design, this sales ploy is undemocratic. The broker must ensure that fair housing law and policy is followed.

• The seller wants privacy. Some people prefer to completely avoid online scrutiny. Here again, the broker must ensure that fair housing law and policy is being followed.

If a buyer is lined up, ready to meet your preferred closing timing, a pocket listing could make sense. Even so, and even within family, buyers and sellers need their own agents. Also, they need to research what their local market requires when a home is listed, and follow the rules.

Dual agency is legal in some states; but generally, sellers and buyers need their own agents to effectively represent them. Learn more about your agent’s fiduciary duties.

The Key Takeaways for Older Adults Ready to Sell:

It’s possible to sell privately for the best possible price. But that usually involves selling to a buyer you know, not selling to a buyer a broker thinks they’ll get. Plenty of brokers are looking around at boomers’ homes as investment material, and would prefer to avoid the competitive dynamic of the market. Some would like to be the sole agent involved in a deal, to maximize their commissions.

If the senior seller understands this, and is still comfortable with a private listing, they can nevertheless  benefit from caution. Get an independent appraisal in advance. Negotiate a reduced commission. See the marketing plan for your home — from more than one company — before hiring anyone.

Important note: This article is not intended to provide individualized guidance. Readers are advised to speak with reputable local agents. See your licensed financial adviser for case-specific financial guidance.