As long time readers of this blog well know I am no fan of pocket listings, which many realtors promote as a sexy insider buying opportunity. I don’t buy into any of the nonsensical arguments for pocket listings and I have frequently enumerated the problems with them.
So we were recently faced with a challenge when we got a listing for a Lake View 2-3 flat at 3734 N Wayne on a 30 foot wide RT 3.5 lot. Based upon the rental income we expected this building to sell around $1 MM as an investment property and we planned on listing it at $1,045,000. However, you could also tear down that building in order to build a massive home there and on that basis it was also worth around $1 MM.
Now, the simple course of action, using my normal maximum MLS exposure logic, would have been to simply list the building and let the market find the highest price. But there was just one catch. There are always these pesky realtors sniffing around looking for teardowns for builders and if we listed the building then one of them could bring our listing to a builder and they would be entitled to the co-op commission of around $25,000. In other words that would essentially reduce the value of any builder’s offer to our seller by $25,000.
Of course, with any other buyer our seller was probably going to have to pay that co-op commission also. However, if we brought the deal to a builder ourselves, before it was listed, we could save our client that $25,000, assuming the builder didn’t need or want representation – and we were pretty sure they could do without. But we also wanted to list the building on the MLS for maximum exposure. We needed to somehow walk a fine line between listing the building on the MLS and marketing it as a pocket listing. What to do?
Finally, we decided to create a list of builders active in the area and to get all their contact information lined up ahead of time with the intention of calling them exactly one day before listing. The idea was to take the deal directly to the builders but then still list the property the next day – the best of both worlds. We had the listing ready to go and on the morning before we were going to list it we started to dial for dollars.
Well, over the course of the day we got a really good sense of what builders were willing to pay for this building. AND, because they knew we were ready to list the next day two of them gave us very attractive offers THAT DAY over the phone: all cash, quick close, no contingencies. In fact, the best offer was for $1,005,000 but the builder insisted that we immediately scrap our plans for listing the property while they put their offer in writing.
We discussed our options and decided that it would be really hard to beat a cash offer (equivalent to a typical buyer at $1,030,000 with a co-op commission payable) with no contingencies and a quick close. So we decided to put our plans to list the property on hold until we could finalize a deal…which we did very quickly.
We didn’t set out to sell this property outside the MLS. Things just moved faster than we expected and we did not take the decision to accept this particular offer lightly. But at the end of the day a peacock in the hand was worth 2 turkeys in the bush.
#RealEstateAgents #Realtors #PocketListings
Gary Lucido is the President of Lucid Realty, the Chicago area’s full service discount real estate brokerage. If you want to keep up to date on the Chicago real estate market, get an insider’s view of the seamy underbelly of the real estate industry, or you just think he’s the next Kurt Vonnegut you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.