Photo: Dennis Rodkin
The penthouse at 880 North Lake Shore Drive that sold as a pocket listing late last year.
Q: Dennis, I live in a large, beautiful vintage home in Hinsdale that I gutted and fully renovated a few years back. I've been thinking about selling the house but for privacy concerns don’t want to sell through the standard MLS approach. Do you have any advice on how to discreetly get the word out? —Name Withheld, in Hinsdale
A: You can list your home with any real estate agent and easily keep the home off the multiple listing service. It’s called a pocket listing.
If you don’t want the fact that your home is on the market to be disseminated publicly, then according to the rules of Midwest Real Estate Data, the Chicago-area multiple listing service, all you, the homeowner, do is sign a form that says you’re opting out of putting the property into the open listing system.
For years, selling as a pocket listing (also known as an exempt listing) has been standard practice for celebrities, wealthy homeowners, and others with privacy issues. But earlier this year, when the housing market got white-hot in some neighborhoods and suburbs—including Hinsdale—the pocket listing method became a very popular way to market any home that came on the market. The Tribune’s Mary Ellen Podmolik reported in April that MRED data suggested 4.7 percent of homes sold in Chicago in April had been pocket listings, up from 2.6 percent in March 2012.
In June on Windy City Live, I talked about why pocket listings were so popular. (The discussion of pocket listings starts at 0:53 in that clip.) With the inventory of for-sale homes very tight, sellers were able to get eager buyers in early and in many cases get the place sold without going through the rigamarole of publishing a listing, vacating the home for a series of showings and open houses, and chewing their nails waiting for somebody to make a good offer. Buyers liked the insider aspect of it.
But there was also a backlash, as I mention in that clip. Many analysts and real estate agents noted that when a home that isn’t exposed to all of a region’s real estate agents—here, that’s about 34,000—via an MLS listing, it may not sell for the highest possible price, because it’s not known to some possible bidders.
(The whole idea of opening a home to all bidders via MLS listings is not only a pure form of the free market. It’s also a safeguard against discriminatory practices: before the days of an open, region-wide MLS, buyers who wanted their homes to stay in the hands of people of their own race got help on that by local listing services that were only open to other people who were already in the same locality. It was a barrier to entry by newcomers.)
This summer, MRED tightened some rules on pocket listings. It made the exemption form say more explicitly to the homeowner that the consequences of not going with an MLS listing can result in a smaller pool of potential buyers. It also increased to $1,000 the fine that an agent pays for failing to put a property in the MLS within 72 hours if the seller hasn’t signed an exemption form.
That fine applies to agents who try to sell something quickly via the pocket listing route and don’t file the exemption form. Because you’d presumably be signing the form—it’s your idea to sell the house without publicity—your agent wouldn’t be assessed a penalty.
What’s your Chicago real estate question? Ask me! dennis@rodkin.com