Regulators Sound the Alarm on Pocket Listings
June 16, 2014
Colorado regulators have urged real estate professionals to avoid selling property in off-the-market deals because they say it can pose greater risks for sellers. The Colorado Real Estate Commission issued an opinion last week stating that selling property without putting it officially on the market is OK, if sellers realize the risk, but if they don’t, such a tactic can “endanger the interest of the public.” Also, the regulators warned real estate professionals against being motivated by commissions when taking part in such transactions, since agents often earn a commission from both the buyer and seller in such off-the-market deals.
The commission’s warnings come after a surge in broker signs appearing in front of properties that say “Coming soon.” Brokers are then finding buyers before the home is publicly listed. The commission says that selling a home before it is listed to the full market may prevent sellers from getting more money from the home.
Sellers could stand to lose as much as 25 percent on their homes’ value by going under contract before being publicly listed to the full market, estimates Marcia Cotlar, a real estate professional at 8z Real Estate in Boulder, Colo.
"I think sellers these days are, 'Oh my god, I can get that much? I'll take it,' where really the seller can get even more than that," Cotlar says.
In the last six to eight months the practice of off-the-market listings has grown “fairly widespread,” says Marcia Waters, director of the Department of Regulatory Agencies’ real estate division. The increase is occurring as demand is high and buyers are competing for a limited number of homes for sale.
Source: “Colorado Warns Real Estate Agents About Listings,” The Associated Press (June 14, 2014) and “DORA to Colorado Agents: Don’t Keep Listings Off Market to Boost Pay,” Denver Post (June 13, 2014)
Updated: June 04, 2020