What Is A "Pocket" Or "Off-Market Listing"?

Hi, Dave.

Great columns. I always learn a lot. Can you explain exactly what "pocket" or "off-market listings" are, how they work, and how a buyer can tap into that segment of the market?

Thanks.

Bill F., Grand Junction

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Bill F,

The under used, but often successful "pocket listing"! One of my favorites! A pocket listing can be a sellers best friend and is something that we certainly use an awful lot each year. In fact, we will sell a dozen properties each year by utilizing the “pocket listing” status. A pocket listing is a listing that is not advertised and may be withheld from the multiple listing service until such time you are ready to go public with the sale of your home. With a pocket listing your listing agent can promote it to their peers and colleagues and will typically do so through word of mouth. If you go this route, you always run the risk of word getting out, but your chances of keeping it quiet are exponentially greater. A pocket listing can be a successful way to flying under the radar and still getting your home sold in a timely fashion and getting a jump start on selling before you are ready to put the sign in the front yard. If you go this route, I would suggest you be prepared to move as the results are often times quite good. 

The pocket listing is a great way to get your property exposure on the “down low” and buyers are generally excited to see these properties as they feel like they are getting a sneak peak at it before everyone gets a chance.  It’s a great option for those who dread the showing process or don’t want the hassle of showing after showing for several weeks. The traffic flow is often sporadic at best, but using this method allows you to hunt and peck for candidates that are most often much more targeted and many times pre-screened to help increase the chances they are a fit!  Keep in mind that a pocket listing may not always be the best option.

The pocket listing process does not provide the best environment for competition and multiple offers as the selectivity of who knows or has access can limit the big rush that many times occurs when a new property hits the market. This means that getting multiple competing offers that may drive the price up above the listing price is not common but getting an offer at the list price is a likely outcome because you can leverage the early access angle. Access to these properties is often times just being in the right place at the right time!  Many buyers are often frustrated when they see a house has sold before it even hit the market and feel cheated that they did not get a chance to view it.  One way we help our buyers get access to the ‘off, but on market’ properties is networking with other agents and e-blasting (email blast) to all the agents about what kind of property we are seeking! It’s amazing how many properties turn up when we e-blast for a buyer’s need if properties on the market at that time don’t fill the bill. 

I would encourage you to hook up with a real estate agent and have them start networking and e-blasting your specific property needs and see what turns up after doing so. You have to turn over every stone and sometimes turn them over time and time again to find just the right place! It does not always happen, but it sure can be an effective way to discover special/unique properties that are ready for sale, but just not in plain sight! Looking off the beaten path is sometimes where the best trails are forged! Looking in ways and places not everyone is looking is sometimes where real gems are found. Have a wonderful Sunday and thanks for your question.

Dave Kimbrough

The Kimbrough Team

Have a question? Ask Dave!

Can a seller still back out after we agree to his counter offer?

Dave,

We recently made an offer on a house and the seller sent us a counter offer that we agreed to, but then we received word that he had changed his mind and was going to sell the home to another buyer. We feel like he made a deal and he should have stuck to his word and had to sell it to us. We feel we lost out on the perfect home and we are now struggling to get in the mood to find another home. We have lost our oomph.

Dale & Nicole, Grand Junction

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Dale and Nicole,

No doubt you are feeling “wronged” by this sellers actions, but it may have well been within his rights to not sell you the house, even after a counter offer was given. When the seller made you the counter offer, I am assuming, that it was in writing. A seller has the option to withdraw a counter-offer any time prior to your “accepting” the counter offer in writing and delivering it to the seller's agent. If your acceptance was in writing prior to the counter-offer being withdrawn and was delivered to the seller agent, then you would have a binding contract on both parties. If this was the case the seller should honor the contract and in the state of Colorado, close the transaction with you as long as you abide by the dates and deadlines of the agreed upon contract.

If any part of this offer/counter-offer process was done verbally, then you would have some significant gray area. Verbal offers and counter-offers are often used by agents throughout the process of negotiations, but when doing this you open the door to many, much more significant issues and misunderstandings that often times lead to problems. If you only accepted verbally or the counter offer was made verbally, then I would say that you do not have much of a case. Without written and signed contracts, enforcement becomes a larger issue and inevitably it comes down to he said/she said. You would need to weigh the cost/benefit of attempting to hold the seller to a verbal commitment and I believe that would be very difficult to achieve.

“Things do not always work out the way we think they should and often times in negotiations people change their mind on an ongoing basis, I see it every day. ”

Things do not always work out the way we think they should and often times in negotiations people change their mind on an ongoing basis, I see it every day.  The best rule of thumb is to do everything in writing and be prepared to respond promptly and make sure you respond in writing. Communication is difficult, even under the best circumstances, this is part of the reason why we have contracts and we do our best to make sure all negotiations are done on paper. Contracts should spell out the terms and conditions and remove interpretation or changes of mind from the equation.

Please remember this is not legal advice and I always recommend you speak to an attorney and see if you have any legal grounds for recourse, he/she will be able to steer you in the right direction. Don’t lose hope because of this set back, doors open and doors close and maybe an even more perfect home is right around the corner. Keep the faith.

Dave Kimbrough
The Kimbrough Team

Houses in our $225k price range are moving so fast! What can we do?

Dave,

We are currently looking for a new house here in the Grand Valley. Our budget is around $225,000 and it seems like every time we find a house we want to see, it’s under contract before we can even schedule a showing! We just got our house under contract and are feeling the pressure to find something new pretty quickly. What’s the deal with houses in our price range moving so fast? Do you have any advice on what we can do to find something we like before it goes under contract?

Thank you so much for your help!!
Mackenzie & John, Grand Junction

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Mackenzie & John,

Wow! Your observations are absolutely correct! The segment of the market that you are searching in is moving at a very brisk pace and the competition can be fierce! I had a property that I put on the market this week and had 3 offers on the first day and the winning bid was significantly over our asking price. I sure did not see that coming! However, situations like this are happening with more and more regularity so as a buyer, you must be ready and willing to put your best foot forward right out of the gate. Don’t be afraid to compete!

“These are several techniques to help you up your game in this increasingly more competitive real estate market. ”

There ARE some simple things that you can do to help move your offer up in the pecking order when the offers are presented to the seller!

1. Be willing to offer more than asking price! I have seen many an offer lost over $500 or $1000. If you really want the property and there are multiple offers, go 1-2% over asking price and watch your chances soar! If the home is $225k, offer $229k and my bet is you get it.
    
2. Offer more earnest money than what the seller is requesting. Earnest money is often times an overlooked negotiating tool that absolutely DOES mean something to a seller and can tip the scales if the offer prices are similar.
    
3. Be flexible with the closing and possession date. This will show the seller that you are willing to work with them and make the transition fit their needs.
    
4. Be willing to cover your own or at least part of your own closing costs. Over 80% of the offers we see contain seller paid closing costs. Eliminating these closing costs indicates to a seller that you are a stronger buyer. After 15 years and thousands of contracts negotiated, it is a fact that most sellers don’t like paying the buyers' closing costs.
    
5. Do not ask for personal property or things that the seller is not offering as inclusions with the property. If they have not included the nice new looking refrigerator, don’t ask for it. If you find their lawn furniture comfy don’t try to throw it in, go buy your own. I have yet to find a seller who looks upon request for personal property with a favorable eye.
    
6. Be willing to waive your inspection contingency! If you do this, it will be clear to the seller that you are making a serious offer and have serious intent to purchase the home. This is a last resort move, however, it is a doozy if you have confidence that the property is in good condition.

These are several techniques to help you up your game in this increasingly more competitive real estate market. Notice that none of these are high dollar techniques or anything really fancy, but I promise they will make a difference and if you combine 2 or 3 of these in the same offer you will probably have an unbeatable combination. 

Remember sometimes it takes a little courage, faith and risk to get what you want so don’t let fear or hesitation hold you back from making things happen. When you craft your offer with your agent, look at it through the eyes of a seller, be willing to think outside of the box and create a win/win for both parties and I bet you have a new home in no time at all. I’ll bet the next time you submit an offer, it will be FUN! Good luck.

Dave Kimbrough
The Kimbrough Team

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Current Real Estate Market Update

Dave,

What’s is the current state of the real estate market in Grand Junction? Is it a buyer’s or a seller’s market? I’m also curious how long it takes to sell a home in our neck of the woods compared to other places like Denver or Fort Collins. It always seems like I’m hearing how Denver is booming and has been for the last couple of years. How do we measure up over here on the Western Slope?

Thanks for the market update!

Steve, Grand Junction

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Steve,

Great question! When I wake up in the middle of the night I am either thinking about ways to improve my marketing plans or pondering what is really going on with our real estate market?  How will this year be, compared to last year?  Will we finally see the job and wage growth start to flow or remain stagnant like a rivers eddy? Is there enough development being initiated to keep pace with present and future housing demands? I spend way more time than I should pondering questions just like this and will admit that I waft back and forth like a wind swept balloon, but will give you what I know as of now! Keeping track of what is happening is hard enough, however trying to predict what will happen typically proves a fools game. Today I am happy to report that the state of the Grand Junction real estate market is strong and holding steady. 

“Steady is the new normal for us and has been for the past several years, as we have seen steady and sustainable growth year over year since 2012! ”

Steady is the new normal for us and has been for the past several years, as we have seen steady and sustainable growth year over year since 2012! Having a real estate market that demonstrates sustainable growth is a real blessing, as that kind of market generally does not lead to a bubble and keeps affordability in reach for most of the residents. Our prices have not gotten too far out in front of our wages and income and that helps any market remain on the healthier side of things. The average days on market for a home in Grand Junction in 2016 was 103, down from 142 days in 2012. 103 is good. Not great, but a healthy good. In stark contrast the Metro Denver area has an average days on market of 27 and Ft. Collins you are looking at 59 days on average. 27 Days is really hard to believe, but Denver has been sustaining that kind of market for 3 years now. What seems like it has to end, has no end in sight. The average days on market for Ft Collins is impressive, however not when compared to Denver! The real test is median sales price and we will see that the prices on the Front Range are soaring!

Since 2012 the median home price in Denver has gone from $233,500 to $350,000, an increase of 50%! Ft Collins went from $228,000 to $344,000, an increase of 51%. WOW. Here in Grand Junction the median house price has gone from $175,000 to $211,000 in the same time span, an increase of 21%. Not as impressive as Denver, however very solid and most importantly very sustainable.  Being able to sustain the growth is very important to the long term viability of our local real estate market. Although the real estate numbers here are not as impressive as the Front Range, I personally believe it is to our benefit over the long haul. Having a real estate market that consistently shows sustainable growth and appreciation will lead to an overall healthy local economy and one where housing will remain affordable to the majority of our residents and that is a very important part of community.

I for one am thankful for where our valley is and where it is headed! As the author Robert Fulgham wrote, "The grass is not, in fact, always greener on the other side of the fence. No, not at all. Fences have nothing to do with it. The grass is greenest where it is watered. When crossing over fences, carry water with you and tend the grass wherever you are.” 

Dave Kimbrough
The Kimbrough Team

What happens when a home appraises for below the contract price?

Dave,

We sold our home last year and during the process our appraisal went by without a hitch, actually everything went as well as we could have hoped for. However, recently it was brought up in a discussion between my wife and I—what happens if the appraisal on a home comes back less than what the buyer offered? Are the buyers able to change their offer accordingly or are they contractually obligated to continue through and purchase the home with their original offer? Like I said, the appraisal on our house was smooth as silk, but it just got us curious about what the options would have been if things had not gone so smoothly.

Thank you for taking the time to answer our question!

Sarah and John, Grand Junction

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Sarah and John,

Congratulations on your smooth transaction last year! It’s always a blessing when all aspects of a sale go smooth and without any significant speed bumps. As I am sure you are aware, speed bumps are just part of the process and a low appraisal can be one of the most significant speed bumps one can encounter on the road to closing!

Low appraisals become more common when a market gets very active and rapidly appreciating prices are hard to substantiate with past sales. It can also be an issue, like it was here in 2011 & 2012 when the large number of foreclosures cloud the data and keep an artificial lid on potentially rising market values. Luckily on the Western Slope we have been seeing very sustainable and verifiable appreciation levels and although we occasionally see low appraisals, it is the exception not the rule. When an appraisal does come in low, there are several options, but all the options generally lead to give and take from both parties involved in the sale.

Unless the buyer waives their right to an appraisal, there is an appraisal provision in every Colorado Contract to buy and sell that provides the buyer an escape clause if the home they have under contract does not appraise at the contracted price. There is no contractual obligation to purchase any property that does not appraise. In fact, Colorado real estate contracts are designed with the intent to protect the consumer. Remember, if the appraisal comes back low, you still have options.

“The first most logical option would be to get a second appraisal, if both parties agree that the first one was, for one reason or another, not as accurate as it could have been.”

The first most logical option would be to get a second appraisal, if both parties agree that the first one was, for one reason or another, not as accurate as it could have been. If the lender will allow a second appraisal, then this is a reasonable choice and both parties can hope that the value comes in at the contracted price.

The next option is to amend the purchase price down to the appraised value. This is not a very popular option for sellers, however very popular with buyers! Funny how it works out that way.  On the flip side, the next option is to keep the agreed upon purchase price and have the buyer make up the difference between the appraised price and purchase price in cash at the time of closing. Funny how this is a very popular option for the seller, however not very popular with buyers. Another option, and by far the most popular, is they meet in the middle. Say the appraisal comes in $6K low, the seller lowers the price $3K and the buyer brings an extra $3K to the closing table to bridge the gap and get the deal to the closing table.

Ultimately a low appraisal generally comes down to how bad the buyer wants to buy and how bad the seller wants to sell and thus the reason that the “meet in the middle” option is the most popular! There are far too many scenarios to go over here, as a low appraisal can have other, more far reaching impacts. More often than not it just takes everyone coming to the conclusion that a win/win is better than a loss! Count your blessings and I hope this gives some simple insight into a complicated and very unwanted situation! 

Dave Kimbrough
The Kimbrough Team

For Sale by Owner: Advice for working with a buyer's agent

Dave,

I’m am going to sell my home by owner this spring and I am willing to cooperate with agents who want to show it to their buyers. One of my friends told me that agents would not show it without offering “agent protection” and I am not exactly sure how that will work or what it means. If I sell my home to a buyer with a realtor, do I still have to pay the typical agent commission? I know I am asking a real estate agent for advice on selling on my own, however I am confident you will shoot me straight. Thanks for your advice.

Jody, Grand Junction

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Jody,

There is one thing I can guarantee, I will always shoot you straight! I think it is great that you are going to try to sell your home by owner! Selling by owner is not for everyone, however it is an option for many and some are successful. According to the National Association of Realtors, 8% of all home sales were by owner and the success rate for by owner properties is 20%. So the success rate is not high, however you never know till you give it a whirl. So you have decided to go by owner, how can you incorporate real estate agents to increase your success rate?

I am confident what your friend meant by “agent protection” was simply referring to your willingness or lack thereof to cooperate with real estate agents in paying a commission. Let's face it, real estate agents are in the business of selling houses and they generally try to sell the homes that offer to pay them a commission if their buyer ends up purchasing the property. You need to decide what commission you are willing to pay and then let the agents know what that is and agree to offer them some kind of assurance that if their buyer purchases, you will cooperate with an agreed upon commission. If you are willing to cooperate, then offer to sign a commission agreement or proactively provide them with an agent commission form that identifies what percentage or flat fee you are willing to pay and allow them to sign it for their buyer. This will protect the agent and probably substantially increase your chances of getting Realtor cooperation! One way I have seen this successfully done is to deliver fliers to the real estate offices and have curbside fliers that openly advertise your willingness to cooperate with paying a real estate commission.

As far as the amount of commission to be paid, you can negotiate this with each agent individually or just figure what amount you are willing to pay and advertise that rate. More often than not the real estate commission is at or close to 3%, but there is nothing set in stone and it is completely up to you!

Remember, the more you embrace the Realtors, the more cooperation you will get from them.  Trust me, word travels quickly about those for sale by owners that are not cooperative or who are abrasive in their dealings with local agents. Bottom line, remember you generally get back what you give! Best of luck on selling your home by owner and If you are not successful, I know a good agent that would be happy to help you out!

Dave Kimbrough
The Kimbrough Team