If you own your home, you’ve probably received letters in the mail from real estate agents claiming, "I have a buyer for your home." Make no mistake: These letters are thinly disguised solicitation letters from wanna-be listing agents.
Even if one of these agents does represent a buyer in the market for a home, it's unlikely that the buyer actually wants your specific home. This may be one of the reasons that the public often mistrusts real estate agents. As long as the agent can rationalize the lie, the agent might not see the harm.
Sellers who offer their homes for sale by themselves, known as FSBO (For Sale By Owner), also hear from agents who claim to have buyers. And maybe they do, maybe they don’t—but really, those agents know that many FSBO homes have trouble selling, and they want to be there when the owners realize they need to list with an agent.
Why the Lie?
How do agents get away with saying "I have a cash buyer for your home" when they don't? Because nobody questions it.
Because agents will say, "Hey, I am working with a few buyers, and even though your home does not fit their parameters, who's to say they won't change their minds about it?"
Or, they may say, "I could run into a buyer tomorrow who wants to buy your home, you never know."
None of this changes the fact that the agent does not, at this very moment, have a buyer for your home.
Agents also invest a lot of money in taking sales training courses. Sales trainers tell them it's OK to bend the truth to get a chance to talk to a seller. What an agent might be angling for is an opportunity to sit down with the seller and apply sales tactics to get the listing. But this is not how listing agents find buyers for your home.
How Agents Find Home Buyers
A listing agent is not going to spend money and invest time in trying to find a buyer for a home that is not their listing. That agent wants to list your home, generally through an exclusive right-to-sell listing. This type of listing agreement says the agent earns a commission when the home sells, regardless of who found the buyer.
Before you say, “Wait a minute, what if I find the buyer?”—you need to realize that this type of preferred listing agreement also induces the listing agent to spend freely and market widely to expose your home to the largest pool of buyers possible.
After the listing agent signs a listing agreement with the seller, the agent will use a mix of several marketing techniques:
- Putting a "for sale" sign in the yard, unless HOA regulations don't permit signage or the seller objects. According to the National Association of Realtors statistics, about 6% of buyers come from seeing a "for sale" or "open house" sign.
- Holding open houses.
- Listing the house into the Multiple Listing Service (MLS). Most buyers come from the listing agent's marketing, and MLS is a key part of that. A good agent will submit professional quality photographs, download the listing to all the major property websites, and use print and direct mail accordingly. Some agents maintain separate databases for contacting buyer's agents in nearby cities as well.
- Networking with fellow agents and promoting the listing at office meetings and board meetings.
- Designing e-flyers and blasting emails to every agent who belongs to their board.
But the fact remains: The agent finds the buyer only after the agent signs the listing agreement with you.
Pocket Listings to Find Buyers
Pocket listings are homes that are not on the open market and are known solely to the listing agent and the agent's broker. Some real estate agents are not fans of pocket listings because it tends to dramatically reduce the number of buyers who will have an opportunity to see those homes.
In certain cases, luxury home sellers don't want their homes exposed to the public because they value privacy over money. Or, their home is so unique that few buyers except those with a ton of cash who can afford to remodel will want it.
Some sellers also hope a pocket listing will attract that patient buyer who is waiting in the shadows. Every agent has a buyer or two who wants the agent to let them know if a home in a particular neighborhood becomes available, but that doesn't mean the buyer will pay market value for that home or that the buyer will even know it is for sale.
Pocket listings were typically favored by many real estate agents because it meant the listing agent would most likely also represent the buyer, a practice known as double-ending and dual agency. It could have meant a double commission to that agent because the agent would probably pocket both the listing and selling agent's fees. It gave a pocket listing a whole new meaning, making the practice controversial.
As a result, the National Association of Realtors adopted a new policy stating the listing agent must market the property to the public within one day, effectively banning pocket listings. The policy went into effect on January 1, 2020.
Realistically, though, it generally makes more sense to show your home to a million potential buyers rather than just one potential buyer.