Hollywood Sign

For most people, selling a house these days involves some compromises. Your home and address are displayed on real estate sites across the Internet with four color photos of interiors and exteriors. Every nosy neighbor can see how much you’re asking, and in most states, it’s not hard to find what you sold it for.

For the rich and famous, selling a house through the Internet can be a nightmare. Fan magazines, television shows, and tabloids flash photos of very private interiors. Asking prices make headlines. Just the fact that a star is selling raises questions of divorce, estrangement, or financial troubles.

Along with privacy, Internet listings of wealthy homes raise concerns about security. Listings provide addresses, interiors, and even maps for any criminal interested in robbing or kidnapping someone who can pay a handsome ransom.

That’s why you won’t find many of the most expensive residential properties listed on the popular national real estate sites or even local sites hosted by brokerages. Instead, real estate brokers who serve the rich and famous have created a secret system to sell their houses that’s accessible exclusively by those with the cash to pay for multimillion dollar digs.

Ironically, these top drawer real estate pros have taken a step back in time to dust off such well-worn tactics as the open house, mailing lists of buyers’ agents who specialize in luxury properties, and brokers’ receptions to introduce other agents to a property.

The Rise of the Pocket Listing

Three years ago, pocket listings took off in California, Texas, and other luxury markets. The tactic even became the subject of a crime thriller starring Rob Lowe and Burt Reynolds and featuring a disgraced Los Angeles property broker and his wife trying to discreetly market and sell their Malibu villa. Yet the growing notoriety of pocket listings has not ensured success for sellers.

Thanks to the old-fashioned way they are marketed and the central role multiple listing services typically play today, pocket listings take much longer to sell. Plus, they close for as much as 30 percent less than they would have on the MLS because they reach fewer people. More than one celebrity has started out with the pocket listing approach, then listed on the MLS after months of frustration.

Now brokers in the pocket listing business are seeking to find ways to use technology to get better prices for their customers without compromising privacy. Local and regional websites have popped up to reach buyers with “off market” listings that don’t include addresses or details.

Recently, a site called HipPocketz launched to aggregate pocket listings from brokers around the country, featuring prices, lush photos, and addresses, unlike most pocket listing sites. HipPocketz says it was “created as a solution to the limited exposure pocket listings receive as well as eliminate some of the negative associations surrounding these listings.”

The Downsides

Legal and ethical issues can make the marketing of pocket listings difficult for real estate brokers who are also members of their local multiple listing services.

To represent sellers who want to go the pocket listing route, brokers must inform sellers that their homes will not be on the MLS and obtain their written authorization. Some brokers representing pocket listings match them with buyers they also represent, doubling the brokerage’s commission.

This is a controversial practice called dual agency that is illegal in some states and allowed in others only if the agency discloses the relationships to both parties.

Off-market sales techniques and dual agency can cause serious legal problems for brokers and agents even in states like California, where dual agency is legal. Concerned about the rise of off-market sales, the California Association of Realtors’ legal department distributed a Q&A several years ago that discussed how pocket listings can lead to civil suits and how the failure to make information available to all buyers can lead to federal Fair Housing Act violations.

Another concern is the impact that large amounts of off-market transactions have on the accuracy of the market information used to prepare local and national reports on sales and prices. The absence of just a handful of high end sales can lower the median sales price significantly. In markets like San Francisco and Silicon Valley, as much as 10 to 30 percent of sales are off market.

Despite the launch of brokerages specializing in pocket lists and new pocket listing websites, many—if not most—of the properties of the rich and famous that start out as pocket listings end up being listed on the MLS along with everyone else.