Secret ‘pocket listings’ return in hot housing markets

With pocket listings, brokers hope to find clients with deep pockets who are willing to pay in cash.

NEW YORK (CNNMoney)

The housing rebound has given new life to an old, but little-known sales practice called “pocket listings,” where agents reserve homes for serious buyers only.

Most homes that are put up for sale are posted on databases called multiple listing services (MLS), on which agents share information with one another in order to find buyers. There are open houses on Sunday afternoons and listings posted on real estate websites.

But with pocket listings, properties are kept under wraps and brokers only show them to people they expect will put money down if the property and the price are right, said Richard Smith, CEO of Realogy, the parent company of Coldwell Banker, Century 21, Better Homes & Gardens and other real estate brokerages. Ideally, the buyer has deep pockets and is willing to pay in cash, fast.

“High-end sellers often don’t want to have the world coming to their property,” said Michael Izquierdo, a Los Angeles-based real estate agent and acquisitions manager for LAPocketListings.com. “When it’s put on the MLS, sometimes the next morning you see people standing outside the property, hoping to talk to the sellers.”

Izquierdo recently got a pocket listing for a $1.2 million home in Mar Vista, Calif., where the sellers wanted to preserve some privacy. They also hoped to heighten interest among buyers by creating an aura of exclusivity.

Related: 5 best markets to sell a home

But pocket listings aren’t just for luxury clients anymore. With the number of buyers far outpacing the number of homes for sale in hot markets like Los Angeles and Manhattan, pocket listings are becoming more common among more moderately-priced homes as well, he said. He has some pocket deals where sellers are asking for as little as $500,000

When Izquierdo gets a pocket listing, he combs his client list for good fits. If he can’t find one, he contacts colleagues to see if they have potential buyers.

If the home is overpriced, the seller and agent will find out quickly, said Alex Clark, founder of pocketlistings.net. “I put in the email, ‘Not listed on the MLS,’” he said. “If it’s priced right, there’s a really good chance you can sell it as a pocket listing.”

Calculator: Was my home a good investment?

If it doesn’t sell, then Clark tries to convince the seller to readjust the price and list it publicly on the MLS.

Some sellers, however, aren’t interested in going public. They are purely using the pocket listing to fish for a “make-me-move” deal. “These are not motivated sellers. They’re saying, ‘Get me a good price,’” said Manhattan real estate agent Wei Min Tan.

Not everyone endorses these pocket deals, however. In New York, the practice could violate the Universal Co-Brokerage Agreement, according to Neil Garfinkel, counsel for the Real Estate Board of New York, the local trade association. Under the agreement, agentsmust share listings. They can only withhold listings if sellers request they do so.

In some cases, agents may try to convince sellers to use pocket listings in order to double their commissions by acting as agent for both the buyer and the seller.

“That’s where it starts to get into the gray area,” said Garfinkel. “If an agent is putting their own economic interest ahead of the seller’s, it’s a violation of state law.”

Related: The bidding wars are back!

They may, for example, steer the deal to a buyer they represent even though another broker’s buyer put in a higher bid.

“Most of the time, pocket listings are done ethically and fairly,” said Betty Graham, president of Coldwell Banker Previews International/NRT, Realogy’s luxury brand.

Nevertheless, she believes listing the property publicly increases the likelihood that a home will sell for the best price.

The National Association of Realtors does not have an official policy on pocket listings, according to spokesman Walt Molony. But most agents, like Graham, profess that sellers are almost always better off getting as many bids from as many potential buyers as possible. 

Sentiment shift: Home prices to rise

The majority of Americans once again believe home prices are going up.

NEW YORK (CNNMoney)

The majority of Americans now are forecasting home prices to rise, and only about a third are expecting prices to fall, a reversal in attitudes of a year ago.

A monthly survey by mortgage finance firm Fannie Mae found 51% of those questioned in April believe prices will rise in the next 12 months, while only 35% are projecting a drop in prices. It is the first time in the three-year history of the survey that a majority said they expect prices to increase.

A year ago, 49% were expecting further price declines while only 32% said they though prices were on their way up.

The latest data from the housing market back up the this new level of confidence in the housing recovery. The S&P Case-Shiller Home Price Index rose 9.3% over the last 12 months, the biggest annual rise in home prices since the height of the housing bubble in 2006.

Related: 3 reasons the housing recovery may not last

“Crossing the 50% threshold marks a significant milestone, as most Americans believe a housing recovery is truly occurring throughout the country,” said Doug Duncan, chief economist for Fannie Mae.

People who were sitting on the sidelines because of concerns that prices were still falling can be drawn back into the market once they believe prices are on their way up again.Home sales are up 10% from a year ago, helped not only by the climbing prices but alsorecord low mortgage rates and falling unemployment.

Related: Selling your home? The cards are in your favor

The survey found that those expecting prices to go up are forecasting a 7.2% rise, on average. It also found 71% think it is a good time to buy a home, relatively unchanged from a year ago, but the percentage who think it’s a good time to sell has doubled over the last year to 30%.

The increase in those thinking positively about selling is also important for the market, as a tight supply of homes for sale has been one of the drags on the market.

The survey is based on the responses of 1,001 respondents, ages 18 and older. 

 

 

Home appraisals no longer derailing sales

This Jacksonville Beach, Fla., townhouse appraised for $5,000 more than asking price.

NEW YORK (CNNMoney)

Consider this one more sign that the housing market is heating up: Appraisers are putting higher values on homes again, allowing for more deals to go through.

During the housing bust, sales were often derailed by low-ball appraisals that fell far shy of a home’s selling price.

For example, if a home cost $500,000 and required a 20% down payment of $100,000, the buyer would need to finance $400,000. But if the appraiser valued the home at $450,000, the buyer would only be eligible for a $360,000 loan — making the home too costly for some buyers.

But now, as home prices climb and housing inventories shrink, appraisers are valuing homes at or above their selling prices, according to Lawrence Yun, chief economist for the National Association of Realtors.

Related:5 best markets to buy a home

Between 2008 and 2010, appraisals for more than a third of Seattle-based real estate agent Michael Ackerman’s sales came in below the selling price. So he had to get creative.

“I started pulling out the key boxes at the homes so the appraisers couldn’t get in,” said Ackerman. “They had to call me to let them see the home. I would bring a packet of comparables along and explain what I used to price the home.”

But now, with home prices posting such strong gains, those strategies may not be necessary anymore.

“I’ve closed 15 homes so far this year and none of the appraisals have come in below the selling price,” said Ackerman.

Related: Homebuyers clueless about mortgages

He was certain a recent deal in Wallingford, Wash. was going to fall through when the buyer agreed to pay $755,000 — well above the average $690,000 other homes in the area had sold for. When the appraisal came in at the full selling price “everybody’s jaws dropped,” he said.

And in some of the hottest markets, appraisals are coming in well above the selling price.

Agent Eric Tan said one appraiser did a “drive-by” of a West Covina, Calif., home he was selling in April.

“He didn’t ask for any comps, to see the inside of the house, or even schedule a time to meet with me. He wrote up the appraisal right at the purchase price,” he said. “I was able to sell the client’s home for about $40,000 more than I thought the appraiser would value it.”

Related: Builders hold lotteries for eager new homebuyers

In Jacksonville Beach, Fla., where prices have soared 15% over the past 12 months, agentCara Ameer was “holding her breath” when it came time to get an appraisal on a two-bedroom townhouse she sold for $5,000 more than its $189,000 asking price.

“It was FHA financing and [the FHA is] typically much more strict,” she said. That appraisal too ended up coming in above the selling price. 

Where the mortgage deduction really pays

AMERICA’S DEBT CHALLENGE

 

 

By Jeanne Sahadi @CNNMoney May 10, 2013: 6:19 AM ET

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NEW YORK (CNNMoney)

The mortgage interest deduction is one of the most expensive tax breaks on the books, but its benefits are distributed unevenly across the country, according to a new report by the Pew Charitable Trusts.

In 2010, the year that Pew analyzed, the mortgage deduction resulted in $80 billion of forgone revenue to the federal government. Over five years, the tax break is expected to reduce revenue by about $380 billion.

The deduction is claimed by fewer than a third of federal tax filers and less than half of homeowners. Only those with mortgages who itemize their deductions, rather than claim the standard deduction, can benefit from it.

As Congress starts to pursue tax reform, who benefits from the deduction and how it affects different states will be a factor in any discussion about changing it.

“[F]ederal taxes could increase in some areas and decrease in others. These results could, in turn, affect economic activity both across and within states,” the Pew report noted.

Generally speaking, Pew found that states on parts of the East and West Coasts had the highest number of people filing for the mortgage deduction and also claiming the highest average amounts compared with states in the South and Midwest.

Minnesota is an exception: It had a high percentage of filers using the deduction and claiming relatively high average amounts.

Within states, filers in large metropolitan areas were most likely to claim the deduction and to claim higher amounts.

More specifically, Pew found that California took the No. 1 spot in a few categories: It had the most tax filers in the country (16.7 million). It also had the highest number of mortgage deduction claims (4.6 million). And in aggregate the state claimed the highest number of mortgage deduction dollars (nearly $72 billion).

Related: Homebuyers clueless about mortgages

But when it came to averages claimed among filers, California actually took a backseat to Maryland. Among all federal filers in California, the average mortgage deduction claimed was $4,311, whereas among all Maryland filers it was $4,580, or more than 1.5 times the U.S. average of $2,713.

When calculated just among filers who actually claimed the mortgage deduction, however, California retains its top-dog position. Its average deduction was $15,755, which is about 50% higher than the U.S. average of $10,640 and more than double the lowest average, $7,177 in Iowa.

North Dakota had both the lowest number of claims (50,000), and the lowest average deduction of $1,192 across all filers. Other states with relatively low numbers of claims and low averages include West Virginia, Mississippi, Louisiana, Arkansas and South Dakota.

Related: See how your mortgage deduction compares

No one has seriously proposed getting rid of the mortgage deduction altogether. It’s very popular and eliminating it entirely might disrupt the housing market.

But if lawmakers choose to reform the mortgage break, many experts say it should be rejiggered so it does a better job of promoting homeownership, while not disproportionately benefiting high-income households anymore.

“The mortgage interest deduction should be restructured, with more of the subsidy directed to low- and middle-income taxpayers who are more likely to be deciding whether to own or rent,” Eric Toder, a co-director of the nonpartisan Tax Policy Center, said at a hearing of the House Ways and Means Committee last month.

One proposal would convert the deduction to a credit equal to a percentage of interest one pays, and capping how much interest is eligible. For example, a taxpayer could take a credit for 15% on no more than $25,000 in interest.

That would broaden the reach of the break, since all homeowners with a mortgage could claim it, regardless of whether they itemize.

And it would no longer skew the benefit in favor of higher-income homeowners.

Here’s why?

Currently, the deduction reduces tax liability by a percentage equal to one’s top tax rate. In other words, the higher your income, the higher your top rate, and the bigger your deduction.

By contrast, a tax credit is a dollar-for-dollar reduction of the taxes your owe. And capping it at a given level — say 15% of mortgage interest paid — means everyone gets the same break regardless of income.

Other ideas include further limiting the size of the loan eligible for the interest tax break, and allowing the break only for loans on principal residences. Right now, homeowners may deduct interest on second homes as well as principal residences so long as the combined amount borrowed doesn’t exceed $1 million, and they may deduct interest on home equity loans up to $100,000. 

Hillsdale Neighborhood

Close in but away from the bustle of the city, the Hillsdale neighborhood is located 5 miles from downtown Portland and covers the southwest slope of Marquam Hill. 

The eclectic hub of the neighborhood is the collection of shops, restaurants and services centered around the vintage “Hillsdale” sign along SW Capitol Highway. The variety of shops available makes it easy to get most errands done just by strolling through this four-block area. In fact, Hillsdale boasts a “walkability score” of 88!

Hillsdale Center has banks, dry cleaners, a bakery, coffee shops, shoe repair, a barber shop, nail salon, wine store, post office, and liquor store. If you need medical care, there are dentists, chiropractors, a veterinarian, pharmacy, podiatrist, massage therapists, and acupuncturists.

Hungry? Hillsdale boasts nearly a dozen places sure to satisfy any preference. Or stop by the Food Front Co-op and stock up your own kitchen with a full selection of groceries, produce, wine, and personal products. They also have a deli counter.

Forest Heights

Located in the NW corner of Portland, the Forest Heights neighborhood is the West Hills’ premier planned community.

Surrounded by the natural beauty of large trees and green space, Forest Heights occupies 600+ acres and has more than 1,600 single family and town homes. There are at least six miles of trails and 215 acres of common area in Forest Heights.

 

This area isn’t called the Heights for nothing—many homes have beautiful views. Residents also love nearby amenities such as Mill Pond Park with its pond, trails and playground; top-rated Forest Park Elementary School; and a retail area located in the center of the neighborhood. The Forest Heights Village houses Starbucks, Quinn’s Prime and Vine, a drycleaner, Pizzicato, Supercuts, a gourmet bakery, and many other shops. Above all Forest Heights is a community that really has a distinctive upscale feel. You have “arrived” if you live in Forest Heights!

Bethany Neighborhood

 

Pushing up against the northwestern edge of Portland’s Urban Growth Boundary, the Bethany area provides a convenient commute to Nike, Intel, and Downtown Portland. It’s close to everything but still easy to get out into the open countryside.

The commercial hub of the area is the collection of shops, restaurants, and services centered at Bethany Village.  The variety of shops makes it easy to get most errands done just by strolling through this central marketplace. There are banks, dry cleaners, a bakery, coffee shops, a nail salon, hair salons, tanning salon, UPS outlet, card shop, cycle shop, and liquor store. 

If you need medical care, there are several clinics, dentists, a veterinarian, physical therapists and Walgreen’s pharmacy too. St. Vincent Hospital and medical offices are a short drive away.

Hungry? Bethany Village boasts nearly a dozen places sure to satisfy any preference. Or stop by QFC and stock up your own kitchen with a full selection of groceries, produce, wine and personal products. They also have a deli counter.