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Commercial Real Estate

The Secret to Secret Home Listings

Four things you should know about how some houses are sold before they even go on the market.
Illustration by Phil Foster

1. Secret sales, known as “hip-pocket listings,” are only kept secret from the Multiple Listing Service.
Well, and a seller’s neighbors. In most home sales transactions, a seller and a broker sign a listing agreement that gives the broker the right to advertise the home’s availability. Usually that means a “For Sale” sign in the front yard and a listing on the Multiple Listing Service, a network of houses for sale that’s controlled by brokers and real estate agents who have paid a fee to be members of the service in a certain area. In hip-pocket listings (the term comes from the idea that an agent or broker carries the listing only in his or her hip pocket), sellers get around the conventional approach by relying on agents and brokers to market houses to each other, without ever putting up a “For Sale” sign or listing on the MLS. “A lot of buyers like hip-pocket sales because then the market doesn’t know what they paid for a house,” says Susan Baldwin, a senior vice president with Briggs Freeman Sotheby’s International Realty in Dallas. “Sellers like it because they feel like it gives them only serious buyers coming into their house.”

2. Hip-pocket listings, which were once a way for the very rich and very famous to protect their privacy, have become more common for buyers across price ranges in Dallas. 
The rate of home sales has been picking up in many Dallas neighborhoods since the end of 2012, and the number of houses available for sale has dwindled to record lows. But agents say they are swamped with buyers. In a market this tight, “For Sale” signs and MLS listings and multiple home showings may not be necessary for some properties. All an agent may need to do these days is pair one of his many buyers with a seller. That is, if they’re well-connected enough to find those sellers.

Real estate agent Blake Eltis and his business partner in the Carroll/Eltis Group have found client requests for hip-pocket listings becoming more common in Preston Hollow and the Park Cities. But they’re not fans of the expanding practice because they believe sellers often don’t get good exposure for their homes. “Your listing is only as good as the people who know about it,” Eltis says. “There are agents like me who sell a lot in these neighborhoods, so we know where to find buyers. But then you’ll get agents coming in from The Colony or Frisco, and they don’t have any idea where the buyers are here. It can be really hard to sell a secret house in that case.”

Still, according to several agents, more homes than ever are changing hands in hip-pocket sales. Wendy Hulkowich, lead agent at the Hulkowich Group, which is associated with RE/MAX DFW, says, “Hip-pocket sales are above 25 to 30 percent of all the sales coming through our brokerage.” Most of the hip-pocket sales, agents say, are happening in Lakewood, Preston Hollow, and Far North Dallas. And several agents say they believe as many as half the sales now taking place in the Park Cities are of the hip-pocket variety. Since those sales never get recorded in the MLS, that might explain why the number of sales in the Park Cities is down 8 percent from the first quarter of 2012, while sales are up in all surrounding neighborhoods.

3. Hip-pocket listings are making loans more complicated. 
Agents rely on the MLS not just to list sellers’ houses and find houses for their buyers, but to compare similar houses so they know what a property is worth. As anyone who has ever dealt with a real estate agent knows, that price setting is done through “comparables” or “comps.” And when many houses are selling outside of the MLS, comps become less reliable. “Pretty soon, we’re not going to have any comparables in some of these neighborhoods where hip-pocket sales are taking off,” says Alan Shaffer, an agent with Clay Stapp & Co. in Dallas. “It’s already a big problem in Preston Hollow and the Park Cities.” What’s worse, appraisers use MLS “comps” to do their work for the banks that make the loans. Agents say they believe appraisers are undervaluing houses right now. “The appraisers just don’t have the right data,” Shaffer says.

4. Some agents really don’t like hip-pocket listings.
Even as more homes are being sold in hip-pocket transactions, some agents are speaking out against those deals. “The hip-pocket thing is a ridiculous phenomenon,” says realtor Jeff Duffey, of Jeff Duffey & Associates in Dallas. “I think a lot of agents are trying to use it as a marketing tool. They’re telling clients, ‘I’m a great agent who is so well connected that I can sell your house without ever listing it.’ Well, let’s be honest. A telemarketer could sell your house if they make enough phone calls. You may still sell the house, but how will you know you got the best possible price if you don’t expose it to the whole market?”