If you’ve been thinking of selling your house or buying a new property recently, odds are you’ve probably heard the term pocket listing. But what is a pocket listing? And is it a good idea to employ a pocket listing when selling your home? Let’s explore these options!
What is a Pocket Listing in Real Estate?
Also known as off-market listings or exclusive listings, pocket listings are properties that are available for sale but not publicly listed alongside other available properties on the standard multiple listing service (MLS).
In such cases, the listing is kept in the proverbial pocket of the seller and their agent, who makes the listing known to only a select few. The real estate professional and the seller will sign an agreement that permits the seller to place the property for sale without publicly listing it on the MLS.
Please note that pocket deals differ from for sale by owner (FSBO) properties. With pocket listings, the sellers still employ the services of listing agents. They just want the property to be marketed differently. It is also not the same as properties with a Coming Soon listing, as those are homes that have not yet been listed but there is a plan for them to be on the market soon.
How a Pocket Listing Works
Most properties available for sale are listed on the multiple listing service, which is a comprehensive database containing the information for all of the properties that are available for sale in a particular area. MLS realtors use the MLS platform to access detailed information on properties that are up for sale.
Then, they use the information they obtain to compare house specifications and prices that fit within their clients’ requirements. However, pocket listing homes aren't listed in the MLS, so they aren’t open to the general public.
As such, only a select number of people will ever find out about pocket listing homes. Rather than being advertised via public listings, sellers depend on other marketing strategies like word-of-mouth advertising and being part of exclusive listing opportunities.
Is a Pocket Listing Illegal?
Although a pocket listing is not illegal, it is frowned upon by the National Association of Realtors (NAR), which is the largest professional organization for real estate agents in America. In fact, in the National Association of Realtors’ bid to curb pocket listings, the NAR approved the Clear Cooperation Policy in 2019.
The policy demands that all realtors list their properties on the MLS within one working day of marketing the property to the public. Realtors who default on this expectation might be subjected to a warning or a fine, though the punishment depends on the disciplinary measure set forth by the realtor’s local realtor association.
The NAR approved this policy to ensure that all agents’ listings are widely available. This is so important because it means that sellers and buyers alike are given an equal shot at listing, selling, and buying homes. Although this policy doesn’t apply to non-members, its approval has caused a significant shift in the industry because many working real estate professionals are members of the NAR.
Nonetheless, some realtors still manage to keep some listings to themselves while remaining in alignment with the NAR guidelines. In order to do so, they’ll sign the listing agreement on Friday, for example, and then take advantage of the weekend to market the property privately before they would otherwise be required to list it on the MLS.
Why Would a Seller Want a Pocket Listing?
In most cases, sellers would want their homes to have the most market visibility, seeing as the greater number of buyers who see your listing, the greater your chances of finding someone who is willing to buy your property at the total asking price or even higher.
Nevertheless, there are some situations where the seller would want to reduce their house’s market exposure. Here are some of the reasons why a seller would prefer a pocket listing.
To Keep the Sale Private
One major reason a seller would want to use a pocket listing is to keep the sale of their home private. This is very common in the case of celebrities or well-known public figures. If and when a seller wants to keep a low profile, the real estate agent handling the property will keep the listing private, only informing specific people who may be interested as long as those people are part of their private network.
When There’s a Minimal Market For the Home
When there’s a minimal market for a home, whether that’s due to how expensive the home is or specific features that make it different from conventional properties, the broker will only make the sale of the home known to individuals who are definitely interested in the property. Those people will be known to have the means to afford the home, too.
When the Seller Already Has a Buyer In Mind
When the seller already has a buyer in mind, like someone who has always expressed interest in the property and has said they are willing to buy the house immediately, there really is no need to list the home in a public way. In such a case, the seller will bypass the typical process of selling a house, like viewings and bidding wars. Instead, the seller will enter a transaction with the specific buyer right away, which is often the fastest and easiest way to sell property.
To Pre-Market The Property
Sometimes, agents will use a pocket listing as a way to pre-market the home. This is a process by which a property that is being marketed before it’s even ready to be listed let alone sold. The point of pre-marketing a home is to garner initial interest in the property while the seller prepares the property to actually be listed for sale.
To Run a Price Test
A pocket listing is also a way to test the selling price of a home and see whether it would actually generate any interest at the proposed asking price or not. By running a price test, you can avoid putting an overpriced property on the MLS and receiving little to no interest in the property, which can be upsetting or demoralizing.
A price test is especially important because the MLS displays the price history of properties as well as the number of days that a property spends on the market. A reduction in the house’s selling price or a long shelf life in general can easily raise buyers’ suspicions of the home.
Pros and Cons of Pocket Listings
Pocket listing, like any form of real estate, has its pros and cons. It’s vital that you have comprehensive knowledge of the pros and cons of pocket listings before you decide whether or not to pursue a pocket listing for your property.
The pros of pocket listings include increased privacy, reduced fees, targeted marketing, and an opportunity to test the market.
A listing agent may take advantage of a pocket listing if their client wants to keep an anonymous profile. This especially applies to public figures like (celebrities or government officials) and individuals who are very particular about their privacy.
In the case of public figures, pocket listings help screen serious buyers from onlookers or fans hoping to swing by and take a tour of their expensive high-end home. Thanks to pocket listing, sellers can control who has access to the property and minimize disruptions to their daily schedule.
Opportunity To Test the Market
A pocket listing allows the seller to test how the market will receive a property at a specific price before listing it on MLS. This helps the seller prevent putting an overpriced property on the market.
This is particularly important because overpricing a property means you will have to reduce the price after listing, and price changes on the MLS can serve as red flags to potential buyers. Thanks to pocket listings, the seller can experiment with different prices without any repercussions when they change the listing prices on the MLS.
A pocket listing will save the seller the financial obligation that comes with listing a house on the MLS. Some agents might be willing to accept a reduced commission rate since they most likely won’t spend money on ethics like staging and professional photography through a pocket listing.
In a pocket listing, the broker only informs individuals who may be interested in buying the property that the property is for sale. This saves you from wasting your time and your efforts by marketing to people who are uninterested in purchasing the home. This way, the agent can distinguish between disinterested bidders and pay more attention to the qualified ones.
Despite these benefits, pocket listings also come with a lot of potential disadvantages. These disadvantages include less market exposure, lower competition rates, the potential for shady ethics, difficulty for house comps, a less-than-ideal selling price, and a long waiting period before the house is officially sold.
Less Market Exposure
The most significant disadvantage of a pocket listing is the lack of market exposure that results from a pocket listing. Since these properties aren’t listed on the MLS, the accessibility of these properties is drastically minimized, resulting in far less traffic. Less traffic means there’s a slimmer chance of receiving multiple offers and increasing the price during a bidding war.
In real estate, competition is a major factor that drives the price of property, and a lack of competition may result in the property being sold for less than it is actually worth.
Pocket Deals May Result in Shady Ethics
Some individuals have expressed their concern about the possibility of pocket listings violating the Fair Housing Act. Since the real estate broker is marketing the property to only a select number of people, it would be difficult to know if the real estate agent is abiding by all of the anti-discrimination laws or if they’re excluding certain people from seeing their properties.
Also, with pocket listings, the listing agent is often in charge of finding a buyer for the property, and as such, they may end up handling both sides of the transaction. This means that the listing agent will likely represent both the buyer and the seller. Things can get dicey at this point since it is almost impossible for an agent to make decisions that are in the best interest of both the buyer and the sellers, which can cause listing agents to compromise in favor of one or the other.
Pocket Listing Makes House Comps Difficult
Comps help real estate agents compare the prices of houses in a certain area, and they’re a very effective tool for pricing a home. When a sizable portion of an area’s available housing inventory is not listed publicly, it affects the local market data. This makes it difficult for industry professionals to accurately discern how much homes are selling for in that area through house comps, which affects everyone in the area.
The Property May Not Be Sold at the Best Price
When the property is only marketed to specific people, the sale results in fewer prospects. It may never sell for its optimum price point either since there’s no competition to drive up the price and act as leverage for negotiation. Also, accurately pricing a home becomes difficult if other pocket listings in the neighborhood have thrown off the numbers as mentioned when we discussed the effects of pocket listings on house comps.
It May Take Time To Sell the Home
The lack of exposure, streamlined potential buyer base, and reliance on word-of-mouth marketing makes it harder to find a buyer for a pocket listing than for an MLS home.
How To Find Pocket Listings
The whole aura of secrecy associated with pocket deals makes finding pocket listings very difficult. Some may even argue that you don’t find pocket listings. Rather, they find you.
When looking to find pocket listings, your best bet may be hiring an experienced real estate agent who possesses a deep bond with the community of pocket listings and a strong network within the industry. This person should know many brokers and be well connected with the elite, so much so that they would trust your real estate agent when selling homes discreetly.
This way, you could remain privy to information regarding pocket listing homes. Additionally, reaching out to the top agents in your area is another way to find pocket listings. If you are qualified and you can prove that you are a serious buyer, they’ll gladly let you in on the homes that are pocket listed.
You also stand a chance of finding pocket listings by reaching out to your family and friends who are connected to established real estate agents in the area. They might be able to provide you with helpful information about individuals who have pocket listed their homes or who are planning to pocket list their properties in the near future.
Attending community events where you can meet and mingle with agents, brokers, or local real estate investors is another great way to get information on houses that are pocket listed or will soon be pocket listed. Lastly, some companies are designed to offer pocket listing services and these companies can connect you with pocket listings from various brokerages across the country.
The Bottom Line
Although a pocket listing is generally frowned upon, there are advantages for both the seller and the buyer. However, as a seller, a pocket listing is only advisable if you’re selling a niched home, trying to test the market, eager to protect your privacy, or you already have a buyer in mind.
Otherwise, it would be in your best interest to list your property on the MLS. This way, you’ll have more buyers to choose from and stand a better chance of selling your property at or above the asking price. In the end, the decision to pocket list your home is entirely up to you, but you must weigh your options first by carefully considering the pros and cons.
This page last updated: March 21, 2022