What is a Pocket Listing and Why Should You Know About Them?
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You may be surprised to know that in today’s housing market, some sellers intentionally limit their home’s visibility to prospective buyers. That’s right! There’s a group of sellers out there who are choosing to reduce the competition for their homes. It’s known as pocket listing and is becoming increasingly popular.
Traditionally, agents register property listings on their multiple listing service, the MLS. Once posted on the MLS, the listing is automatically shared with other agents within the MLS database and with the public on aggregate listing sites such as Zillow, Redfin, and Realtor.com.
Pocket listings don’t appear on any of these sites because they never make it to their local multiple listing service. Instead, agents share the pocket listing with an exclusive network of buyers or with other real estate professionals in their professional network.
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What is a Pocket Listing?
A pocket listing is essentially a privately sold home. The general public isn’t aware of the listing because it remains in the agent’s ‘pocket,’ and is shared with a selected few. Buyers need to have some connection to the brokerage, agent, or seller to hear about the property. Pocket listings are also referred to as ‘exclusive listings’ or ‘off-market listings.’
How Popular are Pocket Listings?
In the past, pocket listings were primarily used by high-net-worth individuals or celebrities who wanted to keep their home sales a secret. That’s no longer the case, with more sellers opting for pocket listings in the last few years.
Given their private nature, it’s hard to pinpoint exactly how many homes are sold as pocket listings, but housing market analysts point towards an uptick in popularity during the pandemic.
According to Redfin, the number of homes that were listed and immediately marked as ‘sold’ or ‘pending’ have increased from 1.8% in June of 2019 to 2.8% in June of 2021. Homes that go under contract this fast are usually marketed privately before hitting the MLS, which would make them pocket listings.
One of the key reasons sellers market their homes privately is to avoid a large crowd of non-serious buyers touring their homes. With buyer demand through the roof, it’s also been easier for listing agents to market real estate listings to their personal network and still have a large pool of potential buyers.
How Pocket Listings Work
When a seller decides to pocket list their home, they enter into a listing agreement that allows the listing agent to market the home strictly through private connections. Information about the listing is kept within the real estate broker’s office and shared individually with potential buyers.
How MLS Listings Compare to Off-Market Listings
According to the Real Estate Standards Organization, 80% of homes sold nationwide are listed on the MLS. The U.S. has about 600 different MLSs on which homes for sale can be advertised.
The MLS introduces a home to the open market, sharing details of the home such as photos, square footage, number of rooms and baths, and a general description of the property. Since only real estate professionals have access to the MLS, these details are then syndicated across multiple listing sites to reach potential buyers.
Pocket listings have all of these details shared as well, just not on the MLS or other listing sites. The agent may instead create a PDF of the property and share it with a private email list individually.
What is the Pocket Listing Policy for Real Estate Agents?
Pocket list real estate is sold in private without the input of the market, hindering its ability to be sold at a competitive price. As a result, the National Association of Realtors has a ‘Clear Cooperation Policy’ requiring homes to be publicly listed if they are being publicly advertised via flyers, lawn signs, or digital marketing.
The NAR’s Clear Cooperation Policy was created to avoid “misuse of various limited exposure marketing tactics.” The policy is meant to encourage cooperation among agents for the benefit of the customer, as well as curb pocket listings that would be in the self-interest of the real estate agent alone. In addition to reducing visibility and competition, pocket listings make it more likely that an agent will represent both buyer and seller, increasing their commission on the real estate transaction.
It’s worth noting that the NAR’s policy on pocket listings does allow for office-exclusive listings, as long as they are one-to-one promotions. You should also know that not all agents are part of the NAR, so not every real estate agent you come across will adhere to the NAR’s policies. Despite being a highly respected organization in the industry, it does not have the authority to prohibit or reprimand any real estate agent outside of its national association.
Are Pocket Listings a Good Idea?
Sellers generally want their homes to have maximum exposure. The more people view a listing, the more likely it is that the seller will find a buyer willing to pay full price or even above asking price. Still, some sellers choose to keep their property as a private listing for the following reasons.
Privacy
The #1 reason sellers choose to pocket list their property is to maintain their home’s privacy. Public figures and celebrities with lavish properties may want to keep their sale hush-hush to avoid the curiosity that the home sale or showing may bring.
If the reason for the sale is a divorce, financial difficulties, or a major professional change, it might be in the seller’s best interest to keep their real estate listing private and off the market.
Ability to Test the Market
Sellers also choose to pocket list their properties because of the ‘premarket’ advantage. Marketing a home privately among a group of select buyers allows the seller to generate interest on the property while they prepare it for the market. It also allows for sellers to understand if they are setting a realistic selling price.
Pocket listings can be temporary. If a seller can’t get a private buyer at their asking price, they may introduce their listing to the market later to increase their chances of selling at full price.
This is a better strategy than potentially overpricing the home on the MLS where price history and number of days spent on the market will show. Buyers tend to be suspicious of a property whose price has been lowered or remained on the market for a long time.
Secured Sales Price
Selling privately allows for the owner to set a price and hold out until they meet a buyer willing to pay said price. Since the property isn’t on the open market, it isn’t subject to competition, therefore it won’t be clear to buyers if the property is overpriced or not. This gives the seller the upper hand in the real estate transaction.
In spite of these pros, pocket list real estate still has a few downsides to both buyers and sellers. Before deciding whether a pocket list is right for you, consider the following.
Drawbacks to Homebuyers
Buyers typically turn to pocket listings when they’ve exhausted all other options. Buyers’ agents will often ask listing agents if they have anything off the market, either because there’s not a home option out there that works for their buyer or the homes that fit their criteria are being taken off the market before they can even put in an offer.
Pocket listing could be a good option when the home buying process has been draining, but buyers should be aware that the process of buying exclusive real estate differs from traditional home purchases. Sellers may not be in a hurry to sell their property and don’t usually see a need to reduce their price, so negotiating may be difficult, if even possible.
Drawbacks to Homesellers
Most sellers are advised to pocket list their property if they want privacy above all else. Privately selling your home forces you to miss out on two big advantages of the marker: buyer competition and a large pool of buyers.
By avoiding the open market, you forgo the opportunity for your property to experience bidding wars, which could increase your home’s final sales price. A limited buyer pool means fewer people are considering your property for purchase, which could mean it takes longer to sell.
Find the Best Real Estate Agent for Pocket Listings in Your Area
Although they’re not illegal, an off-market listing can be more troublesome than what it’s worth. If you’re considering a pocket listing for your home, ask your real estate agent about their experience with pocket list real estate. Have they sold pocket listings in the past? If so, how did they go about finding buyers? What was the financial return for the sellers?
You should also remember that although a pocket listing offers privacy, it’s not a ticket to avoiding home sale preparations. Even if you’re marketing your home to a small network of individuals, you will still have to make any major repairs and/or stage your home to make it attractive. You may even have to schedule a private showing.
Some buyers hope that by pocket listing, they will be able to avoid the home preparation process, but that’s not the case. If you want the best and highest price, you’ll have to put in the work as you would with any other listing. Learn more and sell your home right by talking to a top real estate agent in your area.
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