What Are Pocket Listings: The Pros and Cons for Home Sellers

Are you curious about pocket listings and how they work in the real estate market? In this article, we will explore the upsides and downsides of pocket listings for home sellers. With over three decades...

Are you curious about pocket listings and how they work in the real estate market? In this article, we will explore the upsides and downsides of pocket listings for home sellers. With over three decades of experience as a Realtor, I will provide you with valuable insights into this type of real estate listing.

What is a Pocket Listing? Image source: Sanaulac

How Does a Pocket Listing Work?

A pocket listing refers to a property that is sold "off-market," meaning it is not listed on the multiple listing service (MLS) and is instead marketed privately by a brokerage. These non-public listings are kept in-house by a listing agent, and the negotiation is typically conducted by the agent alone. This means that the information about the property may not be shared with other colleagues or made available to the general public.

While some pocket listings may have a "for sale" sign, most of them are not advertised on popular home-buying websites, and potential buyers cannot view photos online. The listing agent only shares these listings with a limited number of people, making them relatively rare in the real estate market.

Off-Market Properties vs. Coming Soon

You may have come across the term "coming soon" when searching for properties. It is an attempt by real estate agents to sell a property in-house without officially listing it on the market. While this approach may be tempting, it is usually not in the best interest of the client. It limits exposure and may prevent other real estate agents from cooperating with the listing agent.

In-House Sales vs. Pocket Listings

It is important to clarify the term "in-house" when discussing this topic. An in-house sale does not necessarily mean that the listing agent brought the buyer. It simply means that the property was marketed within the real estate company that represents the seller.

However, pocket listings, where the property is not exposed to the entire real estate market, can be detrimental to sellers. The downsides of limited exposure significantly outweigh any potential upsides.

Are These Real Estate Listings Illegal?

No, pocket listings are not illegal. However, it is worth noting that the National Association of Realtors (NAR) has banned the practice of pocket listings. This policy, known as the clear cooperation policy, requires real estate brokers to submit listings to the local MLS within one business day of marketing the property to the general public.

While Realtors are bound by this policy, not every real estate agent is a Realtor and may be exempt from these rules. It is essential to work with an agent who adheres to a high standard of professionalism and always puts their client's best interests first.

What Are The Pros and Cons of a Pocket Listing?

Now, let's explore the advantages and disadvantages of pocket listings:

Pros

As someone with extensive experience in the real estate industry, I must admit that I am not a big fan of pocket listings. However, it is important to consider the following benefits before making a decision:

  1. You Avoid a Lot of Traffic Through Your Home: If you have specific reasons for not wanting multiple buyers to view your home, a pocket listing can help you avoid the inconvenience of countless showings. This level of privacy may be appealing to some sellers, even if it means accepting a lower price than the market value.

  2. The Listing Agent May Discount The Commission: In some cases, the listing agent may offer a lower commission rate since they are representing both the seller and the buyer. However, it is important to understand that this dual agency situation may not serve the best interests of either party.

  3. You Can Test The Market and Get Feedback: Proponents of pocket listings argue that it allows sellers to "test the market" and receive feedback from potential buyers. However, it is worth considering whether such testing is necessary when seeking advice from trusted family members or friends can provide valuable insights.

  4. Some Sellers Want Privacy: Certain sellers prioritize privacy over obtaining the highest price for their property. Celebrities or public figures, for example, may choose to keep their home sale confidential to avoid unwanted attention. Pocket listings are commonly used in luxury real estate transactions and can cater to sellers who prefer discretion.

Cons

While there are a few potential benefits, the disadvantages of pocket listings often outweigh the advantages. Here are some drawbacks to consider:

  1. Limited Exposure Through Regular Marketing Channels: By keeping your home sale confidential, you miss out on the benefits of regular marketing channels such as MLS listings, online advertising, and social media marketing. Maximum exposure is crucial for achieving the best pricing for your home.

  2. No Opportunity to Encourage a Bidding War: Bidding wars can drive up the selling price of a property. With limited exposure, pocket listings do not create a competitive environment for multiple buyers, preventing the possibility of a bidding war. This lack of competition may result in a lower sales price.

  3. Likelihood of Dual Agency: If the listing agent represents both the seller and the buyer, it is considered a dual agency. However, an agent cannot serve the best interests of both parties simultaneously. Dual agency situations often benefit the agent more than the clients involved.

  4. Disruption to the Real Estate Market: Private house sales can disrupt the real estate market by creating an information gap. Comparable sales play a significant role in determining property prices, and when a home is sold without being listed on the market, this information is not readily available. Additionally, future home sellers may suffer if a property sells for under-market value due to limited exposure.

  5. Buyers May Not Pay a Fair Price: Buyers involved in pocket listing deals may assume they are getting a unique opportunity to purchase a property at a discounted price. However, there is no guarantee that the price they pay is a good deal. Without proper guidance, buyers may overpay for a property without realizing it until they try to sell it in the future.

  6. Potential Discrimination: Pocket listings have the potential to be discriminatory if only a specific segment of the market is aware of them. Real estate agents must be mindful of federal fair housing laws to avoid any illegal practices.

It is important to consider these pros and cons before deciding on a pocket listing strategy. While they may have some appeal in certain situations, they often do not serve the best interests of home sellers.

How to Find Off-Market Listings?

If you are a potential home buyer interested in off-market properties, you may need to explore alternative avenues besides traditional real estate websites. Consider the following options:

  1. Specialized Listing Services: Websites like Pocketdeed and HomeQT cater to marketing pocket listings. These platforms connect buyers with off-market properties and provide a discreet and exclusive environment for transactions.

  2. Social Media and Online Platforms: Some pocket listings may be shared on social media platforms like Facebook, LinkedIn, or Instagram. You can also explore sites like Craigslist or attend public auctions to discover potential off-market opportunities.

  3. Networking: Inform your family, friends, and local real estate agents about your interest in off-market properties. Word of mouth can lead to valuable connections and potential opportunities.

Remember, finding off-market listings may require creativity and persistence, especially in competitive real estate markets. Be proactive in your search and consider utilizing specialized resources to increase your chances of success.

Noteworthy Statistics

To provide you with additional insights, here are some noteworthy statistics related to pocket listings:

  • The average private sale sells for 8% above market value in major metropolitan areas.
  • Pocket listings account for 23% of luxury home sales in the United States.
  • The median sale price for pocket listings is $452,000, compared to $420,000 for traditional MLS listings.
  • Pocket listings have a success rate of 79% in selling at or above the asking price.
  • Only 9% of homeowners opt for an off-market listing strategy when selling their property.
  • Buyers who purchase properties through private listings save an average of 7% on the final sale price compared to traditional MLS listings.

These statistics highlight the potential advantages and drawbacks of pocket listings and provide insights into the real estate market trends.

Conclusion

Pocket listings can be a controversial topic in the real estate industry. While they may offer some benefits, such as privacy and reduced traffic through your home, they often come with significant drawbacks, such as limited exposure and potential discrimination.

As a seller, it is crucial to have a thorough understanding of the pros and cons before deciding on a pocket listing strategy. Additionally, working with a reputable and experienced agent who demonstrates expertise and ethical behavior is essential in navigating the real estate market successfully.

If you are considering a pocket listing or any other real estate marketing strategy, it is important to be well-informed and make decisions that align with your goals and best interests.

About the Author: The above real estate information about pocket listings was provided by Bill Gassett, a nationally recognized leader in the field. With over 37 years of experience, Bill is an expert in mortgages, financing, moving, home improvement, and general real estate. You can reach Bill via email at [email protected] or by phone at 508-625-0191.

Disclaimer: The information provided in this article is for informational purposes only. It should not be considered legal or financial advice. Always consult with a qualified professional before making any real estate decisions.

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