When people put their homes on the market, they usually aim to reach as many potential buyers as possible via multiple public channels. However, some property owners prefer to manage their home sale quietly, through a pocket listing. This means they keep their asset off the open real estate market and only share the offer with a small number of private buyers (or their “pocket”). There are advantages to word of mouth, off-market listings, or pocket listings. This article explore what they are how a real estate professional should approach this type of sale.
The Advantages of Pocket Listings
The vast majority of assets on the U.S. real estate market go on the MLS (Multiple Listing Service), a list of databases real estate brokers and agents use to exchange information about local properties up for sale. The MLS is a helpful tool if you’re an agent wondering how to get more real estate listings.
So, why do some sellers prefer to advertise their homes through pocket listings? Let’s look at a few reasons.
Privacy
Some home sellers, especially public figures or celebrities, may prefer a pocket listing because they want to avoid attracting attention or choose not to share information about their assets online. An expensive and/or celebrity home may draw onlookers who pretend to be prospective buyers but only visit the property to take selfies.
Pocket listings can also avoid the bidding wars that may accompany the sales of highly sought-after properties.
Direct Selling
In some cases, the seller may offer a unique property that would appeal to a limited market slice, like a farm or a historic home. They may work with an agent who knows several potential buyers and can privately and directly offer the property to people likelier to be interested in the asset.
In these cases, a pocket listing has a better chance of leading to a quick, hassle-free sale than listing the property on the MLS. The realtor may even offer the buyer a reduced commission since the deal would possibly take less time and effort than a regular public listing.
Testing the Local Market
Some sellers are unsure whether their property would fetch offers at their target asking price. Listing a home at a price that’s too high for the market may eventually result in the property staying on the MLS for a long time. This lag can cause distrust in potential local buyers, especially if they see several price reductions in the asset listing.
An initial low-key listing can help sellers gauge the market and find out at what price they may expect to sell their property.
Some Drawbacks of Pocket Listings
Although pocket listings may make sense for some market segments, this selling approach has the following limitations:
- Smaller buyer pool. Without public advertising and a prominent “For Sale” sign, the listing will attract fewer potential buyers. While that may align with the seller’s purpose, lower visibility means the property may only get a handful of offers.
- Lower competition. MLS listings on hot real estate markets may generate competitive bidding that boosts the property’s final selling price. With a pocket listing, you won’t get a lot of buyer competition.
- Potentially longer sale time. Since pocket listings have lower exposure, finding the right offer may take more time. If you don’t have a prospective buyer in mind, an MLS listing may work better for sellers in a hurry to get an offer for their property.
Are Pocket Listings Legal?
While pocket listings are legal across the U.S., the National Association of Realtors (NAR) practices a Clear Cooperation Policy, which demands that real estate brokers and agents list properties on MLS. According to the NAR, this policy aims to promote cooperation among real estate professionals and protect consumers from conflicts of interest in pocket listings, like one agent representing both the buyer and the seller.
However, the NAR acknowledges that some sellers may have valid reasons to keep their listings private. In these cases, the seller can request their agent or broker to list the property only within real estate professional networks, like broker cooperatives, that restrict public access.
Best Practices for Pocket Listings
Handling a private listing differs in several ways from a regular MLS listing. As you prepare to work on a pocket listing for a client, make sure you:
Assess Your Potential Buyer Database
One obvious challenge of pocket listings is finding the right buyer. The seller’s wish for privacy may leave you with fewer advertising options.
That’s where your existing client network becomes a major advantage. You can look through a list of clients who have expressed an interest in local properties and reach out to them privately to see whether the current listing may be a good fit for them. Or, you may communicate directly with buyers who you believe would be interested in the asset.
Get the Property Market Ready
Many homeowners choose pocket listings because they aren’t ready to host an open house yet, or because they spend a lot of time out of town and can’t keep up with a constant influx of potential buyers.
However, if you source an eligible offer through your private network, the house must still be ready for viewing. Encourage your client to take care of necessary repairs, freshen up faded paint, mow the lawn, get rid of yard junk, and do what it takes to make the property presentable.
Consider Real Estate Ethics
As a real estate agent or broker, you’re representing your client’s interests. If the client isn’t sure that a pocket listing is right for them, explain all the pros and cons of this approach so they can make an informed choice. Also, make sure you comply with state and local NAR pocket listing regulations.
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