What Is A Pocket Listing In Real Estate? (Pros And Cons)

Have you come across terms like “in-house listing” or “off-market listing?” These are all different names for the same type of listing, more commonly known as a pocket listing. But what is a pocket listing exactly?

In this post, we’ll discuss pocket listings, including who should use them and how they’re different from standard listings.

If you would rather watch or listen to this content, check out the video or podcast below!

What Is a Pocket Listing?

Usually, a traditional listing is put on a multiple listing service (MLS) by the listing broker. The information on the property is then available to any Realtor with access to the MLS of that open market.

So how is a pocket listing different? A pocket listing is not listed on a multiple listing service (MLS). Because it is not available to the public, it is in the “pocket” of the broker.

That broker will then try to market that property through word-of-mouth or through private online networks where they think they can find an interested buyer. Or, the seller might have a potential buyer in mind already.

Are Pocket Listings Legal?

Pocket listings are legal in just about every state. However, if you are or are working with a Realtor (a real estate agent who’s associated with the National Association Of Realtors), they are held to more strict standards. Even though a Realtor has a fiduciary duty to their client, they can not create pocket listings. And since most real estate agents are Realtors, it has made pocket listings mostly a thing of the past.

There are a few ways to get around this:

First, the Realtor has one business day to list the property on the MLS after they’ve begun publicly marketing it. This means that if you begin marketing the property on Friday, you have the entire weekend to keep the home as a pocket listing.

Also, if the Realtor never begins to publicly market the property, the listing can stay off the MLS.

Finally, if a real estate professional is not associated with the National Association of Realtors they can list your property as a pocket listing for as long as they wish.

Pros Of A Pocket Listing?

Why would someone not want to list their property on the MLS? Pocket listings are beneficial in a few different cases.

Public Figure

First, one use for a pocket listing is if the property belongs to a celebrity, politician, or another public figure who wants to keep the sale of their home private.

Public figures may want to do this for their own privacy and safety, as well as to limit visits to the property from people who have no intention of actually buying. A pocket listing can ensure that only serious home buyers have access to the home.

Buyer In Mind

Another time to use a pocket listing is if the home seller already has a qualified buyer in mind. There’s no point in the seller putting the home on the MLS if they already have a buyer willing to pay the asking price. This could be a neighbor, family member, or friend who has always had an interest in owning the property.

Test Pricing Or Marketing Strategy

Another use for pocket listings is to test homes on the housing market before placing them on the MLS. This way, the listing agent can determine if the price is fair or not and then raise or lower it depending on the reaction they get.

The MLS tracks the price history and how many days the property has been listed. Using a pocket listing to test a home’s price means the seller can avoid lowering the asking price and having their property listed for too long on the MLS. These are both negative signs that buyers and agents will look at when considering a home.

Earn The Full Commission

This benefit is mostly aimed at real estate agents. Agents can hold pocket listings and have a great chance of representing both the seller and buyer in a transaction. While this does present some challenges, in particular, dual agency, most of the time that can be offset by finding another real estate agent in your brokerage to represent the prospective buyer (and still earn a referral).

As for the seller, this allows the agent to control more of the transaction as compared to working with a random buyers agent and buyer.

Cons Of A Pocket Listing

While these scenarios sound like good reasons to use pocket listings, there is one big reason why sellers may not want to use this listing strategy.

May Reduce Home Value

The main reason pocket listings are bad for sellers is that they miss out on the opportunity to get the maximum amount of marketing and exposure for their home. When this happens, the seller might end up getting a price for their home that is too low.

When a property is listed privately, there is less of a chance that the seller can create a bidding war for their home. A bidding war is beneficial because the seller might come away with a higher amount than they originally asked for.

Potential Issues With Pockets Listings For Real Estate Agents

While pocket listings may or may not be the right strategy for your seller, if you’re a real estate agent, there are clear implications of using this type of marketing for a listing.

Anti-Discrimination Lawsuits

The other downside to pocket listings is that it can be harder to make sure Realtors comply with anti-discrimination laws. The real estate agent may show the home to only certain groups of buyers without realizing it, which excludes many other potentially interested buyers. With a traditional listing, you give a greater number of buyers a fair chance at purchasing the home.

Pocket Listings Affect MLS Accuracy

Real estate agents also might want to avoid a pocket sale is to ensure an accurate MLS database. All Realtors rely on the MLS for up-to-date information about different markets. In addition, sites like Zillow and Trulia collect data from MLSs to give their users accurate data.

When the information on a home is not available on the MLS, it throws off the data for other home valuations in the area.

For this reason, the National Association of Realtors officially banned pocket listings as of May 2020. NAR’s “Clear Cooperation Policy” requires that Realtors list the properties they are working with on the MLS within one business day of marketing it to the public.

Dual Agency Scenario

Lastly, another downside (but potential opportunity) to pocket listings is an increased risk of having a dual agent scenario. In this case, a single real estate agent represents both the buyer and seller in a single transaction.

When this happens, it’s hard to know if the agent truly has your best interest at heart. Particularly if you’re the buyer, you have to be mindful that the listing agent has an obligation to get the best price for the seller. This means you might end up paying way too high.

So if you do decide to purchase a pocket listing, at least be sure to hire your own real estate agent to represent you in the transaction.

Advantages Of Pocket Listings For Buyers

If you’re in the market to buy a new home, how do pocket listings affect you? Should you try to identify pocket listings? And if you do find one, should you consider it?

With a solid knowledge of the home buying process, the prices in the area, or the help of a professional real estate agent, pocket listings can be a great opportunity for buyers. Here’s why:

Flexibility

One major benefit of a pocket listing has to do with flexibility in terms. Typically, a seller whose property is not on the market will offer more flexible terms to buyers like extended closing dates, leasebacks, and other concessions.

In fact, many buyers prefer pocket listings simply because it’s easier to have a more relaxed showing schedule. In addition, the seller may allow you to skip home inspections and appraisals as long as you and your real estate agent sign an affidavit and liability waiver (if needed).

Price

If you can find a pocket listing, essentially off-market, then a buyer stands to gain a possibly better deal than if the property was marketed to all potential buyers.

If you’re buying off-market, you have more freedom in negotiating with the seller since there are no competing offers that need to be considered.

Less Competition

If there’s a pocket listing in your area and it hasn’t been published to the MLS yet, this could be an advantage for you as a buyer because fewer people have access to this information.

In this case, you have a better chance of getting the first look at the hidden house. This allows you to submit a competitive offer before anyone else has a chance to see it or make an offer.

So if you’re tired of dealing with multiple offers, finding pocket listings may be for you.

How To Find Pocket Listings

Finding pocket listings has become harder in recent years as pocket listings have declined due to NAR essentially banning them. There used to be entire websites setup dedicated to pocket listings. Also, many more pocket listings were found on portal sites like Zillow and Trulia.

Today, the best way to find pocket listings is to directly contact local real estate agents and ask about pocket listings or “upcoming listings”.

A key to finding a pocket listing is timing. After all, you wouldn’t be able to find it if the seller has not yet decided to list or unlist it from the MLS. You still need to do your research and know when properties go up for sale.

Final Thoughts On Pocket Listings

So, now that we’ve answered the question, “what is a pocket listing,” should you work with them if you’re a real estate agent? And if you’re a buyer or seller, should you buy or list a property this way?

Overall, it’s best to avoid pocket listings unless you have a good reason for wanting to keep the sale or purchase of your property private. To get the best price for your home and sell it as quickly as possible, you need as much professional marketing and exposure as you can get.