With rising home prices and low inventory levels in the past couple of years, pocket listings have become a popular topic in real estate. Although they tend to be more popular with celebrities and large public figures who want privacy, pocket listings are not restricted to the general public. As such, it’s important to understand how they work if you have ever considered one.
- A “pocket listing” is an off marketing listing that is not available to the general public
- Pocket listings are commonly referred to as “exclusive listings” or “off-market listings”
- They are done for sellers to remain private, sell the house to select individuals, uniqueness of the property, and price of the property
What is a Pocket Listing?
A “pocket listing” is a term used to describe an off market listing that is made known to select buyers rather than listing the property directly on the MLS . Pocket listings are commonly referred to as an “exclusive listing” or “off-market listing”.
The actual listing of the home is kept in the “pocket” of the real estate agent and only made available to private buyers instead of being listed on the MLS. Pocket listings can be very attractive to buyers who want to exclusive deals that fit their specific investing or purchasing criteria.
How a Pocket Listings Works
If you decide to sell your house as a pocket listing, your real estate agent has to draft an agreement. The agreement will state that the transaction will be kept private. The contract will also state the length of time the listing will be kept private. This means that they won’t engage in any traditional marketing methods.
The agent will keep the listing to themselves and only offer it to specific buyers within their network. It’s worth noting that in some cases sellers engage in a pocket listing to sell a house directly to their friends or family members.
Is a Pocket Listing Illegal?
Pocket listings are legal. However, in 2019 the National Association of Realtors (NAR), took a stance against them. They enacted the Clear Cooperation Policy . The policy states that the all listings must be added to the MLS within one business day of being marketed publicly.
So, is it even possible to do a pocket listing with this rule in place?
Yes, it is.
Most real estate agents and realtors are members of the National Association of Realtors (NAR), which by default forces them to follow the Clear Cooperation Policy rules. However, it’s still possible to work with your realtor and get your property sold as a pocket listing.
- Your realtor has one business day to add your property to the MLS. For example, if you sign your agreement on a Friday, your agent has Saturday and Sunday to find a buyer for your property. That isn’t a lot of time, but it still provides you with the option.
- As long as your realtor DOES NOT market the property, it can stay off the MLS.
- A final option is to sell your home as a pocket listing if your agent isn’t a realtor. In this situation, they won’t be subject to the NAR’s Cooperation Policy rules.
Why Do a Pocket Listing?
There are different reasons as to why people chose to do a pocket listing instead of listing their house on the MLS. Most sellers who request a pocket listing do so for the following reasons below.
- Privacy concerns and wanting the transaction to out of the public eye
- Wanting to sell to a specific individual or company
- Uniqueness of the property
- High price of the property
High profile government officials or executives have been known to transact through pocket listings to retain privacy and stay out of the public eye.
In certain situations, with a written agreement of the seller, pocket listings allow the brokerage to facilitate the “selling side” of the transaction as well as the “buying side” of the transaction. This allows the brokerage to earn a commission on both sides of the real estate transaction. This is known as acting as a dual-agent in the transaction.
Can You Advertise a Pocket Listing?
You can certainly advertise and market a pocket listing, but you have some limitations. You can’t market it on the MLS so you have to get creative. The primary method in which pocket listings are marketed is through a private network of buyers which you have previously established a relationship with.
Another way is if the seller already has someone they wish to sell it to but needs an agent to coordinate the full details of the transaction.
Pocket Listing Pros and Cons
Pocket listings can offer specific buyers and sellers advantages over listing the property on the MLS.
- Can reduce the need for multiple showings for uninterested buyers
- The transaction can be quicker and smoother when the listing agent has the right client to show the property to
- Allows the seller to get an idea of the selling price before listing on the MLS
- Provides privacy for the seller as well as the buyer
- The agent can make twice as much since they will be a dual-agent in the transaction
- Limits the marketing options for sellers
- The transaction is limited to one agent
- The chance for a bidding war get reduced since the public does not know about the listing
- If the main buyer backs out, finding a backup offer can be challenging
Are pocket listings ethical?
Pocket listings for the most part are considered ethical. As long as the agent represents the best interest of the buyer and the seller, and both parties understand the purchase contract they are considered ethical.
Are pocket listings considered discriminatory?
By default, pocket listing are discriminatory because the sale of the property is made available only to a select group of buyers. They benefit only a small group of individuals who have the means and knowledge of how they work.