A pocket listing is a signed real estate listing that is not entered into the MLS. In most cases, in addition to not being on the MLS, pocket listings are not advertised to the general public. The real estate broker or agent hired by the seller to represent a pocket listing shares it only with a few other agents that he or she knows and trusts. Pocket listings are also rare. Only 10% of the total number of listings nationwide at any given time are pocket listings.
How to Find Pocket Listings
The best way to find a pocket listing is to ask your real estate agent. Tell him or her that you are expanding your search beyond the properties on the MLS. Encourage them to reach out to their real estate agent contacts to see if there are hidden gems on the market.
You may also want to take your search online. There are sites getting into the pocket listing game, such as PocketList, which specializes in unlisted homes in the San Francisco Bay Area. Zillow also has a “coming soon” search feature that allows you to check for homes that have not yet been posted on a listing service.
Why Do Some Sellers Choose to Have Pocket Listings?
There are a number of reasons why sellers may want their property to be pocket listings. Here are five of the most common reasons:
- Secrecy: The seller may be a celebrity and have a great need for privacy.
- Marketing: Sellers may want to appeal to buyers who seek exclusive opportunities.
- A faster, smoother transaction: Sellers want serious buyers, not curious strangers.
- Cost: A pocket listing usually has only one agent, lowering the overall commission costs.
What Are the Advantages of Pocket Listings for Sellers?
Closely related to the reasons mentioned above, certain homeowners prefer selling their home as a pocket listing for a variety of distinct advantages. Here are some of them:
- To maintain privacy: Some people, especially celebrities, value their privacy very highly. They don’t want everyone to know they’re selling. They don’t want pictures of the insides of their homes plastered all over the Internet. These sellers don’t want a bunch of nosy strangers looking through their house just to see how the richer half lives. Instead, people who come to see the home are pre-qualified and vetted as serious buyers.
- To give them the push they need to sell: Some people don’t want to go through the hassle of showings, not to mention the marketing expenses, unless they can fetch a certain price. A pocket listing may help them find a motivated buyer who is looking for that exact type of property, and is ready to pay the price.
- To avoid a negative perception: Listing a property privately helps to protect it from the stigma that can develop if it has been on the MLS for weeks and still hasn’t sold.
- To test the market: A pocket listing gives you an idea of what interested buyers are willing to pay for your home before you make it public on the MLS. That way, you may be less likely to have to reduce the price if and when you finally make it public on the MLS.
- Reduced commission: Most real estate agents will charge a 6% commission from the home’s sales price. But that could still be negotiated down since the real estate agent doesn’t have to spend so much time or money marketing the property.
What Are the Disadvantages of Pocket Listing for Sellers?
While there are a number of advantages to pocket listings, it comes with some drawbacks:
- A lower price: Restricting a larger pool of potential buyers from knowing about the sale might reduce the final sale price. It would be impossible to know what price the market will bear if you never actually put your home on the market. This could result in fewer interested home seekers and fewer, and possibly lower, bids.
- Lack of walk-in traffic: While it’s true that many people shop for homes online, many people also cruise neighborhoods to see if any “For Sale” signs are up. Neighbors might also be looking for a nearby home for friends and family.
- Limited exposure: A property that is listed on the MLS has the potential to be seen by millions of people. This drastically increases the odds of finding a buyer fast, an advantage you don’t have when you do a pocket listing.
Because of these disadvantages, most real estate experts recommend that most home sellers list their properties the traditional way on the MLS.
What are the Advantages of Pocket Listings for Buyers?
One advantage for buyers is that the competition for pocket listings is often less intense than it is for on market listings. This could mean potentially having a lower offer or buyer incentives approved by the owner more easily than with an on market listing.
What are the Disadvantages of Pocket Listings for Buyers?
The main disadvantage of pocket listings for buyers is the fact that the seller chose to keep their listing off the MLS. In many cases, this means that the seller is less motivated to sell their homes quickly, which may mean they are less likely to negotiate. How motivated the sellers are will vary from seller to seller.
What are the Advantages of Pocket Listings for Listing Agents?
The most notable aspect of a pocket listing is that the transaction remains completely within the listing brokerage, maximizing its commission. And since those listings are not publicly marketed, they usually result in the listing brokerage also representing the buyer, which means double commission. This is not illegal if properly disclosed, but then again it raised a red flag as to whose interests are really being served.
What are the disadvantages of Pocket Listings for Listing Agents?
There are very few disadvantages for the listing agent. First, if they don’t have a big network it’s harder to sell. The limited audience of a pocket listing makes it difficult, since only a few people can hear about it, as opposed to putting it on the MLS and every potential buyer on the market will know about it. Second, along with this reality comes the pressure to sell. Listing agents can’t just tap into the cooperative power of other real estate agents on the MLS. They have to do everything.
The Bottom Line
Pocket listings — listing agreements that aren’t entered into the MLS — aren’t just for the rich and famous. They have benefits for the regular home seller too. However, since they also have their drawbacks, be sure to weigh the pros and cons of each option before spreading the word.