What Is A Pocket Listing?

If you think "pocket listing" sounds like a term describing exclusive real estate, you're right. Homeowners who prefer to keep their home sale very quiet or open it up to only a few individuals may opt for a pocket listing.

A pocket listing comes with a few caveats, however. Keep reading to learn more about the pocket listing meaning, how pocket listings work, the pros and cons, why sellers might use pocket listings and how potential buyers might find them.

Let's dive into the nuances of pocket listings and what they might mean for you as a seller or buyer.

A pocket listing is an off-market listing, or a property marketed to potential buyers through private channels rather than on the multiple listing service (MLS). These non-public listings are therefore kept inside a metaphorical “pocket.”

You won’t find any “for sale” signs on a pocket listing or find it listed online. Furthermore, the real estate agent must also be on board by only sharing the listing with a small number of preferred clients or fellow agents who represent this exclusive clientele. Not a lot of pocket listings exist – they represent a very small percentage of all real estate listings posted in the United States.

A seller can choose a pocket listing to sell their home in order to keep it private. Only certain people would find out about it – the general public will not find the home on the MLS database (which would otherwise allow buyers of all kinds to find them). A pocket listing sale is typically handled by a single listing agent who isn’t a member of the National Association of REALTORS^® (NAR). Pocket listings have been banned by the trade organization, though it's important to note that not all pocket listings violate the REALTOR^® code of ethics, the MLS rule or a state law.

Pocket listings may be marketed internally at a brokerage firm or through private agent networks or select groups. There’s no agreement for the seller or the agent to work with other real estate professionals, so the agent can typically keep the whole commission.

A property seller may choose a pocket listing real estate option in order to:

• Market to a more exclusive or limited clientele.
• Keep their home sale relatively private, particularly if they are celebrities or public figures.
• Test out an asking price or gauge the public’s interest in the home.
• Sell to a buyer they know, possibly leading to a quick sale.
• Avoid the hassles of bidding wars.
• Avoid sharing the number of home price reductions on the MLS, which can raise red flags among home buyers.
• Negotiate a reduced commission with a realtor, who may not have to spend a lot of time marketing the home.

Ultimately, if the goal is to keep a listing on the downlow, avoid placing a listing on the MLS or keep it limited to a small audience, a pocket listing may fulfill these requirements.

Pocket listings can have an effect on the market in terms of industry and ethical concerns. Pocket listings have generally been banned through the NAR’s Clear Cooperation Policy. Prior to the Clear Cooperation Policy, increased pocket listings in competitive markets meant an increase in real estate agents using the MLS, usually with an informal “coming soon” notice. However, these real estate agents often wouldn't share the listings and even retained a full commission of these sales.

According to the Clear Cooperation Policy, all listings must be added to the MLS within one business day of public marketing. Not sharing on the MLS means that it can be difficult to research real estate comps, reduces buyers' choices, skews market data and may not be in the sellers’ best interests.

Let's walk through some potential pros and cons of pocket listings, for both the buyer and the seller.

Pros

Here are some positive reasons to consider pocket listings:

• Sellers can have more privacy selling their home.
• Buyers may experience less competition over their home sale.
• A real estate agent can keep their whole commission with a pocket listing.
• Sellers can test their asking price and gauge interest in the home.

Cons

Now, let's take a look at the cons:

• A seller may get fewer offers on their home because there's less exposure to it.
• There’s little to no chance of walk-ins.
• The chances of multiple offers or bidding wars go down.
• Buyers have less data to research comps.
• Buyers may not get the best price for their home.

The best way to find out about pocket listings is to work with a real estate agent, or an agent not affiliated with the NAR. Real estate agents who are hyper-focused on a certain area will likely have the necessary network and connections to stay informed about pocket listings in that locality. 

It's important to note that there is an “office exclusive” exception to the NAR rule. Office exclusives refers to listing agreements in which the seller asks that the listing only be marketed within the broker's firm, or among the brokers and licensees affiliated with the listing brokerage.

Office exclusive listings ensure seller privacy, particularly in the case of divorce situations or for celebrity clients. If office exclusive listings are displayed or advertised to the general public, those listings must also be submitted to the MLS.

As a seller or a buyer, a pocket listing may appeal to you. Just make sure you get clear on the pros and cons of pocket listings. For the right seller and the right buyer, a pocket listing with a real estate agent might just be the right path. However, it's important to remember that for the majority of homeowners, a public MLS listing serves them best. The public MLS listing will provide increased exposure, which in turn usually means more offers.

Have you found the right home for you? Take action and start your mortgage application with the Home Loan Experts at Rocket Mortgage^®.