A pocket listing is a home that’s listed for sale privately rather than publicly through a site like the Multiple Listing Service (MLS). Pocket listings have many names including off-MLS listings, exclusive listings, private listings, and hip pocket listings, among others. Whatever you call it, pocket listings have many benefits. The term “pocket” speaks to the notion that the listing is in the real estate agent’s “pocket”.
Pocket listings have been around for a long time and until recently were more commonly used in higher-end luxury transactions to provide the seller – often public figures like politicians, actors, musicians, and others – with a level of privacy and anonymity. Private listings gained popularity recently as buyers and sellers started seeing the benefits of off-market listings during the buying frenzy caused by pandemic-induced low interest rates.
This article breaks down how pocket listings can benefit buyers, sellers, and real estate agents, saving them time and reducing stress. We also uncover a few things to be aware of before deciding to buy or sell using a pocket listing.
How Pocket Listings Benefit Sellers
Real estate pocket listings are a great option for sellers who are concerned about privacy.
Common reasons why sellers may decide to list privately are if they are going through a financial hardship, are having health issues, going through a divorce or separation, or struggling in another way and would prefer to keep traffic and distractions to a minimum. Listing a home publicly with a large “for sale” sign in the front yard tends to draw “looky-loos” and other non-serious buyers who are just curious about the house.
Listing a home off the MLS also gives sellers more control over who sees the property and minimizes traffic and disruptions for the homeowner. Before agreeing to show the property, the seller can require that the buyer be pre-approved by a lender to ensure they are qualified and serious.
Financial, health, and personal setbacks aren’t the only reasons why sellers list their homes privately. Other benefits include the potential to negotiate a lower commission given that pocket listings involve a single agent – the listing agent – rather than the typical designated structure where the buyer and the seller have separate real estate agency representation.
Another benefit to sellers that pocket listings offer is that they allow sellers to test the market at certain price points to gauge interest. Sellers generally want to sell their homes at the highest price possible and pocket listings give them the ability to test market demand without risking the negative impacts of reducing the price. According to experts, buyers assume that there’s something wrong with a property that has been listed for a long time and has had multiple price reductions. Pocket listings provide more flexibility to test the waters.
Buyers Benefit from Pocket Listings Too
Pocket listings are beneficial for buyers too. Because fewer people have access to off-MLS properties, there’s less of a chance of a bidding war and time wasted putting together offers that don’t go anywhere. In a “hot” real estate market, buyers often find out after submitting their offer that there were multiple offers already submitted and a buyer already selected. Not only does this waste time and energy, but it can take an emotional toll on buyers who may have fallen in love with the home. Getting involved in a bidding war could also lead to the buyer paying an inflated price for the home.
Overall, transactions that involve pocket listings are lower key than traditional listings. Buyers can take more time to think about their options rather than getting caught up in the frenzy caused by multiple bids. Because the process of buying an off-MLS listing is less stressful and less time-sensitive, it allows buyers the opportunity to begin building a relationship with their real estate agent and gives them time to get to know the neighborhood before they feel pressured to submit an offer for fear of losing to another offer.
Why Real Estate Agents Like Pocket Listings
An agent with a pocket listing has an opportunity to sell the property in a way that benefits both buyers and sellers who may prefer to keep their transaction out of the public eye. More established real estate agents have private networks and potential buyers they can market to directly.
Keeping the sale private until the closing is near means there are fewer showings and less traffic around the home which can be a nuisance to the seller. Private listings also help the real estate agent and client avoid the hassle of meeting together and making offers, negotiating terms, and going through the traditional home buying or selling process.
Another benefit to real estate agents is that in most cases, there is only one agent involved, so the listing agent can keep the entire commission unless a lower percentage is negotiated with the seller.
There Are Some Downsides to Pocket Listings Too
There are a few things to consider before deciding to list or buy with a pocket listing. One of the most important is that the seller may receive fewer offers without listing the property on MLS. Without receiving multiple offers from potential buyers, sellers may not be able to get the best price for their home.
By listing their home privately, the seller will also miss out on “walk-in” traffic that a “for sale” sign on the front lawn would generate.
For buyers, there may be less room to negotiate a lower price. Sellers who list their home privately may not be as willing to negotiate the purchase price and as stated above, many sellers list their homes privately to test market demand. Additionally, since pocket listings are typically not available to view online, there’s less information and fewer photos for buyers to peruse.
Another downside of pocket listings which affects the market in general is that a home sold privately may not be used as an example of what else is available in the neighborhood or area and can’t be used as a “comp” or comparable sale to assist with market valuation.
For a private listing transaction to be successful, the seller and agent must be sure they have a good working relationship to avoid any misunderstandings or legal issues down the line. It’s also important that both parties understand how long the property will remain off the market before other options such as MLS are considered.
Pocket Listings Are a Great Option Overall
In general, pocket listings are a great option for sellers, buyers, and real estate agents alike as long as everyone has a good understanding of the pros and cons. Pocket listings for the most part allow sellers to make the most of their time on the market without having to worry about the inconveniences of open houses and extra traffic around their homes. They can take as much time as needed to find a buyer while still maintaining control over their property and its sale price. Buyers can take their time deciding whether or not the home is a good fit for them without being concerned about overpaying in a bidding war. Agents can provide a higher level of service by spending more quality time with their clients and focusing on their client’s individual needs. Ultimately, real estate pocket listings give everyone involved a better experience as long as all parties involved understand how it works.
