What Is a Pocket Listing?
How Does a Pocket Listing Work?
A pocket listing is any property that is listed for sale but not marketed on the multiple listing services (MLSs) or other mainstream listing websites. Other terms for a pocket listing is a “whisper listing,” which is technically a subset of a pocket listing that spreads only through word of mouth (hence the name).
A pocket listing may happen even if the listing broker or agent is a participant of a local MLS.
Generally, MLSs require real estate professionals to submit new properties and add details about them to the database within a certain timeframe. However, one caveat is that information about the property be added with the seller’s approval or request.
With a pocket listing, the listing agent must submit a form stating that the seller refuses to make the property’s information available for public consumption. In some cases, the property may still be present on the MLS, but with its details withheld from the public.
On the other hand, MLSs managed by the National Association of REALTORS® (NAR) are stricter. NAR enforces a Clear Cooperation Policy that states all participants of NAR-owned MLSs must list properties within one business day after publicly advertising them.
Unless the property for sale is an office-exclusive, this policy obligates the listing broker to submit details about it. But if a brokerage begins to display an office-exclusive on its site, it will have to list it on the MLS.
BY THE NUMBERS: Pocket listings account for 20% to 30% of the total supply of properties for sale.
Source: NextAdvisor with TIME
Why Do Some Sellers Prefer a Pocket Listing?
Sellers can have different motivations for utilizing a pocket listing instead of putting their properties on the MLS.
Some sellers prefer not to draw unwanted attention when doing the transaction. Typically, people going through a divorce or experiencing financial difficulties like to keep things under wraps. Other examples include celebrities and public personalities, who tend to entertain private buyers.
Pocket listings prevent the need to hold open houses. In turn, the seller may feel less pressure to stage the home and will not have to worry about high foot traffic.
Pocket listings can reduce the costs usually associated with selling a home the traditional way. For instance, the fees of a real estate photographer alone can cost hundreds of dollars per hour.
Moreover, pocket listings can help sellers negotiate for lower commissions. It is not uncommon for real estate agents to take less money in exchange for having a lighter job to make a sale. In hot markets, the property’s value is so big that many agents may still wind up with a better deal even after agreeing to take a smaller payout.
Testing the Waters
Seeing how much people are willing to pay for the property can help the seller peg the right price for it once it hits the open market, if it ever does. In this case, even if the sample size is small, the bids from the few potential buyers may give the seller some insight on pricing.
Pros and Cons of Pocket Listings
Pocket listings have their merits and can be advantageous when used for the right reasons.
Advantages of a Pocket Listing
- Low-profile selling. A pocket listing can be a way to sell a property while keeping a low profile and not drawing unwanted attention to the property, seller, and overall transaction. Paying fewer and smaller fees can also be attractive to sellers who want to save as much money as possible.
- Expedites the transaction. Non-public listings can speed up the real estate transaction. On average, the home-selling timeline of on-market properties spans 71 days from listing to closing. Private sales tend to happen much faster, so they can be super convenient for sellers.
Disadvantages of a Pocket Listing
- Unnecessary profit limitations. An MLS listing will get far more exposure to more buyers than a pocket listing. With more exposure, there will be more opportunities to see offers from interested buyers, which often results in a higher sale price. According to public records in multiple areas in the U.S., the houses sold off-market tend to be tens (even hundreds) of thousands less than those listed on the MLS. Competition among buyers is the biggest driver of the sales price and a pocket listing generally has little to no competition, which typically results in a lower sale price.
- May be even more expensive. Leaving cash on the table for selling a property in private can easily diminish any savings one can get out of fewer home prep expenses and low commissions.
BY THE NUMBERS: The median sale price of properties listed on MLSs get sold 16.98% higher than those sold off-market.
Source: Bright MLS
Are Pocket Listings Legal?
Private real estate transactions are legal but ethical is another matter entirely.
As long as the broker or agent acts on behalf of the seller, any transaction can be ethical. However, this is harder to say for those who act in dual agency. An example of dual agency involves not informing the seller about certain offers and counteroffers, regardless of the source.
In addition, pocket listings cannot be illegal when office exclusives are considered acceptable.
Some pocket listings are thought to promote housing discrimination, e.g., limiting properties to an exclusive set of buyers may contribute to racial segregation.
The controversy surrounding pocket listings is one of the reasons many brokerages steer clear of pocket listings as a whole. In fact, some MLSs will even penalize professionals for marketing properties without listing them.
- Pocket listings (also called off-market and whisper listings) are properties for sale not advertised publicly and are not featured on the MLS.
- Privacy, market research, low expenses, and closing speed are the factors that compel sellers to market their properties secretly.
- The advantages of private sales have the potential to backfire on sellers because the houses listed on the MLS tend to sell for more money. In addition, pocket listings may be considered unethical even while they are legal, since they may contribute to housing discrimination.
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