Selling a real estate property has a lot to do with effective marketing.
In the same way that a product needs to be marketed to an audience, so does a home. That why homeowners hire real estate agents. Traditionally, it's the agent’s job to list the home and get it in front of a big audience of buyers.
Sometimes, however, sellers opt to take a non-traditional route and list their property as a pocket listing.
Pocket listing definition
In real estate, a pocket listing refers to a property that is up for sale but hasn’t been made publicly available to other agents or buyers.
In other words, the agent in charge of selling a pocket listing is keeping the property in their “back pocket” and only sharing it with certain people in their network. There are many reasons why a seller might choose this route. In this article, we’ll cover all the basics of a pocket listing, and share advantages and disadvantages.
What is a pocket listing?
A pocket listing is sometimes referred to as an “off-market” or “exclusive listing” because it’s exactly that – exclusive. Instead of making the property publicly available on a Multiple Listing Service (MLS), agents will only share pocket listings with a small group of other agents, who then share them with their buyers. It’s implied that the agent on the other end will only share the listing with buyers who are serious and qualified.
TIP: A Multiple Listing Service is a tool that helps agents list and display available properties. For more information on MLS software and explore different tools, check out G2.
What are the advantages of a pocket listing?
From a seller’s perspective, there are many reasons why they would choose to list their home in this way. Let’s break down all of the advantages.
No more sitting on the market
The clock starts ticking the second a home hits the market. The longer it sits on the market, the less appealing it becomes to buyers. Selling a property as a pocket listing can help ease a lot of this anxiety since the “for sale” status of the home never becomes public.
For many high-profile homeowners, a pocket listing is an appealing option since it allows for privacy. Letting someone inside your house is as personal as it gets, and having your home listed publicly could invite a lot of unwelcome attention. Even for sellers that may not be politicians or celebrities, the low-key factor is desirable.
Test the waters
With a pocket listing, both the agent and the seller have the opportunity to test the waters with a smaller pool of buyers. They can gauge how responsive people are to the listing price and the property in general. Later on, there’s always the option to list it formally if it’s not generating enough interest as a pocket listing.
What are the disadvantages of a pocket listing?
Although pocket listings have their benefits, it’s not to say that there aren't any disadvantages to choosing this route to sell a property.
Smaller audience of buyers
A pocket listing is going to have a lot less exposure than a normal listing. Depending on who you’re talking to, this could be a good or a bad thing. That being said, with a smaller audience there’s a much lower chance of finding the right buyer right away. There could be plenty of equally qualified buyers looking for homes through their agent using an MLS, but if the property isn’t listed, they’re not going to see it.
With less exposure to buyers, there’s naturally going to be a lot less competition. The seller may miss out on a competitive offer since their property is only available to a narrow audience. At the same time, a buyer is a lot less likely to make an offer on a high-priced property when they know that there likely aren’t many other offers on the table.
Although they are absolutely legal, there have been questions raised about the ethics behind pocket listings. Critics argue that the exclusivity factor alienates buyers and throws off comparables that help determine the value of a property against the market. Since these homes aren’t listed, the amount of information available about their local real estate markets is limited. This makes it difficult for appraisers and sellers to accurately determine their market value.
TIP: When a homeowner plans to put their property up for sale, they will look at local properties with similar characteristics that recently sold to determine the listing price. In real estate, this is called a comparable, or “comp” for short.
The National Association of Realtors hasn’t taken an official stance for or against pocket listings, but the organization does warn sellers and agents to do their research before making an offer.
The beauty of real estate is that there’s no one-size-fits-all solution. Every seller has a unique property that will eventually find its match in the form of a qualified buyer. As we’ve mentioned, selling a home as a pocket listing has its pros and cons. It will ultimately be up to the seller and agent to work as a team and decide what will be the right method for listing their home.