What Is A Pocket Listing And How Do You Find One?

Inventory is facing a big enough constraint across much of the country that buying a house can be difficult. So it’s natural to want a leg up on the competition. At the same time, a pocket listing is usually off the market before you even know about it. Let’s take a deeper look at what’s happening here, discuss how you can find them and what you should consider.

What Does Pocket Listing Mean?

In real estate, pocket listings are properties for sale that aren’t listed on a multiple listing service (MLS). These properties don’t have “for sale” signs in their front yards. Real estate agents keep these listings in their “pocket” and market them to their network by word-of-mouth to find a buyer.

Because the property remains unlisted, it’s unavailable to be marketed to the public for as long as the pocket listing is maintained. You can change your mind at any time and have the property listed by an agent on the MLS.

Pocket Listing Policies In Real Estate

Pocket listings generate no small amount of controversy among real estate professionals. The National Association of REALTORS^® has a Clear Cooperation Policy, which aims to limit the circumstances under which members are allowed to withhold the pocket listing from the wider MLS.

Under the policy, real estate agents doing a pocket listing must get a signature from the seller saying they don’t wish the property to be marketed to the public. The information is then submitted to the MLS, but not marketed to everyone. Instead, it becomes an “office exclusive,” open only to real estate brokers and agents in the same listing brokerage.

A justification often used for pocket listings is that they allow a client to sell a home while being respectful of the client’s privacy. This is absolutely a concern for some clients and cannot be discounted.

At the same time, many industry concerns also deserve space here. First, from a purely economic perspective, it stands to reason that for most, more eyeballs will mean more potential offers for a property. This could mean bidding wars.

The other big concern about pocket listings is that the entire market depends on real estate comps, also called comparables. Comparables help market participants understand trends in the local market because you can get an idea of what your 3-bedroom ranch might sell for by looking at your neighbor who just sold their house across the street.

If you don’t know the sale price based on the MLS data, it’s impossible to make the comparison. This also impacts the veracity of appraisals because the property value assigned by an independent appraiser is always figured by judging your property in comparison to recent sales of similar homes in the same area.

Finally, states and municipalities may have their own rules regarding the marketing of homes and what constitutes fair competition. Work with your agent or a local real estate attorney to understand the regulations in your area.

How A Pocket Listing Works

In a standard home sale, the seller signs a contract with a listing agent to help market their property and show it off to prospective buyers. A pocket listing is not publicly marketed or listed on the MLS. Instead, information about the property is kept within the brokerage.

A seller contacts a well-connected real estate agent to set up private showings. Interested buyers can hunt for pocket listings with the help of trusted real estate professionals or by looking online at sites that feature off-market listings. These sites cater to real estate agents who aren’t members of NAR. Your agent will also be able to show you office exclusives for their brokerage.

However, the NAR officially prohibits pocket or exclusive listings, except when the seller consents. Again, permitted pocket listings are only those that remain between agents or brokers in the same brokerage. This was put in place after a 729-70 majority vote on November 11, 2019.

The new regulations state that the listing broker must submit their listing to an MLS within 1 business day of marketing a property to the public.

The ban gives buyers 24 hours to secure a deal before it’s officially on the real estate market. This means if you see a “coming soon” sign on a property you absolutely love, don’t wait on making your move.

We’ve discussed mostly logistics up to this point, but when might a seller consider a pocket listing? We’ve discussed privacy, but there may also be practical concerns. Here are a couple of examples:

• If the house is old enough to have taken on a certain amount of historic character and has all the original work, you could get a fair amount of people who are just there for the tour. If the foot traffic becomes overly dense, it could become a liability concern if someone damages the home or themselves. The same goes for homes shown in movies or TV.
• In some instances, the history of the property could scare some people off if a crime was committed there. People can be very superstitious. Your agent may be able to back channel to both protect your privacy and find people who are serious buyers.

Pros And Cons Of Pocket Listings

While pocket listings may seem like a great way to find your dream home, there are both benefits and drawbacks to using this method in real estate. It’s important to note all aspects of an off-market listing and see which one outweighs the other in your book.

Your outlook on pocket listings also depends on whether you are a buyer or seller. Where something isn’t mutual, we’ll identify who benefits or is disadvantaged by each pro or con.

Pros

• For buyers, there’s a greater chance of your offer being accepted because there’s less competition.
• Less stress with the home buying and selling process.
• Closing may happen sooner.
• There is more privacy to a pocket listing.
• There is a chance of finding a home below market value for buyers.
• For sellers, there’s less traffic through your home and no worries about having to leave your home at any moment for an open house.
• Sellers often won’t have to go through the hassle of sprucing up your landscaping, repairing your roof or staging – buyers will proceed with the home as-is.
• No staging or professional photos keeps more money in your pocket.
• Your potential buyer means business. You won’t have the lookie-loos that open houses may bring in.
• Pocket listings offer a more private home sale and nobody will know the house was for sale until the moving trucks show up.
• Without an official listing, buyers can get a feel for the listing price and can make changes without the negative impact of announcing it on an MLS.
• The seller has the upper hand and the buyer will likely need to meet the asking price because they’re getting an exclusive opportunity.

Cons

• Sometimes, the listing agent is working with the seller by listing the house and helping the buyer – creating a dual agency situation. In this case, the real estate agent isn’t incentivized to get the best deal on behalf of either the buyer or the seller because they have to try to represent both parties in the transaction.
• Some states have made dual agency transactions illegal.
• Because there is no public information on the property, prospective buyers will need to visit the home in-person. You should try to do that anyway, but there are situations when people will have to buy based on the listing photos. This isn’t an instance when you want to do that.
• For buyers, there may be less room for negotiation on the price of the home due to the exclusivity of the opportunity.
• Less traffic when a home is for sale means less opportunity for more offers to come in and the likelihood of a bidding war is nonexistent.
• It may take longer to find a buyer willing to pay the asking price.

How To Find Pocket Listings

There may be a pocket listing ban from the NAR, however, don’t write off your hope of finding one. Savvy real estate agents can use the window of time as a “coming soon” property to make an off-market sale. This still complies with the guidelines of the ban. NAR agents must post the listing to their MLS within 1 business day of signing the listing agreement. Until then, the agent can share the pocket listing within their personal and brokerage network.

To do this, you need to find a real estate agent you trust to serve as your guide on navigating this process.

Find A Well-Connected Real Estate Agent

Not only do you need to find an agent you trust, but you also need to find one who clearly has the connections for the inside scoop on pocket listings.

If there is an area that you desire to live in, find a hyper-focused agent in your local real estate market. They should have an extensive network that they can visit and see if any of their contacts are considering selling their home. This comes in especially handy in markets where inventory is low.

An agent from a larger office can reach out to fellow agents to get the inside scoop and let them know they have a potential buyer for a particular home or area. They may also have Listservs that they’re a part of.

It also comes down to a good reputation. Ask around and see if you have any glowing recommendations for a professional real estate agent who is a pleasure to work with in the area. You will also want to find a go-getter, as some agents may reach out to the homeowners of a dream home to see if they would consider selling their home for the right price.

Look Online For Pocket Listings

While on the hunt for an off-market listing, you can open your laptop and do some investigative work. You can log on and find a plethora of information in an online search on potential pocket listings in your area. You may even have luck with sites that feature off-market listings, and online marketplaces often feature for sale by owner homes. It’s important to note that if you’ve found off-market houses online, others will likely have found them, too.

Pocket Listing FAQs

Now that we’ve gone over the ins and outs, let’s answer a few questions that may still be on your mind.

How common are pocket listings?

There are two problems with trying to answer this question. The first is there’s a good chance it’s going to vary in every market. But second, the very nature of pocket listing sales makes it impossible to find reliable data. You can’t count what was never on the public market in the time leading up to the sale.

What’s the difference between a coming soon listing and a pocket listing?

Pocket listings are never marketed on the MLS prior to the sale. A coming soon listing is one that allows a real estate agent to advertise that a property will soon be for sale, but isn’t currently ready for public showings. A savvy agent might use this to build interest in the home.

What are alternatives to pocket listings?

The most obvious alternative to pocket listings is a traditional publicly listed sale. There’s also nothing keeping you from selling to a family member or friend. Coming soon listings could also give your agent a chance to get offers coming in without the need for an open house, which might cut down on the inconvenience of a sale and privacy concerns.

Are pocket listings illegal?

Pocket listings aren’t illegal anywhere. However, be sure to work with your real estate agent and/or attorney to understand the regulations around marketing real estate in your jurisdiction.

The Bottom Line

Pocket listings are those that aren’t marketed publicly on an MLS prior to the sale. Although pocket listings are legal in all 50 states, they’re highly discouraged by the NAR. The reasoning for this is fair marketing and valuation concerns. However, pocket listings are permitted as long as the real estate agent lists on the MLS within 1 business day of signing the contract.

While they’re great for privacy, pocket listings also won’t attract bidding wars because they limit your market to those your real estate agent or broker can advertise a pocket listing to. It’s limited to those working within the brokerage. On the other hand, a buyer may be more likely to meet your asking price because they’re getting a window without the usual competition.

Proceed with pocket listings carefully, but if you’re serious, they can be your chance at getting the property you want. If you’re ready to move forward, our friends at Rocket Mortgage^® can help you get your mortgage approval started.