POCKET LISTING: Definition, Comission, Pro and Cons

You’re correct if you believe “pocket listing” sounds like a phrase for private real estate. A pocket listing is an option for homeowners who want to keep their property sale private or open it up to just a few people. Furthermore, a pocket listing is a way to sell a house without making it widely known. The realtor “keeps the listing in their pocket” by finding a buyer via informal channels and film. The National Association of Realtors® (NAR) and some individual agents claim that pocket listings hinder transparency in transactions and, for sellers, restrict the prospective buyer pool. However, sellers who prefer privacy may pay a commission for a pocket listing. There are, however, certain restrictions that accompany a pocket listing. Read on in this article to find out what pocket listing is, the pros and cons, and why people do pocket listing.

What Is a Pocket Listing?

A pocket listing is a property that is not listed on the multiple listing service but is instead promoted to prospective purchasers via more discreet means (MLS). So, these private advertisements are hidden away in a “pocket” of sorts.

Your typical “for sale” sign or web listing won’t be able to help you sell your pocket listing. In addition, the real estate agent must agree to limit exposure to the listing to just a select group of high-end buyers or other agents who serve a similar clientele. In the United States, pocket listings only make up a tiny fraction of the total number of real estate ads.

How Do Pocket Listings Work?

A listing agreement is a legally binding contract between a seller and the real estate agent or agency appointed to sell the seller’s property. The property is often advertised via the MLS, a database of available homes used by real estate agents. The purpose of a pocket listing is to encourage real estate agents and brokers to work together and split the seller’s commission.

Unlike traditional listings, however, pocket listings do not involve collaboration with other agents. Pocket listings are often utilized by sellers of high-end or uncommon properties who are seeking only serious, pre-qualified purchasers. Its proprietors might be well-known people in the public eye or even elected officials. Although the pool of possible purchasers is limited, the agent’s network is extensive.

Furthermore, a pocket listing is a low-key way for owners to gauge how much interest there is in their property and get an idea of what they may ask. A Multiple Listing Service (MLS) listing is always an option if a sale is not made throughout the contract period.

Are Pocket Listings a Good Idea?

Pocket listings are bad for consumers and sellers. By nature, pocket listings restrict buyer visibility. From the seller’s point of view, this might mean losing out on the greatest offer as they can’t be confident that the preferred bidder truly made the highest offer.

From the seller’s point of view, this might mean losing out on the greatest offer as they can’t be confident that the preferred bidder truly made the highest offer. Buyers miss out on listings, and listing agents may violate the Fair Housing Act when they select who may visit a house. Because pocketing listings are secret, prejudice may be harder to prove.

In addition, pocket listings might lower house prices. If a house sale isn’t listed in the MLS, it won’t be used to establish a property’s value.

Pocket Listing Real Estate

A pocket listing is a unique real estate listing that is not accessible to the general public in the real estate sector. Properties in conventional home sales are listed on the multiple listing service (MLS), which is the official database used by real estate brokers to search for and give information about houses on the market in their region.

Are Pocket Listings Ethical?

Due to the broker’s legal and ethical obligation to look out for the seller’s best interests, a seller who is hoping to get the most money possible under the most favorable circumstances should know as much as can about pocket listings before pursuing one. Although not technically unethical, pocket listings are often frowned upon in the real estate industry.

Pocket Listing Film

Pocket Listing is a 2016 American neo-noir dark comedy film directed by Conor Allyn and written by James Jurdi, with Jurdi, Logan Fahey, Caitlin Gerard, Christos Vasilopolous, Jessica Clark, Rob Lowe, and Burt Reynolds appearing. On December 2, 2016, Metro-Goldwyn-Mayer and Orion Pictures bought the picture for a limited theatrical and video-on-demand distribution.

The plot revolves around a former Los Angeles property broker who gets a second chance from a corrupt power couple and a commission to sell their Malibu estate, a deal that is rife with illegal activities.

Is Pocket Listing Good for Sellers?

According to Diana, private sellers are the ideal candidates for pocket listings. Someone may choose to sell their property privately due to a sensitive situation, such as a job transfer or a divorce.

Keep in mind that pocket listings are often short-lived. Diana often deals with customers who first sell off-market but subsequently, due to changes in their situation, opt to list openly. Diana said that, if you decide to use a pocket listing, you should be prepared with solid data to avoid frustrating already-weary consumers.

As Diana put it, “Just be conscious if you really want to sell.” Make sure that you realize that the buyer on the other side wants to make sure that you really want to sell.

Also read, OPEN LISTING: A Complete Overview, Types, And Examples

Why Do a Pocket Listing

The following are some of the many advantages of pocket listings: When selling a house, the seller may do it in relative secrecy. There may be fewer interested buyers for a given property. With a pocket listing, a realtor keeps all of the commission for themselves.

Justification for why certain sellers prefer pocket listings

As an alternative to a traditional real estate listing, “pocket listings” allow property sellers to

A real estate agent may not need to spend a lot of time promoting the house, so try to negotiate a lower commission with them.
Concentrate on a smaller, more exclusive set of clients.
Don’t bother with the stress of a bidding battle.
If they are a prominent person or celebrity, they should sell their house with as little publicity as possible.
Don’t broadcast the number of times you’ve dropped the price of your house on the Multiple Listing Service (MLS), since this might send up red flags for potential buyers.

How Do You Market a Pocket Listing?

Collaborate with investment bankers and financial planners.
Private Promotions
Think about the nearby sporting organizations
Demographic Targeting with Google Ads
Make Sure to Check in with Would-Be Backers
Make use of your membership at the country club.

The Pocket Listing Commission

In most cases, including pocket listing, the commission is paid by the seller. If I’m working with a seller on a “pocket listing” and I bring them a buyer on my own, I’m providing even more value than I would in a standard transaction. Without them having to do anything—no marketing, no showings, no cleaning, etc.—I am able to get their desired outcome. So, they are usually content to foot the bill for the Realtor’s fee.

Nonetheless, if a Realtor is delivering you (as a buyer) a big number of profitable, exclusive, off-market offers, they may want payment in exchange for the relationship equity if they are not widely available. In these cases, I have charged my investor clientele a fee of anywhere from $500 to 1% of the final selling price. While this does happen, I often waive any fees in the hopes of earning repeat business from the client (such as a listing should they decide to sell).

Pocket Listing Pros and Cons

Real estate agents are talking about pocket listing a lot these days. The pros of a private sale are appealing to many homeowners, but there are also important cons to consider.

Pros of a pocket listing

#1. Privacy

Utilizing pocket listings has several benefits, but privacy is the most prominent one. Particularly after a traumatic event like a divorce or death in the family, some sellers feel uncomfortable with the prospect of showing their house to complete strangers.

#2. Cost

Pocket listings may save you money in many different ways. The first is that, when advertised in a certain niche, properties often get their asking prices. The second is that when an MLS is not present, sellers have more leverage when negotiating commission rates. With a pocket listing, a real estate agent can keep the whole commission.

#3. Quickness

Your client may want to sell their home fast and for top dollar, if they’re going through a major life transition. Since customers may advertise their house outside of multiple listing services (MLS) and in a more concentrated specialty area, they have a leg up on the competition.

Cons of a pocket listing

#1. Fair Housing Law Breaches

Your customers should be informed of the potential repercussions of selling their house as a “pocket listing” with the intention of vetting potential purchasers. This might be seen as discriminatory and is thus a violation of both state and federal Fair Housing Laws. It is for this reason that you should stress to the customers who use your pocket listings that they should try to maintain objectivity.

#2. Less Exposure

If your customers aren’t well-versed in the area, it’s unlikely that they’ll see any value in pocket listings. Listing a property before it hits the Multiple Listing Service (MLS) might reduce the number of potential purchasers. Potential purchasers who are open to using a Multiple Listing Service might increase. There may be fewer potential buyers and the transaction may take longer without this kind of promotion.

#3. Fewer Rivals

This may seem like a benefit, but it might really hurt the selling price of the home. Forgoing a Multiple Listing Service (MLS) might help you discover a buyer willing to pay a premium for your client’s home. But since it’s a private deal, sellers don’t benefit from competition that might otherwise raise the selling price and tighten the conditions of the deal.

Conclusion

A pocket listing might be an attractive option for either the seller or the buyer. Just be sure you fully understand the pros and cons of pocket listing. A real estate agent’s pocket listing service might be the best option for the appropriate buyer and seller. Remember that a public MLS or “coming soon” listing is ideal for the vast majority of homes.

Pocket Listing FAQs

Are Pocket Listings Banned?

Pocket listings are legal throughout the U.S.

Is There a Reason I Should Use a Pocket Listing to Sell My Home?

Do you have a prominent position in society, or do you merely have a lot of money? There’s a chance that you wouldn’t like having a bunch of strangers wandering about your home.

A real estate agent with a large network of connections may be able to help you locate the person or people who would be most interested in purchasing your home.

In the real estate industry, a “blind ad” is one that provides no physical address or contact information other than a phone number, PO Box, or email address. This kind of marketing is often frowned upon and forbidden. Blind advertising is only allowed for property owners.