What Is a Pocket Listing? Definition, Pros & Cons for 2024

Ready to dive into the secret world of pocket listings? These off-market properties are like the VIP section of real estate—exclusive yet not quite ready for the MLS spotlight. In this comprehensive guide, I’ll explore the ins and outs of this listing type, from what they are and how they work to the pros, cons, and legal considerations. Plus, I’ll share some marketing tips to help you master the art of the pocket listing. So, let’s unravel this mystery together and give you the tools to navigate a real estate pocket listing like a pro!

Key Takeaways

• Off-market listings, not publicly listed on MLS
• Legal in most states, but subject to the National Association of Realtors (NAR) Clear Cooperation Policy
• Pros: Privacy, targeted marketing, quicker sales
• Cons: Limited exposure, reduced competition, fair housing concerns
• Marketing strategies: Leverage network, notify VIPs, private platforms, targeted campaigns, exclusive open houses, competitive pricing

Pocket Listings Defined

So, what is a real estate pocket listing, you ask? In the world of real estate, a “pocket listing” is when a seller signs a listing agreement with a broker, giving them the exclusive right to sell their property. But there’s a catch: the property can’t be listed on the Multiple Listing Service (MLS).

Instead, the agent keeps the listing private, sharing it only with a select group of agents they trust to bring in the right buyers. These off-market or private listings are like the speakeasies of real estate—you won’t find them on the internet or with a “For Sale” sign out front. So, what is a pocket listing? Simply put, it’s a listing that the agent keeps “in their pocket” and doesn’t market to the public.

Standard Listings vs Pocket Listings

When it comes to selling a home, there are two main types of listings: standard and pocket. The primary difference between the two lies in how widely the property is marketed and the level of privacy offered.

• Standard listings: The most common type of listing where a seller works with an agent or brokerage to actively market the property to the public via the MLS, open houses, and various online and offline channels, aiming to maximize exposure and attract competitive offers.

• Pocket listings: A discreet listing option where the property is not actively marketed to the public. Instead, the agent shares the listing with a select group of contacts within their network through word-of-mouth or private communication, offering the seller a higher level of privacy.

It’s worth noting that the real estate terms “pocket listing” and “private real estate listing” are often used interchangeably. However, private listings can include any listing with privacy elements, such as an unpublished listing or a for-sale-by-owner (FSBO) property.

The Pros & Cons of a Pocket Listing

Pocket listings have been a hot topic in the real estate world, with strong opinions on both sides. Some agents swear by them, while others think they’re unethical. Let’s take a closer look at the pros and cons of keeping a listing in your “hip pocket.”

• Exclusivity: Pocket listings can be like a VIP club for motivated buyers, often leading to quicker sales and a sense of exclusivity that can attract high-end clients.

• Risk of conflict: A lack of transparency could lead to disagreements or discontent from buyers or sellers who feel they didn't get the best deal.

• Control: Agents can maintain more control over the marketing and sales process to ensure their seller's interests are the top priority.

• Limited exposure: Fewer potential buyers may mean a longer time on the market, which could be frustrating for sellers who need to move quickly.

• Reduced stress: Fewer showings and less disruption for the seller—only serious buyers are typically involved. No nosy neighbors or looky-loos.

• Fair Housing concerns: Limited marketing may raise fairness and discrimination issues, as certain groups of people may have less access to pocket listings.

• Negotiation power: Limited exposure can sometimes lead to better terms and pricing for the seller, as buyers may be willing to pay a premium for an exclusive opportunity.

• Limited inventory: Relying too heavily on pocket listings can reduce an agent's pool of available properties for clients, which could hurt their business in the long run.

• Privacy protection: Agents can be the superhero of privacy for sellers who want to keep their home sale on the down low, leading to referrals and a stellar reputation.

• Reduced commission: Since pocket listings may sell faster and at a lower price, agents might earn less in commission.

Ultimately, whether or not to use a pocket listing depends on the specific situation and the seller’s needs. As agents, our job is to weigh the pros and cons and advise our clients on the best course of action. And if we do go the pocket listing route, it’s crucial to ensure we’re doing it for the right reasons and not just to increase our commissions by double-ending a deal.

Why a Seller Would Want a Pocket Listing

Pocket listings might seem like an odd choice, but there are actually some pretty compelling reasons why a seller might opt for this approach to selling their home. Understanding your client’s motivations and concerns is important to provide the best possible service.

• Privacy: For some sellers, especially celebrities or those who value their privacy, the thought of their home being splashed across the internet is less than ideal. Pocket listings allow them to keep things quiet and avoid having random looky-loos wandering through their home just to see how the other half lives. Plus, all potential buyers are prequalified and vetted, so sellers know they’re dealing with serious shoppers.

• Testing the waters: Pocket listings can be like dipping your toe in the pool before diving in. Sellers can get a feel for what buyers will pay before going public on the MLS. This way, they might avoid making a price reduction, which can be a red flag for buyers.

• Avoiding the “stale listing” stigma: When a home sits on the MLS for too long, buyers wonder what’s wrong with it. Pocket listings allow sellers to avoid this stigma and protect their property’s reputation.

• The perfect match: Some sellers aren’t quite ready to commit to listing their home, but they’d consider it for the right price. A pocket listing allows their agent to play matchmaker and find that perfect buyer willing to pay top dollar for their dream home.

• Negotiating power: Savvy sellers might be able to negotiate a lower commission with their agent since pocket listings require less marketing and effort. It’s like getting a discount for being an “easy” client.

So, while pocket listings might not be the right choice for everyone, they can be a smart move for sellers who value privacy, want to test the market, or are looking for a quick and easy transaction. It’s all about weighing the pros and cons and finding the best fit for their unique situation.

As real estate agents, we must be well-versed in all available options to provide tailored recommendations that align with our client’s unique goals and priorities.

Alternatives to Pocket Listings

It’s true that pocket listings are not permitted for National Association of Realtors members. But that doesn’t mean there aren’t other ways to market a listing privately on behalf of confidentiality-seeking sellers. Here are a couple of alternatives savvy agents can employ.

Office Exclusive Listings

Office exclusive listings offer a private alternative for sellers who want to limit their property’s exposure. The property is marketed only within the listing brokerage, and promotion is limited to the brokerage’s agents and their clients. This targeted approach is ideal for situations where confidentiality is crucial, like celebrity home sales. However, if the listing is advertised to the public, it must be submitted to the MLS for cooperation with other brokerages.

Direct Cash Buyer

For a seller who values privacy but doesn’t want to restrict their property’s exposure to the level of an office exclusive listing, seeking a cash offer from a direct buyer, like an investor or housebuying company, may be an alternative. These buyers often prefer off-market purchases, which can simplify the process and provide a more discreet transaction.

So, whether you choose a standard listing, pocket listing, office exclusive listing, or direct sale depends on your client’s unique situation and what matters most.

Are Pocket Listings Legal?

Is a pocket listing legal? As of this writing, holding a pocket listing is technically legal in all 50 states. No specific laws prohibit a real estate agent from representing a seller while keeping the listing off the MLS. However, the National Association of Realtors (NAR) threw a wrench in the pocket listing game in November 2019, effectively banning it for all its members, known as Realtors.

• NAR, the largest trade organization in the country with nearly 1.5 million members, effectively voted to ban pocket listings starting in May 2020.
• The new Clear Cooperation Policy requires NAR member-Realtors to post listings to their local MLS within one business day of marketing the property to the public.
• Public marketing includes everything from flyers in windows and yard signs to digital marketing on websites, email blasts, and even social media posts.

So, while keeping a pocket listing isn’t illegal, Realtors who don’t follow NAR’s rules could face warnings or fines from their local Realtor association. And since Realtors make up a big chunk of the real estate industry, this policy change is a pretty big deal.

But there is an exception.

• The Clear Cooperation Policy does have an “office exclusive” exception.
• This means if a seller asks that their listing only be marketed within the listing broker’s firm or among the brokers and licensees affiliated with that brokerage, it can stay off the MLS.
• However, the listing must be filed with the MLS, accompanied by a certification signed by the seller stating they don’t want the listing shared on the MLS.

The Ethics Question

Pocket listings are not illegal, but some people argue they’re not always ethical. Here’s why:

• Pocket listings can limit transaction transparency since only one agent represents the buyer and seller.
• They might also invite discriminatory practices by disproportionately limiting access to listings for certain groups of people, such as those protected under fair housing laws.
• For sellers, pocket listings can restrict the potential buyer pool, which might not be in their best interest.

Sure, pocket listings can occasionally be useful for sellers who value privacy, but the general consensus among NAR and many individual agents is that they should be used sparingly and with caution.

As always, checking with your state’s real estate commission for the most up-to-date information on the legality and regulations surrounding pocket listings is essential. But one thing’s for sure: The Clear Cooperation Policy has definitely shaken things up in the world of off-market listings.

Your Take

Pocket listings have been a staple in the real estate industry and will likely not disappear soon. However, answering the question of what a pocket listing is has evolved over the past few years. There will always be opportunities for agents to tap into the exclusive world of private listings, no matter what shape they take because there will always be sellers who value privacy and VIP status. Savvy agents interested in pocket listings will learn how to expand their network to find those hidden treasures.

Have you thought about slicing your own piece of the exclusive listings pie? There are tons of opportunities out there for agents with a little gumption, hustle, and stellar networking skills. Are you tapping into a strategy I didn’t cover? What’s your take on pocket listings? Share with me in the comments.