Pocket listings: What are they and how to uncover off-market homes?
Everything You Need to Know About Pocket Listings
If you're considering selling your home or buying a new one, you may have heard the term pocket listing thrown around in a real estate setting. Put simply, a pocket listing is a home that is not advertised publicly and not listed on the multiple listing service (MLS), but rather shared amongst the listing agents sphere of influence and their network in order to reach the right buyers. It is kept in the metaphorical ‘pocket’ of the listing agent and only shared with a select audience.
What is a pocket listing?
According to the National Association of Realtors (NAR), a pocket listing is defined as a real estate listing that is offered for sale by an agent to a limited number of buyers without being entered into the multiple listing service (MLS). Put simply, a pocket listing in real estate is a home that is listed off-market by a listing agent or the seller and shared in their local market or network, rather than being publicly available on the Multiple Listing Service (MLS).
In the traditional real estate process, homes that are not listed off-market are posted on the local multiple listing service, which is the database that listing agents and buyer’s agents use to find new inventory and provide information to their clients about the homes for sale in their real estate market.
In the context of a home purchase in New York, an off-market listing might be marketed through personal connections or word of mouth among real estate agents, rather than being widely advertised to the general public.
The buyer interested in purchasing the property would typically need to be working with a real estate agent who has connections to either the seller or the listing agent. The listing agent would be able to arrange a showing of the property, negotiate any reductions in the asking price, and assist with the home purchase process.
It's worth noting that an off-market listing does not always mean that the property is a good deal or that there is something wrong with the home. It's simply a way for the seller to quietly sell the property without public exposure.
Some sellers may choose an off-market listing because they want to avoid the hassle of showings, open houses, and negotiations or bidding wars with potential buyers.
If the buyer of an off-market home wants to refinance the property after the purchase, they will need to follow the standard refinancing process and requirements, regardless of whether the property was acquired through a pocket listing or a MLS listing.
Are pocket listings and off-market listings the same?
Pocket listings and off-market listings are the same type of listing and these terms are often used interchangeably in the real estate industry. They are also sometimes referred to as exclusive listings or 'office exclusives', especially if they are first advertised internally at the listing agent’s brokerage amongst their counterparts.
The real estate agent for a pocket listing usually works with only a select group of prospective buyers, often from their personal network, to sell the home discreetly without the hassle of having to create an MLS listing.
Pocket listing transactions can be beneficial for home sellers who want to keep the sale of their property private for various reasons. They are also a great option in the home buying process as they usually involve less competition, less bidding wars, and sometimes a lower price than homes available on the open market.
How does a pocket listing work?
Real estate brokers and agents use private listings or off-market home sales as a way to protect their clients’ privacy and also to create some buzz around an exceptional or not-so-exceptional home.
Word of mouth can play a significant role in off-market or pocket listings. When a home is not publicly listed on the MLS or other sites like Zillow, it is often marketed through the listing agent’s connections and word of mouth among other local real estate agents.
Word of mouth can be an effective way to reach a targeted group of buyers who may be interested in the off-market housing market, but it's also important for real estate agents to follow ethical practices to ensure that all potential buyers have a fair chance to make an offer on a property.
What are the NAR rules for pocket listings?
It is also worth noting that according to the National Association of Realtors (NAR), brokers must follow fair housing laws and clear cooperation policies when selling pocket listings. These rules include being transparent with all potential buyers, treating all buyers equally, and maintaining the confidentiality of the seller, per their signed listing agreement.
The National Association of Realtors (NAR) actually cracked down on pocket listings with its Clear Cooperation Policy, effective as of January 1, 2020, which now requires that homes be listed on the MLS within one business day of being marketed to the public. So, if the listing agent or seller wants to advertise their off-market listing more publicly, they will need to add it to the MLS within 24 hours of the advertisement going live.
Why sell off-market?
- High-end or luxury homes: Sellers of luxury or high-end homes may prefer a pocket listing to maintain privacy and exclusivity during the sale process. Many sellers of higher end homes want to be private about the sale price or other financial aspects of the transaction.
- Celebrity or public figure sellers: Celebrities or high-profile sellers may choose a pocket listing to avoid attracting attention from the media or the public, especially if they are selling their primary residence. Having strangers in your home can be very invasive for more private sellers.
- Probate or estate sales: When selling a property as part of an estate or probate, a pocket listing may be used to discreetly and efficiently handle the sale for all parties involved.
- Distressed properties: A pocket listing could be the best option for a homeowner facing financial difficulties, such as a potential foreclosure, to avoid a public listing and the stigma that may come with it. Many distressed properties are owned by sellers who are unable to fix up the home for a variety of reasons, normally people do not want everyone to know what those reasons are.
Some sellers also opt for a pocket listing sale when they are selling for personal reasons, such as a divorce or a death, as they do not want their entire neighborhood or the general public to know all of their family secrets.
Benefits of Selling a Home as a Pocket Listing
- Privacy: One of the biggest benefits of a pocket listing is that it offers more privacy than a traditional home sale. If you're a celebrity, high-profile business executive, or just someone who values privacy or doesn’t want their financials to be public, a pocket listing can help keep the sale of your home confidential.
- Curated Buyer List: Pocket listings typically receive heightened attention from the real estate agent and a smaller curated pool of potential buyers, which can lead to a faster sale.
- Better Negotiating Power: Normally with a pocket listing, you have a bit more control in the sale than you would in a more traditional process. The open houses and broker tours are usually less frequent with pocket listings, as these homes normally just have private tours with serious buyers. This can make for an easier, less stressful transaction.
Potential Disadvantages of Selling a Home as a Pocket Listing
- Potentially less exposure: Since a pocket listing is not publicly listed on the MLS or other online portals, it could have limited exposure to potential buyers. This could limit the number of offers the seller receives and make it harder to find the right buyer for your property.
- Less Competition: While limited exposure can be a pro for homebuyers hoping to avoid bidding wars, reduced competition can also be a disadvantage for sellers. With fewer buyers fighting for your property, you may not receive as many offers or as high of offers as you could in a traditional home sale. But, remember that you really only need one good offer in order to sell your home with confidence.
A pocket listing can be a useful option for those who value privacy or want to receive more personalized attention from a real estate agent. However, it's important to weigh the pros and cons carefully before making a decision.
If you're unsure if a pocket listing is right for you, consult with a real estate agent to discuss your options or check out Aalto.com to see how easy it is to sell your home using our self-service real estate platform.
Aalto is a real estate broker licensed by the State of California, License #02062727 and abides by Equal Housing Opportunity laws. This article has been prepared solely for information purposes only. The information herein is based on information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy of the information. Aalto disclaims any and all liability relating to this article.