Pocket listing: The pros and cons

From both the buyer’s and seller’s standpoints, there are some important details to know about pocket listings. 

Pros for the seller:

• More privacy: A listing agent might utilize a pocket listing if their client wants to keep a low profile on the sale of their home. For example, a famous politician or celebrity may want a more private home sale to minimize exposure to strangers for showings or to avoid sharing information about the property on the internet. This type of listing also helps with finding a buyer who is willing to put in a serious offer and eliminates onlookers who might just be interested in seeing an expensive home.

• Testing the market: A pocket listing allows sellers to test the waters, so to speak, and see if the property can generate interest at their ideal asking price. This way, homeowners can set a realistic selling price before putting the home on the MLS. 

• The home could spend less time on the MLS:  Homes that stay on the multiple listing service for a long time could raise concerns with potential buyers, especially if the asking price has been lowered. A pocket listing can help sellers find out what their property is actually worth so they aren’t putting an overpriced home on the MLS.

Cons for the seller:

• Fewer offers: Without an MLS listing—and with a lack of walk-in traffic from a “for sale” sign in front of the home—fewer people will have a shot at making an offer on a pocket listing, which means the property might not reach the same competitive pricing as it would in a bidding war. The real estate agent is essentially acting as a solo agent for the property, so if the deal falls through or no seller is found, the property has had no visibility on the market.

• It may take more time to sell your home: Because pocket listings don’t receive the maximum exposure offered on the open market, home sellers may have to wait longer to find a buyer willing to pay their asking price. (In general, most real estate experts agree that, to maximize a sale, the majority of home sellers are best served by listing their home on the MLS.)

Pros for the buyer:

• Less competition: When home buyers look at a pocket listing, there’s usually little worry that it’ll sell out from underneath them. Less competition during the home buying process means less likelihood of an intense bidding war, so a buyer may be able to purchase the property for less money than if it were on the open market. (However, it’s also possible that there won’t be much room for price negotiation if the homeowners aren’t set on selling.)

Cons for the buyer:

• Less room for negotiation: While some pocket listing sellers will settle for a lower price in order to save them from having to list their home on the MLS, many are just testing the market and may not be willing to negotiate their asking price. Avoiding competition with other home buyers can seem like a great way to save money, but it may lead you to pay more for a property than you should.

• Lack of photos and information: Since information about these exclusive listings isn’t usually available online, potential buyers will likely need to visit the home in person without seeing the property listing. Buyers also won’t have the opportunity to go back and review or details about the property after the showing.

While pocket listings can be beneficial for select home sellers and buyers, this type of home sale can be detrimental to the market as a whole. Because pocket listings aren’t publicly listed, it’s more difficult for industry professionals to get an accurate sense of how much homes are selling for in a given area, which can ultimately impact property values for entire neighborhoods. 

What’s more: If a real estate agent is only marketing their properties to certain buyers, it can be hard to know whether they’re violating fair housing laws by excluding certain groups from seeing their properties, whether unintentionally or on purpose.

The National Association of Realtors (NARS) recently cracked down on pocket listings with its “Clear Cooperation” policy, which requires that properties be listed on the MLS within one business day of marketing a property to the public. The policy went into effect on January 1, 2020, with a May 1, 2020, deadline for implementation.

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