Are you wondering what a pocket listing is and how it works?
Pocket listings are properties sold “off market” or marketed to potential buyers by a brokerage privately instead of utilizing the multiple listing service (MLS).
These non-public listings are kept in-house by a listing agent. Negotiation will be done by the agent, who may or may not share the information with colleagues.
Sometimes, there is a for sale sign on pocket listings, and sometimes there isn’t. These properties will not be marketed on the most popular home-buying websites. Potential buyers will not be able to see photos online.
The listing agent only shares pocket listings with a limited number of people. On a percentage basis, there are few of these real estate properties.
While there are rare circumstances where the practice makes sense, in most cases, sellers are ill-served by a pocket listing or in-house sale.
Whether you are a seller being encouraged to allow your agent to sell your home without advertising it, or you are a buyer who is being told you are getting a great deal by getting a house before it is listed, beware.
Pocket listings are hazardous for sellers wanting to maximize their home’s sales price.
In my experience as a Realtor for three decades, your ability to maximize the selling process is hampered.
Let’s comprehensively look at what you need to know about this type of real estate listing.
How Does a Pocket Listing Work?
A home sale that happens ‘in-house’ is where the listing agent finds a buyer for your home without going through the usual channels or traditional methods like having the house on the open market.
In real estate circles, it is known as “double ending a deal.”
This is real estate nirvana for agents because they don’t have to give another agency half the commission. They get to keep the whole thing. Who wouldn’t want double the compensation?
In a standard home sale, the listing agent will list the home on the multiple listing service (MLS), where most buyers and real estate professionals search for properties to buy.
Instead of advertising to the market that your home is for sale and you are looking for buyers, the transaction happens in-house with a buyer the listing agent finds. Only you, your real estate agent, and the buyer know about the sale.
You will typically sign an exclusive right-to-sell listing contract but will agree not to have the home entered into the MLS.
Off-Market Properties vs. Coming Soon
The perfect example of an attempt to have an in-house sale by a real estate agent is when you see a real estate sign that says, “coming soon.” A coming soon listing is not officially on the market in regular marketing channels, but the agent is attempting to find a buyer nonetheless.
Marketing this way is usually not in the client’s best interest. The agent gets phone calls from potential buyers who could purchase before the general buying public knows about the house.
Marketing as coming soon can be a form of a quiet listing when other real estate agents cannot cooperate with the listing agent.
In-House Sales vs. Pocket Listings
However, the term “in-house” can be misleading when discussing this subject. Many people in the real estate industry consider an in-house sale to be the company marketing the property with the listing and selling sides.
It does not necessarily mean that the listing agent also brought the buyer.
Another agent within the real estate company could have brought the buyer, and it would have been considered an in-house transaction.
As long as the home is exposed to the entire real estate market, there is nothing wrong with an in-house transaction. Most real estate companies want to sell their listing, which is perfectly acceptable.
Are you confused yet? Don’t be – you will quickly see the pros and cons of a pocket listing. In most cases, the downsides significantly outweigh any upsides when the property is not exposed to everyone.
Pocket listings are almost always a disservice to a home seller. So, when referring to “in-house” sales, I do not cooperate with outside agencies.
Are These Real Estate Listings Illegal?
No. A pocket listing is legal. However, do you want to know something telling? The National Association of Realtors banned the practice of pocket listings. The NAR has a pocket listing policy that must be followed.
So, this option is now illegal if you’re a Realtor. Remember that not every real estate agent is a Realtor, so they are exempt from these rules.
This makes perfect sense as someone always looking out for their client’s best interests!
The mandate is referred to as the clear cooperation policy. The new rules went into effect on January 1st, 2020, but were not implemented until May 1st, 2020.
The original implementation was delayed to give more than eight hundred multiple listing services time to educate its users and make necessary technological changes.
Under the clear cooperation policy, real estate brokers are required within one business day of marketing the property to the general public to submit the listing to the local MLS.
Under the NAR policy, public marketing includes yard signs, digital marketing on websites, flyers in windows, open houses, email blasts, and other real estate marketplaces.
Having a market listing places the client’s best interest first.
A set of real estate agents is already complaining about the ban on pocket listings in online forums and on Facebook. Frankly, it sickens me, as these agents always do what’s best for themselves, not the client.
Exempt Property Listings to The Clear Cooperation Policy
Is it possible to have an exclusive right to sell a listing contract without going into the MLS? Yes, it is. For a home not to be listed in the multiple listing service, the property owner must have their wishes in writing.
The listing would become an office exclusive. The property would still need to be submitted to MLS by the listing broker like a traditional listing but would not be disseminated to the MLS participants.
The document stating the seller’s wishes would accompany the signed listing agreement. So, technically, pocket listings are not banned, but they have become limited by the clear cooperation policy.
Are These Off-Market Houses Ethical?
As long as listing agents educate the seller on the downsides and follow current regulations, they are ethical. There should be significant concerns about a real estate agent not explaining how this approach could negatively impact the selling price of their property.
There should always be valid reasons why you would want to keep your home sale confidential.
What Are The Pros and Cons of a Pocket Listing?
Let’s look at the advantages and disadvantages of these off-market homes.
Pros
ProsAs you can probably tell, I’m not a big fan of pocket listings. However, a few benefits are worth considering before we get into all the drawbacks.
In other words, what is the purpose of this type of real estate listing? Why would a seller do an exclusive sale?
You Avoid a Lot of Traffic Through Your Home.
If you are seriously ill or have some other reason not to want multiple buyers looking at your home, an in-house sale can help you avoid the inconvenience of showing the house to different people.
The only buyer that will know about the sale is the one the listing agent communicates with, which likely means you will only have to show your home once.
For some sellers, accepting a lower price than market value is worthwhile to avoid showings and deal with multiple potential buyers. There will be far less hassle when there is limited access.
This is the #1 reason any seller would want to accept a real estate agent having a pocket listing.
The Listing Agent May Discount The Commission.
Your real estate agent might discount the traditional commission rate. This isn’t a benefit for the seller, which is unfortunate since it is arguably the most significant benefit of an in-house home sale.
Under normal circumstances, a listing agent would probably split the commission with the agent who brings in a buyer – but since the listing agent is the one bringing in the buyer, they get to serve both seller and buyer.
However, it is impossible to serve the best interests of both at the same time. A seller’s agent should seek the best terms for the seller.
A buyer’s agent should attempt to get the best conditions for a buyer. One agent can’t do both. It is hard to believe that an agent encouraging an in-house sale serves anyone’s interests but their own.
So, while the agent may charge you a lower commission, you may not be getting the full scope of services from the agent if they become what’s known as a dual real estate agent.
If you are selling your home in-house, you should insist your agent remains a seller’s agent. Never accept a single-agent dual agency where your agent becomes a neutral party. The practice is so bad some states have made it illegal altogether.
If your Realtor remains a seller’s agent, they can guide and advise you. If you allow them to practice dual agency, they will not be permitted by law to provide you with any advice.
Dual agency is one of the ways real estate agents trick their clients.
You Can Test The Market and Get Feedback
Another claim that real estate agents like to make who are advocates for these listings is that a seller can “test the market” and get feedback.
If a real estate agent doesn’t know that the dark brown kitchen cabinets from the 1970s and the rose-colored wallpaper in the dining room aren’t going to be drawbacks, you should hire another agent.
These agents will claim that an open house will do the same once your home is on the market. They will let strangers into your home for their gain rather than explaining any downsides to hosting one.
You should ask yourself if testing the market is necessary. A good idea would be to ask a family member or friend for advice. I am sure they will be able to help. No one needs to “test the waters.” It’s just dumb.
Some Sellers Want Privacy
Believe it or not, some sellers will put privacy ahead of selling for the highest price. They will forgo a higher price by letting fewer people know their home is for sale. These sellers will rely on word of mouth to get their homes sold.
Examples of this would be celebrities or public figures, though doing business this way would eliminate many qualified buyers. There is often discretion when the sale involves a celebrity.
They may not want everyone in the community to know their home is being sold. It could draw significant unwanted attention from people who don’t help the sales process.
Pocket listings are most common when selling luxury real estate. Someone who owns a mansion is less likely to follow the traditional guidelines of home sales.
Cons
Now that we have exhausted the pros – we can look at the cons. Like selling a house for sale by owner, there are more disadvantages than advantages.
Real Estate pocket listings almost always benefit an agent more than any other party to the deal. Less competition among qualified buyers leads to a lower sales price.
It is doubtful to have a bidding war on an off-market property.
If you want the best deal, using the MLS is imperative to get the word out. It is the best choice and essential to sell for top dollar.
You Get No Exposure Through Regular Marketing Channels.
Keeping the fact that the home is for sale hush-hush means that the agent uses no regular marketing channels to get the word out about the deal. Exposure to the house will be limited.
No MLS listing, advertising, social media marketing, or other marketing types exist. To get the best pricing for your home, you must have the maximum exposure possible.
Marketing a house takes a lot of work, so it is obvious why the listing agent would want to avoid it if possible. But the hard work in marketing attracts all the offers a seller typically gets.
You want the best marketing plan to sell your home. Having limited access does not encourage this process.
Lowball offers, average offers, and spectacular offers are all avoided. The seller gets the proposal from the buyer that the listing agent has pulled into the deal, and that’s it.
There is No Opportunity to Encourage a Bidding War.
Bidding wars are not always desirable for real estate agents. But it would be unethical to say that most sellers don’t hope for a situation where buyers try to outdo one another.
Most clients want to understand how to get a bidding war on a house.
If the seller is in a hot market, getting more than the asking price is often possible when good marketing attracts many buyers.
Sellers in such situations can walk away with more money than they expected. With high demand, they often select a buyer meeting all their terms, such as their desired closing date.
However, if the house is not marketed, and multiple buyers do not have a chance to make offers, a bidding war is guaranteed not to happen.
Private listings foster less competition. They are not in the best interest of the client.
Dual Agency is Likely – Which Never Benefits Clients.
If the listing agent serves the seller by listing the house and helping the buyer, then the situation is a dual agency.
As I mentioned earlier, an agent cannot serve the best interests of a buyer and a seller at the same time. It just isn’t possible.
With single-agent dual agency, both clients lose out, and the agent is the only one that benefits – which is why many states have made dual agency illegal.
Even where it is legal, it must be disclosed to the clients before any transaction occurs.
Whether you are a seller or a buyer, you don’t want an agent representing you and the other party.
Why put yourself in such an undesirable situation when you could easily find a real estate agent who would happily serve your interests exclusively for a split commission with an agent serving the other party?
Most consumers hire a Realtor for their guidance and expertise. You don’t get any when you allow dual agency unless the agent provides it illegally!
The Listings Disrupt The Market.
It can seem strange to think that a single home sale could disrupt something as big as the real estate market, but private house sales can do just that. Granted, depending on your local market’s size, it may not be a massive disruption.
Off-market listings cause problems in the real estate market because prices are based on recent sales.
When a real estate appraiser appraises a home, they look at comparable sales in the same area to determine the price – homes similar to the one they are estimating.
It is all interconnected. Buyers, sellers, and real estate agents use the same systems – particularly the MLS – to ensure transparency in the marketplace. It is this transparency that provides that market values are accurate.
When a home is sold without going to market, that information is unavailable like other homes listed as usual. It creates an information gap that is not helpful to anyone. The likelihood is higher of having inappropriate pricing when you have limited knowledge of sales that impact the market.
Further, future home sellers suffer if the house sells for under-market value because it wasn’t appropriately exposed.
There are significant disadvantages to selling your house as a pocket listing!Click To TweetBuyers Don’t Know If They Are Paying a Fair Price or Not.
Often, buyers pulled into a pocket listing deal are given the idea that they are unique and getting the home for cheaper than they would otherwise. But there is no guarantee that their price is a good deal.
Sure, the home may be priced below market value. But it also may be priced at true value. The actual market value can only be determined by selling a home on the market, not hidden away as an off-market listing.
Avoiding competition can seem like a great way to save money, but it may lead you to pay more for a property than you should. You may only find out that you paid too much later when you try to sell the home.
If you don’t have a buyer’s agent advising you, there is no way to know whether you are overpaying. The seller’s agent certainly won’t be recommending you.
Are Exclusive Listings Discriminatory?
A pocket listing has the potential to be discriminatory if only a segment of the market is aware of it.
For example, if a real estate agent only showed the home to a few white buyers, it could be considered illegal.
Real Estate agents always need to be aware of Federal Fair Housing Laws. Hip pocket listings could place them in jeopardy of doing so.
Other Names For Exclusive Homes
It should be noted that real estate agents also refer to these properties by other names. Buyers, sellers, and real estate investors should understand this lingo if they come across it.
Here are the other common names to know:
- Exclusive listings
- Off-market properties
- Private listings
- Off-market listings
- Off-market homes
- Office exclusives
- Coming soon properties
- Coming soon listings
- Quite listings
- Hip pocket listings
- In-house listing
If you hear one of these terms, they probably refer to a pocket listing.
Things You Should Know About Avoiding Quiet Listings
You could have a reason to engage in private properties, but chances are you would be better served by buying or selling through the standard channels.
To help you avoid this approach, here are a few tips:
Interview Real Estate Agents Before You Hire Them.
A reputable real estate agent will happily answer your questions and undergo an interview process.
You can ask pointed questions, like how many sales the agent has been involved in this year, how many price reductions were needed, the average days on the market for their listings, etc.
Feel free to walk away if you don’t like what you hear. There is always another agent you can hire. Never discount the importance of going through multiple interviews.
Consumers should know the differences between a real estate agent and a Realtor. Realtors are held to a much higher standard. They are required to follow the code of ethics and put the interests of their clients ahead of their own.
It is vital to hire an agent who has an exceptional reputation. Someone well respected locally for going above and beyond for their clients.
Not someone who thinks through their wallet!
Many real estate agents put the all-mighty dollar before everything else.
You Are The Final Word.
You hire the real estate agent, not the other way around. If you feel your agent is pressuring you to sell a property in-house or your agent is trying to get you to buy a property in-house, you can say no.
You know the adage – always walk away when something seems too good to be true.
How to Find Off-Market Listings?
If you’re a potential home buyer, you may wonder where to find in-house homes for sale. It would help if you looked elsewhere besides the standard real estate sites.
Finding these homes on social media sites like Facebook, Linkedin, or Instagram could be possible. Other potential places are the newspaper or a site like Craiglist. You may also find them at a public auction.
If you’re lucky, asking around with several local real estate agents might help you strike gold.
Pocket Listings Near Me
There are also a few less conventional methods for finding these homes. When the inventory of homes for sale is tight, you must pull out all the stops, right?
Try a Specialized Listing Service
There are a few websites that cater to marketing pocket listings. The most well-known is Pocketdeed. Pocketdeed lets real estate companies submit off-market listings to be seen by their private networks of home buyers.
Another site is HomeQT, but it is much less known. It is a pocket listing match-making site that discreetly puts consumers in touch with one another.
You might also try doing a Google search as well. The search term pocket listings near me might give you some potential home sellers or real estate agents to contact.
Of course, keeping your ears to the ground and letting friends and family know you are looking for a home may help. The more people you tell, the better.
In hot real estate markets, some agents try to entice buyers to work with them by telling them they have homes for sale nobody knows about. More often than not, this is just a sales pitch to avoid.
Noteworthy Statistics You Should Know
1. The average private sale sells for 8% above market value in major metropolitan areas.
2. They account for 23% of luxury home sales in the United States.
3. The median sale price for these listings is $452,000, compared to $420,000 for traditional listings.
4. The listings have a success rate of 79% in selling at or above the asking price.
5. Only 9% of homeowners opt for an off-market listing strategy when selling their property.
6. Buyers who purchase properties through private listings save an average of 7% on the final sale price compared to traditional MLS listings.
FAQs
Do off-market houses impact property pricing?
Absolutely! Exclusive listings can indeed have an impact on property pricing. When a property is marketed in this fashion, it is not publicly advertised on the multiple listing service (MLS) or other real estate platforms. While creating a sense of scarcity and desirability, this exclusivity eliminates many potential buyers.
It is possible since pocket listings are often marketed through word-of-mouth or to a select group of individuals, they may attract more serious buyers. Some buyers might be willing to pay a premium to purchase an off-market property. These guidelines are more likely in seller’s markets.
Are there legal considerations for this type of marketing?
There are indeed legal considerations to keep in mind. While this marketing concept has been around for quite some time, recent updates to real estate regulations have brought about stricter guidelines. To ensure compliance, agents and brokers must adhere to these legal requirements.
Some key considerations include obtaining written consent from the seller, maintaining confidentiality throughout the process, and providing equal opportunities for potential buyers.
By following these legal protocols, sellers and agents can navigate with confidence and peace of mind.
Can agents advertise or market these homes?
Yes, there are options. Agents can indeed advertise or market private home sales, although it is essential to note that the approach may differ from traditional listings. Agents typically employ more discreet marketing strategies since these properties are not publicly listed on the Multiple Listing Service (MLS).
This could involve utilizing their networks, contacting potential buyers directly, or leveraging exclusive platforms designed for exclusive homes. By targeting a select group of individuals who may have expressed interest in similar properties in the past, agents can effectively market these residences without compromising their exclusivity.
When a celebrity wants their property to be publicly confidential, you must utilize your connections.
Where are these homes usually advertised?
They are typically advertised through exclusive channels that cater to a select group of high-net-worth individuals and industry professionals. These properties are often shared discreetly within private networks, such as luxury real estate clubs or invitation-only platforms.
In addition, they may be promoted through targeted marketing campaigns, utilizing personalized direct mailers or email newsletters sent directly to potential buyers who have expressed interest in exclusive properties.
The confidentiality and exclusivity of pocket listings make them highly sought by discerning buyers looking for unique and off-market opportunities.
Final Thoughts
Not thoroughly discussing the pros and cons of a pocket or in-house sale does not act in a client’s best interests. Agents can violate state real estate license laws, MLS policies, and the Realtor Code of Ethics. This behavior gives real estate agents and the industry a bad reputation.
Is an off-market listing a good idea? Only you can decide that. The vast majority of homeowners would probably say no.
Every client should be well informed about the pros and cons of any real estate marketing strategy. An exclusive property may not yield the best results for a seller.
Hopefully, you now have a better idea of what a pocket listing is and why you may want to avoid being one selling your home. These listings in real estate usually serve an agent’s interests more than anyone else.
About the Author: The above Real Estate information about what a pocket listing is was provided by Bill Gassett, a Nationally recognized leader in his field. Bill has expertise in mortgages, financing, moving, home improvement, and general real estate.
Learn more about Bill Gassett and the publications he has been featured in. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of Metrowest towns for the last 37+ years.
Are you thinking of selling your home? I am passionate about real estate and love sharing my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.
