“A pocket listing sells without publicly hitting the market,” Jason Gelios, a realtor at Community Choice Realty in Detroit, Mich., told The Balance by email. “Many times, a (pocket-listed) home is sold by ‘word of mouth’ either through the network of the home seller or a real estate professional.” According to a report by the National Association of Realtors (NAR), 88% of buyers purchased their homes through a real estate agent or broker. However, the majority of them (51%) say they originally found their choice home on the internet. Others (28%) found it through a real estate agent, and 6% found their home through a friend, relative, or neighbor. Only 3% said they knew the sellers, as is common with a pocket listing.
How Pocket Listings Work/Examples
Pocket listings aren’t common, but they do exist, according to attorney Michael J. Franco, licensed associate real estate broker at Compass Realty in New York, NY. So why would a seller use a pocket listing? “One reason would be if someone wants privacy regarding the asset that they are selling, or when the market is super strong or weak,” Franco told The Balance by email. Showings and open houses are designed to generate interest and show off the property’s best features. But in a strong market, Franco said the sellers might not want the hassle of showing the property to an influx of potential buyers. “On the other hand, when the market is weak, a seller doesn’t want to rack up a day count with a listing, especially at an ambitious price,” he said. The more days a property is listed on the MLS, the less attractive it is to buyers. Even if the buyers don’t know the exact reason for the length of its listing, they believe the property may have an issue and will view the listing as “stale.” So, what’s the relationship between the pocket listing and the property’s price? Sellers can use pocket listings to test the market or interest in their home, Gelios says. “Let’s say a homeowner has a slight interest in seeing what they could sell their home for, but they don’t want to publicly list the home,” he said. Instead, they may tell their agent that they can bring potential buyers to view their home. If the agent’s buyers believe the home is too expensive, the seller knows that they may need to reduce the price, he said.
Pros and Cons of a Pocket Listing
Pros Explained
Can offer privacy: A pocket listing can be a good idea if you want privacy as you’re selling your home. With a public listing, your neighbors or others can learn that your home is for sale. More convenient than officially showing property: Because pocket listings are only known to a private group of potential buyers, you don’t have to keep preparing for open houses and various showings. Avoid day counts on a public listing: Buyers consider homes that are on the market a long time to be stale listings. Public listings include the time a home has been listed among the information available to buyers. With pocket listings, buyers are not aware of how long the seller has been trying to sell the property. Cut down on non-buyers: Pocket listings help sellers avoid tending to buyers who aren’t really interested in making a purchase. For example, some people may not even have the money to purchase the home, but just enjoy visiting properties.
Cons Explained
Does not attract a large pool of buyers: With public listings, the pool of potential buyers is very broad as anyone with internet access can view the property. Private listings with word-of-mouth advertising attract much fewer potential buyers. Less exposure than a public listing: Public listings get exposure in several ways, including through open houses. Private listings have less exposure, which also draws a smaller pool of buyers. Sellers may lose out on higher prices: It’s hard to create a bidding war with one or two potential buyers. Someone may have been willing to pay significantly more if they had known about the listing. Could be discriminatory: Because only select people are made aware of the listing, sellers can discriminate against people to whom they do not want to sell
Controversy Surrounding Pocket Listings
Pocket listings could also be considered discriminatory. In a 2021 op-ed, Glenn Kelman, CEO of Redfin, a real estate brokerage firm, stated that pocket listings tend to disproportionately exclude people of color. Another complaint is that large brokerage firms with numerous pocket listings decrease competitiveness by flaunting their ability to get exclusive listings. The National Association of Realtors (NAR) has banned pocket listings among its members. The organization has also created the MLS Clear Cooperation Policy which requires that any listing with a member Realtor that is “publicly marketed” must be filed with the MLS and provided to other MLS participants within one business day.
