Pocket Listing: What Buyers Need To Know
Maybe you’ve heard the adage “most jobs aren’t advertised.” While this may not be true, the sentiment that not all opportunities are open to everyone absolutely applies to buying a new home. Plenty of homes are sold without ever being listed.
Pocket listings are a way for homeowners to sell their home discreetly without dealing with the general public. We’ll explain how pocket listings work, pros and cons for buyers to consider and how to find them.
What Is a Pocket Listing?
In real estate, a pocket listing means the property isn’t being sold publicly. In other words, it won’t be listed on a multiple listing service (MLS) or marketed online. With no for sale sign in the yard, the seller will rely on their representative’s private connections to get a deal done.
How Does a Pocket Listing Work?
A seller will inform their representative that they wish to sell their home privately. Once the home is ready, the seller’s representative will reach out to their network to try and find a buyer.
Usually, the seller’s representative is either a broker or a listing agent unaffiliated with the National Association of REALTORS® (NAR) – in other words, a real estate agent who’s not a REALTOR®. The reason the listing agent can’t be a REALTOR® is because the NAR prohibits their members from engaging with pocket listings.
From the buyer’s perspective, once you’ve found a property and are in touch with the seller’s representative, the process of submitting an offer and negotiating is largely the same as for properties that are publicly listed.
As a buyer, the trick with pocket listings is finding out about them. We’ll cover how to do that later.
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Are pocket listings legal?
Yes. As of this writing, there are no state or federal laws prohibiting pocket listings.
However, the NAR effectively banned pocket listings for their members with their Clear Cooperation Policy. They claim they implemented the policy to reinforce the benefits of cooperation for the consumer.
Before the policy was implemented, REALTORS® could only suggest pocket listings to their clients when it was in the client’s best interests. However, even back then, there were concerns about dual agency.
Dual agency means the agent would represent both the buyer and the seller in a transaction and keep the full commission. The practice is widely considered unethical because it’s impossible for an agent to advocate for the best interest of either party fully.
How To Find Pocket Listings
Your best bet to hear about a pocket listing is to find a real estate agent who’s extremely well-connected in your area. The more people they know and talk to, the more properties they’ll hear about.
You might be wondering if you should look for a real estate agent who isn’t an NAR member. We’d advise looking for a plugged-in agent with a robust network versus worrying about NAR status.
The reason why is semantics. While the NAR prohibits REALTORS® from engaging with pocket listings, there are workarounds for selling off-market houses. For example, agents can sell a home during the “coming soon” window. Effectively, this gives them a chance to shop the property within their network while still complying with NAR policy.
The savviest agents know how to find off-market properties for their clients. They just won’t call them pocket listings if they’re a REALTOR®.
Should You Consider Buying a Pocket Listing?
To help you decide if a pocket listing is something you should consider, we’ve put together a list of pros and cons.
Because the property isn’t publicly available, fewer people know about it. This means the seller will likely receive fewer offers. This can make the entire process less stressful for the buyer and likely means they won’t need to pull out all the stops necessary in a seller’s market.
✅Could get a deal
There’s a chance of getting a pocket listing for below market value because there aren’t as many potential buyers to bid on the home.
✅More opportunity for back-and-forth
Instead of hearing things like “highest and best due tomorrow at noon,” the seller’s representative might be more candid about the price the seller is looking for. Plus, you may have the opportunity to go back and forth on price multiple times – something that doesn’t happen in a bidding war. There’s also a good chance for flexibility around the closing date.
⛔Hard to find
One of the biggest negatives for prospective buyers is that pocket listings can be hard to find. If there’s no property, there’s no potential home sale.
⛔Dual agency risk
Depending on who your real estate agent is, they might also be representing the seller. In cases of dual agency, you need to be careful, as it’s impossible for the agent to be completely in your corner due to conflicting agendas.
⛔Price might not be flexible
When sellers don’t officially list their homes, they might be testing the waters on price. This could mean they aren’t serious about selling yet or that they’re only interested in selling at a great price for them.
Alternatives to Pocket Listings
For buyers, the biggest upside to pocket listings is the chance to get a great price due to less competition. Here are some other ways to find homes that offer similar upsides:
- For sale by owner (FSBO): When a seller doesn’t work with a real estate agent, it means the property won’t be listed on an MLS. This can mean less competition, and if you’re comfortable negotiating with the seller directly, you’ll both save on the commission from the real estate agents.
- Real estate auctions: Buying a house at auction can be another way to reduce the competition and potentially get a deal. Of course, there are no guarantees with auctions, but many homeowners have found success through this process.
- New construction: You might not get a discount with new construction, but if you’re in touch with a builder, you can get ahead of the competition – and you might be able to request some level of customization for the home.
Are pocket listings a good idea?
It’s possible to find a great deal on a pocket listing without the pressure of extra competition. You could also be wasting your time on a home that’s not ready to be sold or end up overpaying for it. If you’re considering a pocket listing, make sure to find a real estate agent you trust and confirm they aren’t operating as a dual agent.
Are pocket listings cheaper?
They can be, but there are no guarantees. Some sellers like to put up their homes as pocket listings as a form of market research on price.
Are pocket listings ethical?
They can be. For example, if a celebrity wants to sell their home, making the general public aware would come with risks. In this situation, a pocket listing could make sense.
However, they can also be considered unethical – usually in situations where a real estate agent operates as a dual agent.
Final Thoughts on Pocket Listings
Pocket listings can be a discrete way for prospective buyers to get into the home of their dreams. But they shouldn’t be the only avenue you rely on. Work with your real estate agent and make sure to keep all of your options open.