What is a pocket listing?
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When you want to sell your home, you usually aim to get as many prospective buyers interested in the property as possible. However, some sellers opt for an alternative route that doesn’t involve sharing photos online and hosting open houses. Instead, they choose an approach known as a pocket listing, in which the home is not marketed in the typical ways. There can be some benefits to pocket listings, but there are drawbacks as well — first and foremost, they limit exposure to your home. Here’s everything you need to know.
What are pocket listings in real estate?
A pocket listing might also be referred to as an exclusive or off-market listing. In this setup, the property isn’t included in the Multiple Listing Service (MLS), as most sale listings are. Instead, the seller quietly keeps the property “in their pocket” — hence the name.
When you hire a real estate agent to help you sell your home, the agent typically places your listing on the MLS for other agents and brokers to see. Listings on the MLS are also aggregated by real estate portals like Zillow, so they’re accessible to the general public, too. But with a pocket listing, the sale status is never made public.
Pocket listings are legal, but they fall into a bit of a gray area. The National Association of Realtors is not a fan of them, and has actually adopted a specific policy that requires Realtors to share listings on the MLS. (Of course, not all real estate agents are Realtors.)
Despite those efforts, plenty of listings are sitting in sellers’ pockets, so to speak. And the numbers appear to have risen during the pandemic. In fact, according to data from Redfin, between 20 and 25 percent of 2021 listings were sold without ever appearing on the MLS.
When to consider a pocket listing
In today’s seller’s market, pocket listings come with a big drawback: They severely limit the seller’s ability to leverage competition among buyers. According to data from Zillow, in 2021, 24 percent of sellers received four or more offers on their home. Still, there are a few situations where it might make sense for a seller to keep their listing quiet.
You already have a buyer
Let’s say you’re thinking of selling your home and a family member or friend has expressed interest in buying it. In this scenario, you have a buyer lined up already, and you just need an agent to handle the transaction. So, it might not make sense to list your home on the MLS and go through the hassle of fielding inquiries from other buyers. A pocket listing here actually simplifies the process.
Keep in mind that with a pocket listing, if your pre-arranged deal falls through, you’re back at square one. Whereas with a listing on the MLS, you could have several other interested parties waiting in the wings just in case.
You’re concerned about privacy
Once a home is listed on the MLS, that listing is available for anyone to see. If you prefer anonymity — a common occurrence for celebrities and other public figures — a pocket listing provides that.
“In my experience, most sellers who use pocket listings don’t want everyone knowing they are selling,” says Michelle Goetzinger, a real estate agent with Realty One Group Gold Standard in Pittsburgh. “They want a fairly private transaction.”
You want to test the waters
Another reason someone might choose a pocket listing is to get an idea of how much buyers are willing to pay for the home. If you start out on the MLS with an asking price that’s too high, you might be forced to reduce it — and that becomes public record.
A property that sits on the market gathering dust can be a red flag for buyers, who might wonder if there is something wrong with it. By keeping it as a pocket listing, you can avoid giving potential buyers the impression that no one is willing to pay the price you’re asking. “This way, sellers can test the market without really setting a final price and not have to open their home for every stranger on the MLS who wants to see it,” Goetzinger says.
Pocket listing pros and cons
As with any decision related to selling your home, it’s important to consider both the benefits and drawbacks of a pocket listing.
- Provides privacy for both parties in the transaction
- Allows for a smooth sale if you have a buyer already lined up
- Can give you a better idea of a reasonable price, avoiding the possible need to lower your asking price later
- Limits competition and bidding wars between potential buyers, which might cause you to make less money on the sale. “You could be leaving substantial money on the table by not doing a traditional listing,” Goetzinger says.
- Difficult to promote without the MLS, and therefore can take much longer to sell
- Likely won’t have other interested buyers to fall back on if the deal falls through
Pocket listings do serve a purpose in the real estate market, especially for sellers with privacy concerns or with a buyer already lined up. But for most sellers, it makes more sense to go the typical route. The housing market is expected to ease up a bit in 2022, so the majority of sellers will want to take advantage of every marketing and promotion opportunity possible while things are still hot.