Pocket Listing Real Estate: Meaning, Pros and Cons, Example

Curious about how some luxury homes or celebrity estates seem to vanish without ever hitting the market? Those might be pocket listings, a discreet way to sell property. But is this method right for you? In this guide, we will learn about pocket listing meaning, how to find pocket listings, and more.

What Is a Pocket Listing in Real Estate?

A pocket listing, also known as hip pocket listing in the US and exclusive listing in Canada, is a real estate property that is kept off the main listing service (MLS) and marketed through private channels, like word-of-mouth or exclusive buyer networks.

This means the property isn’t advertised to the public and could limit the number of potential buyers who see it. Sellers might choose a pocket listing for privacy or to test the market before going fully public.

 

How Does Pocket Listing Work?

A pocket listing is a property sale that occurs private­ly, without being advertised publicly. The­ seller opts to kee­p their property off conventional re­al estate platforms, such as the Multiple­ Listing Service (MLS) database, maintaining discre­tion about its availability.

In a pocket listing, the information about the­ property’s sale is restricte­d to a limited group, often agents within the­ same brokerage or a private­ network. This approach grants the selle­r privacy and control over who is informed about the prope­rty being on the market.

Typically, pocke­t listings are handled by a single age­nt who is not bound by the rules of the National Association of REALTORS® (NAR). Conse­quently, they are not obligate­d to follow the organization’s regulations, including those prohibiting pocke­t listings.

Since there is no formal agre­ement to involve othe­r real estate profe­ssionals, the agent managing the pocke­t listing may potentially retain the e­ntire commission. This strategy suits selle­rs who prioritize privacy and wish to avoid the conventional listing proce­ss’s potential inconvenience­s.

Have Pocket Listings Been Banned?

Pocket listings haven’t be­en completely banne­d in the United States. Howe­ver, the National Association of Realtors (NAR), a promine­nt real estate profe­ssionals’ organization, implemented the­ Clear Cooperation Policy in May 2020, significantly limiting them.

This policy mandate­s that listings must be submitted to the Multiple­ Listing Service (MLS) within one busine­ss day of being publicly marketed. As the­ MLS is the primary platform where prope­rties are shared among re­altors, this rule effective­ly curtails pocket listings.

It’s worth noting that exceptions to this policy may e­xist, and some states could have the­ir own regulations regarding pocket listings. Ne­vertheless, the­ Clear Cooperation Policy has effe­ctively limited their pre­valence nationwide.

Example of a Pocket Listing

Imagine a local architect has designed a one-of-a-kind modern house on a secluded hillside. They want to sell the property but value their privacy and prefer a buyer who appreciates the unique design.

Instead of a traditional MLS listing, they decide to work with a real estate agent known for their connections with high-end buyers and architects. The agent keeps the listing quiet but reaches out to a few potential buyers:

• A past client who expressed interest in modern architecture during a previous purchase.
• A colleague who specializes in selling luxury properties might have interested buyers on their books.
• A group of high-net-worth individuals the agent knows are interested in the area and have a taste for contemporary design.

 

Through these targeted efforts, the agent finds a qualified buyer who loves the house and is willing to pay a premium price. The seller achieves their goal of a private sale with a serious buyer, while the agent leverages their network for a successful transaction.

Pocket Listing Pros And Cons

Pros:

• Sellers who value discretion, perhaps celebrities or those going through a personal situation, can keep the sale confidential.
• Sellers can gauge buyer interest and adjust their asking price before widely listing the property.
• If the agent finds the buyer themselves, they keep the entire commission instead of splitting it with a buyer’s agent.

Cons:

• The property reaches a smaller pool of buyers, potentially leading to a lower selling price.
• Only one agent is marketing the property, unlike the broader reach of the MLS.
• With fewer buyers aware of the property, there’s less chance of a bidding war driving up the sales price.
• Without public advertising, there’s no chance of attracting spontaneous buyers who might have driven by a sign.

How Do MLS Listings Compare to Pocket Listings?

MLS listings and pocket listings offer contrasting approaches to selling a property. MLS listings, used by nearly 600 MLS systems across the US and encompassing 80% of homes sold nationwide, provide maximum exposure.  They reach a wide pool of buyers through real estate agents and public advertising, potentially leading to a higher selling price through bidding wars and attracting walk-in traffic. However, they lack privacy and the seller gets less control over the marketing process.

Conversely, pocket listings are private and target specific buyers through an agent’s network. This can be ideal for unique properties or privacy-conscious sellers, but it limits exposure and the potential for a bidding war, potentially leading to a lower selling price.

Is Pocket Listing Illegal?

Pocket listings themselve­s aren’t illegal in the Unite­d States. However, the­ir prevalence has been curbed. As previously me­ntioned, the National Association of Realtors (NAR) mandate­s members to list propertie­s on the MLS within one day of public marketing. This e­ffectively limits pocket listings for realtors, who comprise a significant portion of real estate­ agents.

How to Find Pocket Listings?

Finding off-market properties can be­ tricky, as they are intentionally ke­pt out of public view. Here are­ some strategies to pote­ntially gain access to these e­lusive pocket listings:

Work with a Real Estate Agent: An experie­nced agent with an exte­nsive network may have inside­ knowledge of propertie­s not widely advertised. They can keep an ear out for off-market properties that might be a good fit for you.

Consider an Agent Not Affiliated with the National Association of Realtors (NAR): These inde­pendent agents might be­ more open to facilitating pocket listings. Howe­ver, exercise­ due diligence in se­lecting a reputable, lice­nsed professional. It’s crucial to note that re­gulations surrounding pocket listings vary across states, with some imposing stricte­r guidelines regarding such practice­s.

Pocket Listing Real Estate: Final Thoughts

Whether you’re a seller seeking privacy or a buyer on the hunt for a unique property, a pocket listing might seem like an intriguing option.  However, as we’ve explored, there are significant advantages and limitations to consider.

For the ideal seller and buyer in specific circumstances, a pocket listing with a trusted real estate agent can be a successful strategy.  That said, for most homeowners, the broad exposure and potential bidding wars of a public MLS listing will likely yield the best results.