Imagine you have news to share, but instead of a tweet or other post on social media that anyone can see, you send a direct message to a few select people. A pocket listing in real estate is similar in concept.
With a pocket listing, a home isn’t marketed through the usual public channels. The agent finds a buyer through word of mouth and their own private network — keeping the listing in their proverbial “pocket.”
Pocket listings occasionally have value for sellers who want privacy, but the National Association of Realtors® (NAR) and individual agents say they can limit transparency in transactions and, for sellers, restrict the potential buyer pool.
“I can’t say I love pocket listings,” says Margaret Wilcox, a top real estate agent serving Hartford County, Connecticut, and a real estate agent of more than 15 years. “It isn’t exactly the best-case scenario for the seller.”
Let’s look closer at pocket listings and how they differ from a traditional sale.
How pocket listings work
A pocket listing is an agreement between a real estate agent and seller to market a home through private connections rather than publicly advertise it.
The key distinction is that a pocket listing does not appear on the Multiple Listing Service (MLS), which is the local or regional database cooperating real estate brokers use to share data and information about properties for sale.
You also won’t see a for-sale sign in the yard of the home, or hear local media gush over the luxury property’s massive square footage or amazing backyard pool.
Rather, information about the listing is kept within a brokerage, and shared on an individual basis with clients who may be interested.
How MLS listings compare to pocket listings
In an open market sale, an agent uses the local or regional MLS to distribute information about a new listing to the market — including its square footage, number of beds and baths, listing photos, and a description about the property. These details are then syndicated across major real estate websites for consumers to browse through.
The U.S. has nearly 600 MLSs, listing 80% of homes sold nationwide, according to the Real Estate Standards Organization. Pocket listings are rare because without the MLS, a home isn’t likely to be seen by many people which can greatly hinder a home’s ability to sell or cause it to sell at a lower price.
Are pocket listings illegal or banned?
Pocket listings are not illegal, but the National Association of Realtors® — the largest trade organization in the country — does have a policy around how its nearly 1.5 million Realtor members can accommodate off-market listings if a seller requests one.
What’s the pocket listing policy?
Under NAR’s pocket listing policy, known as the Clear Cooperation Policy and effective as of January 1, 2020, listing agents and brokers must submit a listing to the MLS within one day of marketing a property to the public. That includes any promotion or advertisement such as flyers, yard signs, or brokerage website displays.
NAR’s Board of Directors adopted this policy to avoid “misuse of various limited exposure marketing tactics” with such listings. The MLS requirement is intended to encourage cooperation among agents for the benefit of the consumer.
The policy is also aimed at curbing pocket listings that would be in the self-interest of the real estate agent alone. Pocket listings, in addition to reducing visibility of the property, can make it more likely that an agent would represent both buyer and seller, increasing their commission cut.
Are there exceptions?
Say Beyonce and Jay-Z are selling their $88 million mega-mansion in Bel Air. If these celebs treated their real estate listing like everyone else’s, they’d end up fielding a lot of financially unqualified and starstruck looky-loos who just want to wander their crib and take selfies.
It’s not just the rich and famous who might want this privacy though. Think about prosecutors or judges that try tough cases, or controversial politicians who want to remain anonymous in their personal lives.
Wilcox, who is a team leader in her office, said one of her agents recently withheld a listing from the MLS because the sellers owned a daycare business. They were concerned that parents who knew publicly that their house was for sale would worry they were leaving the area and would take their business elsewhere.
In any of these situations, a seller might opt for a pocket listing. So how does that work under NAR’s policy?
What’s a ‘by the book’ pocket listing?
In the case of a pocket listing, a seller must first express to their agent that they do not want the listing disseminated by the MLS. The agent must then still file that listing with the organization and include a signed certification from the seller indicating that they are refusing MLS services.
The listing is then considered an “office exclusive.” The listing agent can share information about the listing with members of the brokerage and through one-to-one promotion between these members and their clients who may be interested in the pocket listing. Agents and brokers who go against NAR policy may face fines.
You’re just marketing to a much smaller community of people. It’s really narrowing your buyer pool, and you’re less apt to get top dollar for your property that people seem to be getting these days. You’re probably leaving money on the table.
- Margaret Wilcox
Real Estate Agent
Real Estate Agent at William Raveis
Currently accepting new clients
- Years of Experience
- Average Price Point
- Single Family Homes
Why pocket listings are usually inadvisable
Much like advertising a job opening, the more people who know your property is for sale, the better. These are some of the risks when you list off-market:
Limited visibility and reach for the property
Staying off the MLS keeps thousands of agents and their clients from viewing your property and making an offer.
“You’re just marketing to a much smaller community of people,” Wilcox says. “It’s really narrowing your buyer pool, and you’re less apt to get top dollar for your property that people seem to be getting these days. You’re probably leaving money on the table.
Possibility of underselling
While there’s no centralized national data about homes sold that aren’t marketed publicly, individual MLSs report that more exposure and visibility equal better prices. Earlier this year, a Bright MLS study of about 443,000 comparable home sales over two years found that homes marketed through the MLS sold for nearly 17% more than homes sold off market.
May encourage dual agency
On average, the commission for real estate agents nationwide is about 5.8%, typically calculated as a percentage of a property’s sale price.
Although a seller pays this (deducted from the proceeds at closing), the listing agent, who represents the seller, doesn’t keep it all. They typically split it with the buyer’s agent, and then each share a percentage with their sponsoring broker.
An agent who markets a property solely to their private network may have a better chance of keeping the full commission, but that also might compromise their ability to negotiate on a seller’s behalf.
Potential for fair housing violations
NAR says it enacted the Clear Cooperation Policy in part to provide equal access to all available properties, which promotes Fair Housing.
Because agents’ clients and connections typically reflect their own background and ethnicities, personal and private marketing creates racial barriers in the housing market, say researchers such as University of New Mexico sociologist Elizabeth Korver-Glenn, author of Race Brokers: Housing Markets and Segregation in 21st Century Urban America (Oxford University Press, 2021).
Skews local market data
The transparency of shared data is a valuable resource for pricing homes. Lesley Walker, associate counsel at the NAR, has said that keeping listings off the MLS “limits the available information about the market and makes it difficult for other agents, buyers, and sellers to determine values of nearby properties, and for appraisers trying to determine the current market value of a particular property.”
Does a pocket listing ever work to sell your home?
Privacy is a top reason why Wilcox and other agents say sellers ask about off-market, exclusive, or pocket listings.
The Compass real estate company, for instance, promotes “Compass Private Exclusives,” which agents share with their colleagues and buyers discreetly. Some sellers have changing family or financial circumstances, health issues, or own valuables such as art or antique furnishings that they don’t want someone scoping out online.
Others may express “legitimate concerns” about privacy or legal issues when selling property, such as having a restraining order against someone or going through bankruptcy proceedings.
Other instances where a private listing might work for you include:
- You already know your buyer.
You might not need to list your home if a friend or neighbor has already approached you with a direct offer, but be sure to have a real estate attorney and a tax professional review everything before you sign. If you’re looking for a go-between between you and a loved one to avoid issues, a real estate agent can still serve a critical role as transaction coordinator, likely for a reduced commission rate.
- You want to “test the waters” on price.
Wilcox spoke with one seller who wanted to see what their house would fetch without putting it on the MLS, thinking if they adjusted the price later, no one would know about it. But based on the guidelines of SmartMLS — which Wilcox is a member of as a local Realtor — the property still would show a price reduction and time on market dated back to the listing agreement.An agent’s comparative market analysis, which evaluates your home against comparable sales and makes dollar adjustments based on competitive differences, is a better way to arrive at a listing price without messing with your time on market. Wilcox says she and her client opted not to do the pocket listing, and the property sold readily once it went on the MLS.
- Your home is in the upper pricing echelon for your market.
Sellers of luxury homes are often drawn to the privacy a pocket listing can provide. A high price tag — or high-profile seller — can draw unwanted attention to the property such as media coverage or buyers who aren’t serious about making an offer. In this case, an approach that allows the listing agent to market the home to a select pool of buyers, collect feedback, and find a buyer through targeted exposure can be appealing.
Pocket listings: Approach with caution
Although they’re not illegal, off-market listings can be more complicated than they’re worth. If you’re considering this route, ask your real estate agent about their experience with such listings, Wilcox suggests. How will they reach out to find buyers?
Also, while a pocket listing offers privacy, it’s not a ticket to avoiding sale preparations. Even if you’re selling to a private network, you’ll likely need to stage the home and make necessary repairs, as you would with any other listing.
Wilcox recently worked with “extremely private” sellers in the greater Hartford, Connecticut, area who asked her to keep their three-bedroom, two-and-a-half-bath home off the MLS. “They just did not feel that they wanted everybody viewing their home online; they only wanted very serious buyers,” she explains.
Through her personal and brokerage network, she was able to show the property to a handful of interested people, who “didn’t feel any sense of urgency.” Once she listed the property on the MLS after 30 days, “it immediately got showings. … We ended up getting more than one offer on it,” resulting in a contract.
“People think, ‘Oh, I don’t want to prepare [my house] to the point that we have to have photos taken, or have an open house,” Wilcox says. “But you kind of have to prepare your home anyway if you want the highest and best price.”
Header Image Source: (Dane Deaner / Unsplash)