Pocket Listings: What You Need to Know

By Jessie Trapp, Marketing Coordinator

It’s a cut-throat market out there. Inventory seems to become increasingly scarce by the day, and sellers continue to hold tight to their reign as the power players of the real estate world. With agents scrambling to find a competitive edge, it’s no surprise that some of the tactics being used are stirring up serious controversy within the industry.

Enter: pocket listings. The actual usage of the term “pocket listing” can be somewhat confusing, as it is often used to describe multiple types of property listings that agents have different intentions for. Put simply, a pocket listing is a signed property that an agent has acquired but hasn’t listed on the MLS (Multiple Listing Service). In some cases, the agent intends to list it but simply hasn’t yet, however, for the most part it means that they have a property and intend to sell it to someone in their sphere without ever even placing it on the MLS at all. If you haven’t already, now is the perfect time to put this method on your radar because the secrets out – and clients are asking about it.

The topic of pocket listings is a fiery one among agents because it tends to walk on a fine line between tactical and, arguably, unethical. Agents are, in compliance with the Code of Ethics, required to do everything in their power to ensure that they get the best offer for their client. Those against the practice claim that withholding a pocket listing from the MLS presents the risk of missing out on higher offers that could result from making it accessible to the general public, therefore failing to act in the best interest of the client. Transactions for pocket listings also generally remain in the hands of the listing agent, as they often represent the both the seller and the buyer. Some opposed to the practice also express concern that some agents are too biased in favor of it due to the potentially higher commission in it for them, and fear that clients might not always be well educated on the ramifications associated with the practice.

Although these risks likely account for why pocket listings are usually not considered to be the standard practice in real estate, sellers occasionally prefer it and it has the potential to give agents a notable advantage. Not only can the limited exposure component of the method offer a more private experience for the seller, but it can also simplify the offer process all together and speed up the transaction time. For sellers who are wanting a quick sell, this aspect can be a major incentive to sell their home as a pocket listing. By avoiding listing a property on the MLS you lower the amount of wide spread interest and walk-throughs but, in the right situation, you can also increase the quality and seriousness of the interest received. This brings it back to the agent- because pocket listings take the MLS exposure out of the equation, the quality and health of your CRM and overall sphere plays a major role in how successful you can actually be with this strategy. Not sure if your sphere is up to par? Take a look at this piece we wrote to help you gauge where you stand.

Buyers also occasionally prefer to make offers on pocket properties because less competition means that they are more likely to avoid the grueling bidding war process. Again, depending on the situation this can be negative for both buyers and sellers, but some continue to prefer its more simplistic approach and pursue it anyway. For the sake of transparency, some in the industry feel as though agents should always present pocket listings as an option on the table for their clients. This could be risky for both the client and the agent if handled improperly. As the agent, it’s your responsibility to make sure you’re practicing within the laws, which vary among states, and making the pros and cons associated with the method abundantly clear so that sellers can make informed decisions and you can cover yourself against any potential violations.

Like I said, this topic is complex, and people are all over the board in relation to how they feel about it. The practice is very unregulated, meaning there aren’t reliable statistics reflecting how many agents are actually engaging in it. It does, however, seem safe to say that it’s usage is significant considering tech companies, like this one, are viewing it as an opportunity to create a structured platform for it. Regardless of whether you believe this approach to be an epidemic or a tool, it’s important to analyze its effect on the market from all angles because let’s face it- you’re bound to run into it eventually, and you’re going to want backup.