What Is A Pocket Listing And Are There Downsides?

When you sell your home with a real estate agent, one of the first things that will happen is that information about your home will be posted on a multiple listing service (MLS), which is a network of databases real estate agents use to find information about homes on the market in their area.

As the name implies, a “pocket listing” refers to a real estate listing that is kept in the “pocket” of the seller and their agent, instead of being made fully public.

While pocket listings have been banned by the National Association of REALTORS^®, they may still be an option but it’s not usually advised. If you’re still interested in pocket listings along with their pros and cons, this article provides an in-depth look at the practice.

What Is A Pocket Listing In Real Estate?

A pocket listing is a real estate listing that isn’t found on the MLS but is instead marketed to potential buyers through alternative means, such as word-of-mouth or private listing networks that limit who can see information on the property.

The term refers to agents holding listings in their metaphorical “pocket.” These types of listings are also known as off-MLS or off-market listings.

How Do Standard Listings Work Vs. Pocket Listings?

There is not a single, comprehensive multiple listing service. Each local real estate market has its own MLS which publishes detailed information on each home listed on it, from square footage to photos. This information is known as a “listing.”

Real estate brokers and agents pay to gain access to this information, which they then use as part of their research for prospective buyers. The information is exclusively available to members who pay for access to the MLS. Before the formation of the MLS, real estate agents met informally to share this information; now, the process is much more organized. Also, while real estate agents get first access to the MLS, many sites can also access this information after it’s been published.

Because pocket listings aren’t available to all the real estate agents in a particular area, listing agents can only promote the home using word of mouth and direct communication with other sellers and their agents.

Have Pocket Listings Been Banned?

The National Association of REALTORS^® recently cracked down on pocket listings with its newly approved “Clear Cooperation” policy, which requires that properties be listed on the MLS within 1 business day of marketing a property to the public. The policy went into effect on January 1, 2020, and has been fully implemented as of May 1, 2020.

NAR members, known as REALTORS^®, make up a large portion of working real estate professionals, so while non-members aren’t bound to the trade association’s rules, this is a significant shift for the industry. REALTORS^® who don’t follow the rules may be subject to warnings or fines, depending on the rules of their local REALTOR^® association.

Though there have been some detractors, this policy has largely been seen as a win for consumers. Pocket listings can be beneficial for a select few, but detrimental to the market as a whole.

If you want to use a pocket listing, you’ll need to consider it when choosing a real estate agent. For example, REALTORS^® and some other real estate agents may not be able to do a pocket listing.

What Are The Pros Of A Pocket Listing?

Generally, sellers should want their homes to have the most marketing exposure possible. After all, the more people who see your listing, the more likely it is that you’ll find someone willing to pay full asking price (or higher). But there are a few situations where a seller would want fewer people to know that they’re selling.

Protects The Buyer’s Privacy

One big reason why a listing agent might use a pocket listing is if their client wants to keep the sale of their home private.

A well-known local politician or a nationally recognizable celebrity may want to keep their home sale private to minimize the traffic that comes with house showings. This traffic often includes onlookers who are more interested in seeing an expensive home or getting a peek at a celebrity’s lifestyle than they are in actually putting in a serious offer.

Increases Interest In The Property

Real estate agents have also used pocket listings to “pre-market” a property to generate interest on it while the seller prepares it for the market or makes vital repairs.

A seller may find a pocket listing beneficial as a way to price test a home and see if the property can generate any interest at their ideal asking price. That way they aren’t putting a potentially overpriced home on the MLS, where it will show a price history and the number of days spent on the market. Having your home on the MLS for an extended period could raise concerns with buyers if the price has been lowered or the home has been on the market for a long time.

What Are The Cons Of A Pocket Listing?

Despite these possible pros, pocket listings come with a lot of potential downsides that could mean way less money for the seller.

Limits Your Buying Pool

As previously mentioned, not listing on the MLS seriously diminishes your pool of potential buyers. This could translate to a lower selling price.

Affects Local Property Values

When a significant portion of an area’s available housing inventory is not publicly listed, it skews the local market data. This makes it more difficult for industry professionals to get an accurate sense of how much homes are selling for in a given area through real estate comps, which can ultimately impact everyone’s property values.

Could Violate Fair Housing Laws

Some have also raised concerns about whether the practice could violate fair housing laws in certain circumstances. If a real estate agent is only marketing their properties to certain buyers, it can be hard to know whether they’re following anti-discrimination laws or if they’re excluding certain groups from seeing their properties.

The Bottom Line: Consider Both The Cons And Pros Of Pocket Listings

Pocket listings can give a homeowner more privacy and create more interest for a property. Unfortunately, this type of listing can also mean a smaller number of potential buyers and misaligned property values.

On the other hand, a traditional, above-board listing is typically going to provide the most benefit to all parties involved in a real estate transaction.

With a traditional MLS listing, a for-sale property is visible to all real estate agents and buyers in a given area. This allows for more competition between buyers, which is good for sellers looking to get the best possible price for their homes.

Another good way to sell your home is to work with an agent. This means you’re working with a carefully vetted and experienced real estate professional who can answer your questions and help you get the best possible price for your home.