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Q: When it comes to real estate, I’ve heard the term “pocket listing,” but I’m not entirely clear on what it means. What is a pocket listing, and could one be right for me?
A: Also known as off-market listings or exclusive listings, pocket listings are handled privately and are not made available to the general public. When sellers sign with a realtor to list their home in a standard listing, they agree to the practices that agents typically use to promote and sell a home. This includes listing the home on the Multiple Listing Service, or MLS.
An MLS listing allows both potential buyers and other realtors to view the listing online on home selling sites. Homes that are not shared on an MLS are known as pocket listings.
A pocket listing is a real estate listing that’s kept private.
Rather than relying on public marketing, pocket listings are handled privately by the realtor and seller. The two parties agree on the terms in a listing agreement, which outlines whether the listing is public or private. Sometimes the arrangement will stipulate that the listing will only remain private for a set period, while other times, it will remain private until the home sale is complete.
Since the sale won’t be marketed publicly in any way, the realtor will instead reach out to personal contacts in an attempt to find a buyer. Sellers can similarly tap into their own network of family and friends to gauge interest.
Why would sellers opt to forgo traditional marketing? One of the simplest reasons is if a seller already has a buyer—like a friend or family member—who is interested in the property. Therefore, they can skip the marketing phase and complete the sale privately.
One major benefit of a pocket listing is privacy. Since pocket listings aren’t found on an MLS, they are often used by celebrities and other high-profile sellers as a way to keep their real estate dealings out of the public eye. By opting to avoid a public listing, they are not required to share photos of their home’s interior. Pocket listings are also common in the high-end housing market so that agents can limit the home’s exposure to serious buyers only.
Related: What are iBuyers, and Can They Really Drive Up Real Estate Prices?
Pocket listings can have negative impacts on the housing industry.
While pocket listings are technically legal across the country, the National Association of Realtors (NAR) formally banned pocket listings with its Clear Cooperation Policy in 2020. This means any real estate agent involved with the association may not use them. Real estate agents have professional certifications but are not necessarily NAR members, meaning they are not bound by the organization’s policies. Licensed realtors, however, are by definition members of the NAR.
Real estate agents are obligated by a code of ethics to work in their clients’ best interest, but critics believe pocket listings are often used to help agents secure a double-sided deal in which they receive the commission as both the buying and selling agent. While this is beneficial for the real estate agent, it doesn’t mean the buyer is getting the best price for the property.
Pocket listings can also have a negative impact on the market as a whole. Since they are not listed on the MLS, these sales often go unreported. This means that the local real estate landscape is somewhat obscured, giving agents, buyers, and sellers a less clear picture of the reality of the market. On top of that, pocket listings present potential ethical issues since many buyers from marginalized communities and those with fewer connections are excluded from such sales.
Related: 15 Things Not to Say in Your Real Estate Listing
There are exceptions to the National Association of Realtors’ rule against pocket listings.
According to the NAR’s Clear Cooperation Policy, “Within one (1) business day of marketing a property to the public, the listing broker must submit the listing to the MLS.” While pocket listings go against NAR policy, there are still some significant loopholes. If a property is never marketed to the public, for example, it does not need to be listed on the MLS. “Office-exclusive” listings also are permitted, meaning a realtor can market them within an agency or privately to other brokers affiliated with the agency.
Another way realtors might stretch the boundaries of the policy is by beginning the marketing process on a Friday, leaving the entire weekend to find a buyer before the listing must be entered into the MLS. This period can be extended even further if the home is listed on a holiday weekend. These practices can easily allow realtors to skirt around the policy without technically breaking any rules.
Related: The Right 5 Questions to Ask a Prospective Selling Agent
In general, sellers benefit more from a public listing than a pocket listing.
For sellers, pocket listings don’t offer many advantages beyond privacy. Since the home won’t be marketed to the public in any way, there will inevitably be less interest and fewer potential buyers. One benefit, however, is that some agents might offer a lower commission price for pocket listings since they won’t have to spend time or money on marketing.
For buyers, pocket listings may be hard to come by, since you can find them only through a well-connected agent. Even if buyers become aware of a pocket listing, they may have to visit the home in-person since photos are not always available.
There are, however, some potential pocket listing benefits for a buyer. There is less competition, meaning they might be able to get a house at a comparatively lower price if it’s never listed publicly. For the same reason, buyers may also have a higher chance of their offer being accepted.
