What Is a Pocket Listing & What Are the Downsides?

A pocket listing is a property that is for sale, but the property is not publicly advertised using wide ranging advertising methods like a multiple listing service (MLS). You can sell a property as a pocket listing with a member agent of the National Association of REALTORS®. NW Indiana real estate agent Chuck Vander Stelt can help you sell a property as a pocket listing excluding it from the MLS.

What Does It Mean – House Pocket Listed?

A pocket listing is a property listed for sale with a real estate agent without mass marketing or collaboration with other real estate agents.

First, a pocket listing is not mass advertised. A pocket listing is not submitted to a multiple listing service preventing the home from appearing on consumer facing real estate websites. Other mass advertising methods like email campaigns, social media campaigns, and other wide reaching marketing is not used.

Secondly, the absence of collaboration and communication between the listing agent and other area real estate agents is another unique feature of a pocket listing. Due to this, the listing agent is most likely to represent both the buyer and the seller leading to both a limited agency transaction and the listing agent earning the entire commission fee.

How Do Pocket Listings Work?

The first step for the homeowner wanting to sell their home as a pocket listing is to find a real estate agent in the area who is successful with pocket listings. The homeowner will sign a listing agreement with their agent. It is likely the seller will complete a document about excluding the home from the MLS. This is because many local associations follow the rules and regulations of the National Association of REALTORS®.

Pocket listings are not advertised using mass marketing tools. Instead, the listing agent contacts potential homebuyers they already know to tell them about your home. The listing agent will tell newly met homebuyers about the pocket listing who would be interested in the property.

Pocket listings are mostly used by owners of unique properties, distressed properties, or high value properties priced in the top 3% within the local area. Sellers list as a pocket listing for reasons related to privacy. The absence of public advertising keeps the sale off of the radar. Pocket listings can also be used to weed out the unqualified, the unserious, the frivolous, and the fickle homebuyers. Lastly, some home sellers use it as a way to gauge interest in the property.

Pros and Cons of Pocket Listings

Off market listings have some benefits, but the benefits of a pocket listing are outweighed by the consequences.

Advantages of Pocket Listings

Here is a list of the benefits to a pocket listing if you want to sell your home off market.

• Full commission for the agent: Since all of the real estate commissions are going to one agent, a home seller is likely to get a lower commission fee. Due to this, it is likely a home seller can negotiate for a lower commission.
• Confidential market exploration: Selling off market gives the homeowner the opportunity to gather useful information about how homebuyers perceive the home. Learning what improvements to make and homebuyers’ opinion on the price are valuable pieces of information.
• Fresh start on the MLS: Home sellers can use information gathered while privately marketing the home to make a better first impression if the seller ever decides to publicly market the home. Most notably, pricing the home right.
• Enhanced privacy: Off market listings let a home seller sell their home privately. This keeps nosey neighbors, friends, or family members from knowing your intentions to sell the property keeping this personal part of your life private.

Risks and Challenges of Pocket Listings

The consequences of a pocket listing have a meaningful negative impact on your home sale.

• Limited exposure and reach: The most profound consequence of a pocket listing is the limited exposure. More than ever consumers like to start their buying process anonymously. Homebuyers hiding behind their screen will never learn about your home being for sale.
• Marketing constraints: Owners selling with the pocket listing strategy prevent their real estate agent from using the most effective marketing tools at their disposal including their MLS, other marketing campaigns, and collaboration with other agents.
• Risk of underselling: Pocket listings carry a high risk of getting less money for the home. This is due to the fact fewer homebuyers are aware the home is for sale which lessens overall interest and the likelihood of a bidding war.
• Reliance on the agent’s network: A pocket listing is reliant on the network of a single real estate agent. Your agent is unlikely to know or casually bump into the person who would pay the most for your home.

Northwest Indiana homeowners planning to sell should use our full-service listing with low real estate commission fees. Contact us or call us at (219) 309-609.

Pocket Listing in Action

Sally Seller owned a livable home needing significant work, meaning it would list below comparable prices and attract heavy buyer traffic. She wanted the best price, a hassle-free sale, and minimal marketing exposure. I suggested a pocket listing, explaining it might not yield the absolute highest price. Satisfied with a fair offer, she agreed. I invited select investors, and she quickly secured a cash deal with no contingencies. She even left behind unwanted belongings, making the process seamless. Sally achieved her goals, but it is likely she could have received more money for the home by publicly advertising the home.

Why Would a Seller Do a Pocket Listing?

Three common reasons for a pocket listing are privacy, embarrassment, or greed. Celebrities, politicians, notable people, or family issues may make privacy most important. Secondly, embarrassment from a dilapidated home or a hoarder situation. Lastly, make me move mentality which is a seller who would sell for a fantastical price.

Why Should You Avoid a Pocket Listing?

Most home sellers will not benefit and instead be harmed from selling their home as a pocket listing. Pocket listings are not marketed to the full audience of active homebuyers. Minimal exposure of a property does not lead to getting the best price and the best purchasing terms for your home.

Pocket listings make sense when the likely buyer audience is incredibly small. This would be applicable to distressed homes, difficult to mortgage homes, unique properties, and homes priced in the top 3% within the local area market.

Is Pocket Listing Illegal in Northwest Indiana?

Pocket listings are not illegal in any state, and pocket listings are not illegal in Northwest Indiana. A member of the National Association of REALTORS® can take a pocket listing.

The National Association of REALTORS® Clear Cooperation Policy at Section 1.3 allows for exempt properties. Home sellers seeking to market their home privately will likely need to complete an additional document with their listing agent. Information saying NAR has banned pocket listings is inaccurate.

Is a Pocket Listing Ethical?

A pocket listing is ethical. So long as the real estate agent provides an honest and professionally realistic explanation of the likely outcome from the pocket listing versus a publicly marketing listing while also following the duties of agency, a pocket listing is ethical.

What Is the Difference Between a Pocket Listing and a Private Listing?

With a pocket listing the listing agent only tells specific homebuyers about the home. With a private listing the listing agent submits the listing to the MLS, but it is not syndicated to external real estate websites. Member agents of the receiving MLS become aware of the listing.

Home Selling Options Similar to a Pocket Listing

Home sellers have alternative options between a pocket listing and the typical, full on publicly advertised listing.

• Office exclusive listings: Office exclusive listings are pocket listings shared with agents at the same brokerage as the listing agent, so all of those agents can market the home privately to their networks.
• “Coming Soon” listings: A coming soon listing allows agents within an MLS to preview the property online before it is displayed publicly on real estate websites.
• Private listings: Mass marketing is limited to placement in the MLS. All MLS member agents can see the home, but it is not syndicated out to consumer facing real estate websites.

The best methods for advertising your home is placement in an MLS and allowing collaboration from other area real estate agents.

Bottom Line on Pocket Listings

Home sellers looking for less public sale might benefit from selling their home as a pocket listing. However, the absence of mass marketing increases the risk of underselling the home and other consequences. Instead, hire a listing agent to mass market the home including MLS placement and collaboration with agents representing homebuyers.

The best way to sell a home in NW Indiana with a professional real estate agent is to hire the Quadwalls Real Estate Team. Get in touch by completing our contact form or calling (219) 309-6098.