Have you heard the terms "in-house listing" or "off-market listing" before? All of these terms refer to the same sort of listing, which is most frequently known as a pocket listing. But what precisely is a pocket listing?
What Is A Pocket Listing And How Does It Work?
The listing broker usually posts a standard listing on a multiple listing service (MLS). Any Realtor with access to the open market's MLS can then see the details on the property.
So, what makes a pocket listing unique? A pocket listing is one that does not appear on a multiple listing service (MLS). It's in the broker's "pocket" because it's not available to the general public.
That broker will next attempt to sell the property through word-of-mouth or private web networks in the hopes of finding a willing buyer. Alternatively, the seller may already have a bidder in mind.
Is It Legal To Use Pocket Listings?
In almost every state, pocket listings are allowed. If you are or work with a Realtor (a real estate agent who is a member of the National Association Of Realtors), they are held to higher standards. Even though a Realtor owes their customer a fiduciary obligation, they are unable to make pocket listings. Pocket listings are mostly a thing of the past now that the majority of real estate agents are Realtors.
There are a couple options for avoiding this:
First, after publicly marketing the property, the Realtor has one business day to put it on the MLS. If you start marketing the property on Friday, you'll have the entire weekend to maintain it as a pocket listing.
The listing can also stay off the MLS if the Realtor never begins to publicly advertise the property.
Finally, a real estate agent who is not a member of the National Association of Realtors can offer your home as a pocket listing for as long as they like.
What Are The Advantages Of A Pocket Listing?
Why would someone not want to sell their home on the Multiple Listing Service (MLS)? Pocket listings are useful in a variety of situations.
Figure In The Public Eye
If the property belongs to a celebrity, politician, or other public figure who wants to keep the sale of their home private, a pocket listing is one option.
This is something that public persons may want to do for their own privacy and safety, as well as to limit visitors to the home who have no intention of buying. Only serious house buyers will be able to see the home if it is listed in a pocket listing.
With The Buyer In Mind
If the home seller already has a qualified buyer in mind, a pocket listing is another option. If the seller already has a buyer willing to pay the asking price, listing the home on the MLS is pointless. This might be a long-time neighbor, family member, or acquaintance who has always wanted to buy the house.
Pricing Experimentation Or Marketing Strategy
Pocket listings can also be used to test homes on the market before putting them on the MLS. The listing agent can then assess if the price is reasonable or not, and adjust it accordingly based on the response.
The MLS keeps track of the property's price history and how long it's been on the market. When a seller uses a pocket listing to test a home's price, they avoid lowering the asking price and having their property listed on the MLS for too long. Both of these are red flags that buyers and agents will look for when evaluating a home.
Get Your Full Commission
This perk is primarily for real estate agents. Pocket listings allow agents to represent both the seller and the buyer in a transaction. While there are some drawbacks, such as dual agency, these may usually be mitigated by locating another real estate agent in your business to represent the prospective buyer (and still earn a referral).
In terms of the seller, compared to working with a random buyer's agent and buyer, this allows the agent to have greater influence over the transaction.
The Drawbacks Of A Pocket Listing
While these instances appear to be compelling reasons to use pocket listings, there is one major reason why sellers may not wish to do so.
It's Possible That Your Home's Value Will Drop
The major reason why pocket listings are unfavorable for sellers is that they miss out on getting the most promotion and visibility for their property. When this happens, the seller may receive an unfairly low offer on their home.
When a home is advertised privately, the seller has a lower probability of inciting a bidding battle for their home. A bidding battle is advantageous since the seller may receive a larger price than they originally requested.
Real Estate Agents' Potential Issues With Pockets Listings
While pocket listings may or may not be the best tactic for your seller, there are definite consequences for employing this form of promotion for a listing if you're a real estate agent.
Lawsuits Against Discrimination
Another disadvantage of pocket listings is that it can be more difficult to ensure that Realtors follow anti-discrimination rules. Without recognizing it, the real estate agent may only show the home to a certain group of purchasers, excluding many other possible buyers. With a typical listing, you provide a larger number of potential purchasers a chance to buy the house.
Pocket Listings Have An Impact On MLS Accuracy
Real estate agents may also want to avoid pocket sales in order to maintain a current MLS database. For up-to-date information on different markets, all Realtors rely on the MLS. Furthermore, sites like Zillow and Trulia receive data from MLSs in order to provide reliable information to its visitors.
When a home's information isn't available on the MLS, the data for other home appraisals in the vicinity is thrown off.
As a result, the National Association of Realtors has declared pocket listings illegal as of May 2020. Realtors must identify the properties they are dealing with on the MLS within one business day of selling them to the public, according to the National Association of Realtors' "Clear Cooperation Policy."
Scenario Of A Dual Agency
Finally, another disadvantage (but potential benefit) of pocket listings is the greater likelihood of a dual agent situation. A single real estate agent represents both the buyer and the seller in this transaction.
When this happens, it's difficult to tell if the agent is actually looking out for your best interests. If you're a buyer, keep in mind that the listing agent is obligated to obtain the best possible price for the seller. As a result, you may end yourself paying far too much.
So, if you do decide to buy a pocket listing, make sure you hire your own real estate agent to handle the deal.
Buyer Benefits From Pocket Listings
How do pocket listings affect you if you're looking to buy a new home? Should you make an effort to locate pocket listings? Should you consider it if you do find one?
Pocket listings can be a terrific chance for buyers with a good understanding of the house buying process, local prices, or the assistance of a competent real estate agent. This is why:
One of the most significant advantages of a pocket listing is its flexibility in wording. When a seller's property isn't on the market, they're more likely to offer buyers more flexible terms, such as longer closing dates, leasebacks, and other concessions.
Many buyers choose pocket listings because they allow them to have a more flexible showing schedule. In addition, if you and your real estate agent sign an affidavit and liability waiver, the seller may allow you to forgo house inspections and appraisals (if needed).
If you can uncover a pocket listing, which is virtually off-market, you may be able to get a better deal than if the property is advertised to all possible purchasers.
Because there are no rival offers to consider when buying off-market, you have more flexibility in negotiating with the seller.
There Is Less Competition
If a pocket listing hasn't been published to the MLS yet in your area, you may have an advantage as a buyer because fewer individuals have access to this information.
You have a better probability of receiving the initial glance at the concealed house in this situation. This gives you the opportunity to submit a competitive offer before anybody else sees it or makes an offer.
Finding pocket listings may be for you if you're tired of dealing with several offers.
Where Can I Find Pocket Listings?
Finding pocket listings has gotten more difficult in recent years, as the number of pocket listings has decreased as a result of the NAR effectively outlawing them. Pocket listings used to be the subject of entire websites. On portal sites like Zillow and Trulia, there were also a lot more pocket listings.
The easiest way to find pocket listings today is to call local real estate agents directly and inquire about pocket listings or "upcoming listings."
The importance of timing in locating a pocket listing cannot be overstated. After all, if the seller hasn't opted to list or unlist it from the MLS, you won't be able to find it. You must still conduct research and be aware of when properties become available for purchase.
Conclusions On Pocket Listings
Should you work with pocket listings if you're a real estate agent now that we've answered the question "what is a pocket listing?" Should you buy or sell a home this way if you're a buyer or seller?
Overall, pocket listings should be avoided unless you have a compelling reason to keep your property sale or purchase confidential. You need as much expert marketing and exposure as possible to achieve the best price for your home and sell it as quickly as feasible.