People hear the term ‘pockets listings’ and wonder what it means.
A home sale where the listing agent only sells the home to one buyer without marketing it to other potential buyers is something that happens occasionally.
This is when an agent has a property listing that they are not marketing publicly.
Selling a home without using a real estate agent is usually not a good idea. There are some rare circumstances where it makes sense, but in most cases, sellers are not helped by selling their home themselves or by only showing it to a few potential buyers.
Be careful if you’re a seller and your real estate agent suggests selling your home without advertising it, or if you’re a buyer who is told you’re getting a great deal on a home before it’s listed.
You would be more successful if you sold or bought things using traditional methods. Sellers who want to get the most money for their home should be careful with pocket listings.
Here’s what you need to know about pocket listings:
What is an In-House Home Sale or Pocket Listing?
A home sale that happens ‘in-house’ is one where the listing agent finds a buyer for your home without going through the usual channels or traditional methods. Instead, the listing agent uses their own network of contacts to find a buyer for your home.
‘Double ending a deal’ is a term used by people in the real estate industry to describe a situation where the same real estate agent represents both the buyer and the seller in a transaction.
This is the perfect situation for real estate agents because they don’t have to pay another agency half of the commission. They get to keep the whole thing.
The majority of buyers and real estate professionals search for properties on the multiple listing service (MLS). Listing agents will typically list homes on MLS.
The listing agent finds a buyer for the home instead of advertising to the market that the home is for sale. Only you, your agent, and the buyer that the agent finds will know about the sale.
An in-house sale by a real estate agent is when the agent tries to sell the property themselves without going through the usual channels. A coming soon listing is an example of this, where the agent is trying to find a buyer before the property is officially listed.
When marketers use this method, it is usually not beneficial for the client. The agent is contacted by potential buyers who may purchase the house before the general public is aware of it.
In-House Sale vs. Pocket Listing
The term ‘in-house’ can be misleading when discussing this subject. An in-house sale is where the company marketing the property has the listing side and the transaction’s selling side. This does not mean that the agent who listed the property also found the buyer.
An agent from the same real estate company could have brought the buyer, and it would be considered an in-house transaction. If the home is being exposed to the entire real estate market, there is nothing wrong with an in-house transaction. Most real estate companies want to sell their own listing. This is understandable and perfectly acceptable.
Confused yet? You don’t need to worry – you will quickly see the advantages and disadvantages of a pocket listing. The pros of a secluded property do not normally outweigh the cons when the property is not exposed to the public.
NAR Has Banned Pocket Listings
Want to know something really telling? The National Association of Realtors has forbidden the practice of pocket listings. If you are a Realtor, pocket listings are now illegal.
The policy is often referred to as the clear cooperation policy. The new rules took effect on January 1st, 2020, but were not implemented until May 1st, 2020. The original implementation was supposed to happen sooner, but it was delayed so that more than 800 multiple listing services would have time to educate their users and make any necessary technology changes.
Under the clear cooperation policy, real estate brokers are required to submit the listing to the local MLS within one business day of marketing the property to the general public.
The NAR policy includes yard signs, digital marketing on websites, flyers in windows, open houses, email blasts, and other real estate marketplaces as public marketing.
When a client has a market listing, their best interest is always the number one priority. The next thing they should do is ban dual agency. That would help consumers because it would give them more choice.
Some real estate agents are unhappy about the ban on pocket listings, and are discussing it in online forums and on Facebook.
Exempt Listings to The Clear Cooperation Policy
Is it possible to have a listing that is not in the MLS? Yes, it is. If a property owner does not want their home to be listed in the multiple listing service, they must submit a written request.
The listing would become an office exclusive. This means that the property wouldn’t be visible to people who use MLS to find homes.
A document expressing the seller’s wishes would be included with the signed listing agreement.
Are Pocket Listings Legal?
Pocket listings are legal in just about every state. However, real estate agents who are associated with the National Association of Realtors are held to stricter standards. A realtor’s fiduciary duty to their client means they cannot create pocket listings. Pocket listings are becoming less common as most real estate agents are now Realtors.
There are a few ways to get around this:
The Realtor has to list the property on the MLS within one business day after they start publicly marketing it. This means that you can market the property beginning on Friday and keep the home as a pocket listing for the entire weekend.
If the Realtor never begins to publicly market the property, the listing can stay off the MLS.
If a real estate professional is not associated with the National Association of Realtors, they can keep your property as a pocket listing for as long as they want.
Pocket Listing – The Pros and Cons Explained
Pros of Pocket Listings
Despite the many drawbacks, there are a few benefits to consider.
You Avoid a Lot of Traffic Through Your Home.
If you are not interested in having multiple people look at your home, an in-house sale can help you avoid the inconvenience.
The only people who will know about the sale are the listing agent and the potential buyer, meaning you won’t have to show your home more than once.
Some sellers are willing to accept a lower price than the market value in order to avoid having to show the house to multiple potential buyers.
The number one reason a seller would want to accept a real estate agent having a pocket listing is that it allows them to sell their home without it being publicly listed.
The Listing Agent May Discount The Commission.
Your real estate agent could charge a lower commission rate than what is typically charged. Although this may be the most significant benefit of an in-house home sale for the seller, it unfortunately is not a benefit.
In most cases, the agent who lists a property would share the commission with the agent who finds the buyer. However, if the listing agent is also the one who finds the buyer, they get to keep the entire commission.
It is not possible to serve the best interests of both a seller and a buyer. This means that the seller’s agent should try to get the best possible deal for the seller.
A buyer’s agent should work to get the best possible conditions for their buyer. One agent can’t do both.
An agent may charge you a lower commission if they become what’s known as a dual agent, but you may not be getting the full scope of services from the agent.
If you are selling your house without the help of a real estate company, you should make sure that your agent is only working for you and not also representing the buyers. Do not agree to have your agent act as a neutral party in a single-agent dual agency. So many states have found this practice to be bad that they have made it illegal.
Real estate agents who engage in dual agency are not being truthful to their clients.
With a Pocket Listing, You Can Test The Market and Get Feedback.
An advocate of pocket listings claims that a seller can get feedback by “testing the market.”
If a real estate agent is not aware that certain features in a house could be potential deterrents to buyers, then it would be advisable to find a different agent.
The same agents who claim that open houses are effective in selling homes will tell you that once your home is on the market, an open house will do the same thing. They will let strangers into your home without telling you about the potential risks, only so that they can get something out of it.
You should question whether it is really necessary to test the market. This is a good idea because you can trust the opinion of people who are close to you and who want what’s best for you. I am sure they will be able to help.
Some Sellers Want Privacy.
Some sellers will prioritize privacy over obtaining the highest sale price. If they want to sell their home for a high price, they need to let fewer people know it is for sale. Sellers who rely on word of mouth to sell their homes will have to wait longer to find a buyer than those who use other methods.
Examples of this would be celebrities or public figures. The company prefers to do business this way, even though it eliminates a lot of potential buyers.
Cons Of A Pocket Listing
Some of the main reason sellers may not want to use pocket listings is because of the following.
May Reduce Home Value.
The main disadvantage of pocket listings for sellers is that they forgo the opportunity to market and expose their home to the widest possible audience. The seller might not get a fair price for their home if this happens.
If a seller lists their home privately, they are less likely to be able to create a bidding war. If there is more than one buyer interested in a property, they may compete against each other to offer the seller a higher price than the listed price, which can be beneficial for the seller.
Potential Issues With Pockets Listings For Real Estate Agents
If you’re a real estate agent, there are benefits and drawbacks to using pocket listings.
The disadvantages of pocket listings also include the difficulty of ensuring that real estate agents comply with anti-discrimination laws. The real estate agent may unintentionally show the home to only certain groups of buyers, which means that many other people who are interested in the property may not have a chance to see it. A traditional listing provides more buyers with an opportunity to purchase the home.
Pocket Listings Affect MLS Accuracy
Real estate agents will want to avoid a pocket sale to ensure an accurate MLS database. The MLS is essential for Realators in order to have current information about various markets. Sites like Zillow and Trulia use data from MLSs to give their users accurate data.
If the information for a specific home is not accessible on the MLS, it can skew the data and valuations of other homes in the area.
The National Association of Realtors has banned pocket listings as of May 2020. The “Clear Cooperation Policy” of the National Association of Realtors requires that real estate agents list the properties they are working with on the MLS within one business day of marketing it to the public.
Dual Agency Scenario
The final downside to pocket listings is the increased chance of having an agent who represents both the buyer and the seller. In this case, one real estate agent is working with both the buyer and the seller in one transaction.
This can make it difficult to tell if the agent is really looking out for your best interests. If you are the buyer, you have to be aware that the listing agent’s duty is to get the highest price for the seller. This means you could end up paying too much.
Final Thoughts On Pocket Listings
Now that you know what a pocket listing is, should you work with them if you’re a real estate agent? If you’re considering buying or selling a property, you may want to investigate the possibility of doing so through a short sale.
Pocket listings are generally not a good idea unless there is a specific reason you want to keep the sale or purchase of your property private. To sell your home quickly and get the best price, you need to market it professionally and make sure it gets a lot of exposure.