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The Pros and Cons of Pocket Listings

Putting a house on the market can be just as stressful as going through the process of buying a home. You probably want to sell your home quickly, and at the highest possible price. Sellers often host open houses and list their homes on multiple websites. If you’d prefer to only show your house to a hand-picked group of buyers, however, you could always go for a pocket listing. Whether that’s a good idea depends on your perspective.

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What Is a Pocket Listing?

A pocket listing is a property that doesn’t appear in one of the Multiple Listing Services (MLS). These databases, which are compiled by brokers, list all of the local homes that are currently up for sale. Pocket listings typically aren’t included on real estate websites like Trulia or Zillow, either.

Pocket listings make real estate marketing more exclusive. Instead of having hordes of people viewing their homes, sellers can be selective about the kinds of buyers they want to attract. In the past, pocket listings have been primarily used by celebrities and high-end sellers, but they’ve recently become popular in the mainstream real estate market.

Buyers generally find out about pocket listings by contacting agents from specific realty companies, visiting pocket listing websites, attending private tours led by brokers or through word-of-mouth. Some pocket listings are eventually included in the MLS while others are never listed publicly.

The Benefits of Pocket Listings

The Pros and Cons of Pocket Listings

If you’re a seller, advertising your home as a pocket listing could be a way to keep your home sale private and low-key. That could be enticing if you’re not a people-person or you’re selling your house after experiencing something traumatic like a divorce. And if you don’t have the funds on hand to market your home, quietly selling your place could save you some money.

Pocket listing is a practice that can also give a seller the chance to experiment and see how a subsection of the market responds to their property. After launching with a pocket sale, the seller can adjust the sale price based on what they learn and have the listing added to a MLS if the pocket listing isn’t getting enough traction. If a seller opts for a pocket listing, a buyer might be able to get a great deal on a house that’s been sitting around for months due to lack of visibility in real estate listings.

Related Article: 3 Must-Do Moves Before Selling Your Home

Pocket listings also give sellers more control over their home sales. Instead of being stuck with a bunch of people viewing the home who can’t afford to buy it, a seller can choose to work exclusively with serious contenders. Ultimately, sellers can save by paying their agents a smaller commission when finding buyers for their pocket listing.

Why You Might Want to Avoid Pocket Listings

Despite their advantages, pocket listings can be potentially problematic for sellers and buyers. Because pocket listings receive less exposure and there are fewer buyers involved, a homeowner might be forced to sell his or her home at a low sale price due to lack of competitive offers. A desperate seller might have to offer a seller concession or spend more money on repairs if there’s not much interest in a home.

Buyers who don’t have the right connections might be at a disadvantage if pocket listings become more common because these buyers will have fewer homes available to them during their search. Buyers could get overlooked if they don’t have the “credentials” that sellers and their agents are looking for. Buyer’s and seller’s agents can work together when there’s a pocket listing and sometimes, a single agent can represent both parties. Either way, there might be a conflict of interest.

What about the effect that pocket listings have on the housing market? Some folks argue that they’re detrimental to the real estate industry because they reduce competition and obscure the prices of homes. This price information might be helpful to folks looking to refinance or compare home appraisals. The lack of sale records can present buyers with an inaccurate view of the market. Agents who don’t know about certain pocket listings can suffer as well if they don’t have as many homes to show their buyers.

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In fact, pocket listings are somewhat controversial among real estate professionals. The National Association of Realtors doesn’t have any guidelines in place to address the issue of pocket listings. However, pocket listings are looked down upon in New York because they interfere with the state’s Universal Co-Brokerage Agreement. That policy says that real estate agents must have access to each other’s property listings.

The Takeaway

The Pros and Cons of Pocket Listings

Pocket listings allow agents to sell properties that aren’t available to the general public. They’ve been a trending topic in the housing market in recent years and can seem appealing to sellers who value their privacy. But because they have some disadvantages, buyers, sellers and their respective real estate agents might want to be careful when dealing with these hidden listings.

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Photo credit: ©iStock.com/Tomwang112, ©iStock.com/François Pilon, ©iStock.com/Feverpitched

Amanda Dixon Amanda Dixon is a personal finance writer and editor with an expertise in taxes and banking. She studied journalism and sociology at the University of Georgia. Her work has been featured in Business Insider, AOL, Bankrate, The Huffington Post, Fox Business News, Mashable and CBS News. Born and raised in metro Atlanta, Amanda currently lives in Brooklyn.
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