Listing agreements are contracts between a seller and a real estate broker to find a buyer for the owner’s property. By signing the listing agreement, the homeowner is giving the real estate broker the authority to act as the owner’s agent in the sale of the owner’s property.
Most homes listed for sale by real estate agents are posted on databases called Multiple Listing Services (MLS). These databases are shared amongst other agents in an effort to share information for the purpose of finding buyers.
WHAT IS A POCKET LISTING?
A pocket listing on the other hand, is a real estate industry term referring to an off-market listing. With pocket listings, a broker and seller have a signed listing agreement to sell the homeowner’s property, but they do not disclose the property for sale in a Multiple Listing Service or openly advertise it.
For a variety of reasons, real estate agents may choose to purposely keep sales information about a home private.
Some reasons to keep a listing private may include:
- To protect the privacy of the seller. Some sellers have no interest in going public.
- So the listing agent can receive a full commission on the sale, and not share it with another agent.
- To be choosier about the buyers that view or make offers on the property.
THE DOWNSIDE OF A POCKET LISTING
One of the biggest reasons for sellers to not keep their home listed in the agent’s pocket, is that a pocket listing limits exposure to other real estate brokers which in turn limits the homes publicity to potential buyers.
Generally, the more people that see the home, the higher the price will rise. Keeping a home private means no one will know about it.
Some housing industry experts say that pocket listings can actually create a gray area as it allows an agent to collect commissions on both sides of the deal, for the buyer and the seller. Being motivated by the commission, instead of having the seller’s best interest first, is a major no-no. In fact, it’s against the law.
Although the National Association of Realtors has yet to put an official policy in place on pocket listings, most agents agree that it’s almost always better to get as many bidders as possible by publicly listing the property.
SHOULD SELLERS CONSIDER POCKET LISTINGS?
One of the biggest challenges for homes that are listed publicly on the MLS is that the time-on-the-market clock starts as soon as the home is listed. The longer a home sits on the market, the less likely the seller is to get top dollar for their home.
By listing the home privately, there is no clock ticking for how many days the property has been on the market.
Pocket listings can also give a seller some time to do some necessary repairs, stage their home, and even test the market before fully committing to selling. Seller often view pocket listings as a way for their broker to fish for buyers without the hassle of having a few nosy neighbors and other tire kickers that aren’t serious about buying their home.
If a homeowner is private, or doesn’t want lots of people walking through their home, or doesn’t want their home to sit on the MLS for too long and essentially devalue, pocket listings could be an option.
In most U.S. markets today, good properties are in high demand. In a seller’s market where there’s a lack of inventory, “secret” pocket listings could be a hot commodity. Be sure to ask your real estate professional for advice as to the best way to market your home for sale.