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Real Estate Pocket Listings 101

Posted by Emily Murray

Jul 5, 2018 8:00:00 AM

real estate pocket listings

Agents new to the market are often intrigued by the idea of pocket listings, but it’s important to fully understand what they are, how they work, and the code of ethics attached to them before jumping in head first. Not sure what the ins and outs of pocket listings are? No problem, we’ve got you covered!

Here’s what you should know about real estate pocket listings:

What is a Pocket Listing?

First off, let’s look at what a pocket listing actually is. A pocket listing is a property that’s for sale but is purposely not listed in a MLS database. There are many reasons that a seller may opt to do this, however, privacy is often the driving factor behind this. Another reason that a seller may go the pocket listing route is simply that the home sold to a family member or friend and therefore never needed to be listed on the MLS. Regardless of the reason, the agent is bound by law to assure that the best outcome is found for the home seller.

The Benefits of a Pocket Listing

For an agent, there are several benefits of a pocket listing. First and foremost, this arrangement allows agents and brokerages to handpick qualified buyers. Also, the level of exclusivity involved in pocket listings may make an agent more desirable since he or she has the “inside scoop” on elite properties in the area. Often celebrities and other high-profile individuals take the path of the pocket listing as both seller and buyer.

Another benefit of the pocket listing is that the seller can experiment with a small section of the market to judge potential buyer response. If the pocket listing isn’t appealing to buyers, the agent and seller may then decide to change their pricing, and tactic, and place the property on the MLS at a more desirable price without having exposed their original pricing to the majority of buyers.

For a seller, the benefits typically include paying agents a smaller commission and also limiting the amount of unqualified buyers that come to view their home.

The Drawbacks of a Pocket Listing

So the benefits sound pretty great, why would you not want to get involved with a pocket listing? There are several drawbacks to consider. First off, with fewer potential buyers at the table, the chance for competition driving up the home sale price is reduced. If there is not a lot of interest in a home, often the seller is forced to pay more for repairs or updates per the buyer’s terms and conditions of purchase.

For buyers, the drawback is that they may be qualified but if they don’t have access to exclusive agents, they may miss out on desirable homes.

As far as the market is concerned, it’s been argues that pocket listings have a negative impact on the housing market since they reduce the competition and as a result, drive down home costs. Without the sale records of the pocket listings available, the market reporting may be skewed or inaccurate.

When Does a Pocket Listings Violate the Code of Ethics?

A pocket listing must produce a favorable outcome for the seller…not the agent. When the agent suggests a pocket listing for the prospect of a double commission this is considered against the code of ethics.

Now that you have the basics, you will be better informed and equipped to make a decision regarding your own involvement with pocket listings.

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