In today’s sizzling housing market, some sellers are taking the unconventional approach of intentionally limiting their house’s visibility to prospective buyers.
You read that right — some sellers are reducing how many house hunters can compete for their home. The technique is known as a pocket listing and it’s becoming more common. Pocket listings — also called office exclusive listings or off-MLS listings — are properties that are never made available to the general public.
Normally, agents register listings with their local multiple listing service (MLS), a regional database of homes for sale. Once a house is posted on the MLS, it’s automatically shared with other agents and on aggregate listings sites like Redfin, Zillow, and Realtor.com.
Pocket listings, however, don’t appear on these sites because they never get plugged into the MLS. Instead, agents market pocket listings to other agents in their office or to an exclusive network of buyers.
“A pocket listing is essentially a privately sold home,” says Amber Taufen, managing editor at HomeLight’s Buyer Resource Center, an advice blog for home buyers. “Buyers need to have some sort of connection to the brokerage, the listing agent or the home seller in order to hear about the property.”
By nature, it’s difficult to pinpoint how many homes are sold this way, but housing market analysts say pocket listings have become more popular during the pandemic.
According to a Redfin analysis, the number of homes that were listed and immediately marked as sold or “pending" have ticked up from 1.8% in June 2019 to 2.8% in June 2021. (Considering how quickly these homes went under contract, there’s a strong chance they were marketed privately before they were put on the MLS, which would make them pocket listings.)
One reason they’ve gained traction is that “a lot of sellers didn’t want strangers traipsing through their home,” says Redfin’s chief economist Daryl Fairweather. On top of that, unbelievably high demand from homebuyers has enabled some seller’s agents (and brokerages) to have a larger pool of buyers in their personal sphere, making pocket listings more viable.
“Pocket listings have traditionally been used by very wealthy people or celebrities, who don’t want other people to know that they’re selling their home,” Fairweather adds. “That’s no longer the case.”
The benefits of a pocket listing
Don’t want a lot of foot traffic coming through your home? A pocket listing gives you more control over who has access to your home, preserving your privacy.
“In some cases, high-end sellers who are experiencing financial difficulties, or prominent community members who are going through a divorce don’t want other people to know that they’re selling their home,” Taufen says.
Some homeowners may also find constant visitors and the need to keep their homes in showing condition frustrating. After all, homebuyers don’t always make the most respectful of house guests. (Picture groups of people tracking mud inside your newly cleaned house because they ignored your “no shoes” policy.)
A way to test the market
If you’re not sure that you want to sell or for how much, a pocket listing allows you to test the market to see if buyers are willing to purchase your home — and get an idea how much they might be willing to pay. That’s great information to have when you eventually put your home on the MLS and market it to the masses, because it can prevent you from mispricing your house. (Even in today’s market, overpriced homes are a hard sell.)
Lower expenses and fees
Not having to market your home helps you curb some selling costs. You might not have to hire a professional photographer to take listing photos, which generally costs between $100 and $125 per hour, according to Thumbtack. Moreover, some real estate agents may be willing to charge a lower commission for a pocket listing since pocket listings don’t require a public marketing campaign, which takes some load off a listing agent’s shoulders. In some states, there is also the possibility of being able to rake in two commissions by also representing the buyer in the transaction as a “dual agent.”
The drawbacks of a pocket listing
Lower sales prices
Selling your home as a pocket listing can prevent you from fetching top dollar for your home, Taufen warns. “Because you won’t have as many buyers competing for your property, there’s a possibility that you’ll be leaving money on the table,” she says.
Matt van Winkle, broker and owner of RE/MAX Northwest Realtors in Seattle, agrees. “For most sellers, maximum exposure is going to get you the best sales price,” he says.
Homes listed on the MLS sold for approximately 17% higher than homes sold off the MLS, a new study by Bright MLS found. That translates to an extra $51,000 for a $300,000 home.
Potential fair housing violations and discrimination
Pocket listings are controversial, because fair housing advocates say they promote housing discrimination, according to Kate Scott, executive director of the Equal Rights Center.
“The reality is the housing market is already segregated due to decades of discriminatory practices, and pocket listings are inherently discriminatory because they only show homes to an exclusive group of buyers, who tend to be white,” Scott says. “People of color don’t usually have access to pocket listings.”
In addition, many real estate brokerages — including van Winkle’s — refuse to sell pocket listings. And, some multiple listing services, such as Bright MLS, which serves 95,000 real estate professionals in the Mid-Atlantic, impose fines on brokers for noncompliance.