Buying a property or piece of land is hardly ever easy. While you’re trying to find a great home to invest in or a property to develop on, you must contend with the increased demand in the buyer market. This heightened demand means that properties don’t stay on the market for too long before being sold. Because of the complexities that exist when buying any property, it can be difficult to find the right property or piece of land that you can use for a home or investment.
One of the simplest and most effective methods that real estate agents and individuals can use to search for homes that are currently on the market is with a multiple listing service. The MLS is a comprehensive database of real estate listings that can be accessed by realtors for the purpose of helping their clients find a new home to buy. When a realtor who has access to the MLS is hired, it becomes possible for buyers and sellers to be connected for a smoother transaction.
There are also additional methods that you can use to find properties for sale before the general public is able to find out about them, the primary of which is via a pocket listing. Because of the sharp increase in buyer demand that has taken place over the past two years, it may prove difficult for you to find a property to purchase that fits your specifications and includes the necessary zoning that you require for the building you’d like to develop.
Pocket listings are property listings that aren’t listed on an MLS. Nearly all properties will be displayed on an MLS, which ensures that these properties are widely viewed and can be easily accessed. If you’ve had difficulties finding a property in your area to invest in or develop on, pocket listings could provide you with additional listings to consider. This guide goes into more detail about pocket listings and how they are used to purchase properties and pieces of land.
What is a Pocket Listing?
A pocket listing is a private real estate listing that can’t be found on a multiple listing service.
More specifically, these listings are considered to be exclusive listings that the public is unable to easily access. Some real estate agents will provide clients with pocket listings that are only available through them. When it comes to standard home sales, nearly all properties are posted directly on a multiple listing service, which is the primary real estate database that agents are able to use when they want to find information about properties that their clients may want to purchase or invest in.
Instead of being listed on an MLS, these off-market listings are essentially marketed on private listing services or by word-of-mouth, which means that only a small segment of buyers will even see these listings. If a homeowner or landowner chooses to sell their property via a pocket listing, the listing will be kept private to most buyers and will only be made available by a single listing agent. Keep in mind that pocket listings have been formally banned by the National Association of Realtors, which means that only listing agents who don’t have membership with the NAR will be able to take part in pocket listings.
It’s possible for pocket listings that are held by real estate agents to be marketed through a private agent network or internally at the brokerage firm that the real estate agent works at. When a seller uses a pocket listing, their listing agent doesn’t have an agreement to work with other agents or real estate professionals, which means that the listing agent is usually able to keep 100% of the commission.
Because of how private pocket listings are meant to be, the property that’s being sold won’t have a “For Sale” sign. Today, less than 10% of all real estate listings are pocket listings. There are plenty of reasons that homeowners choose to sell their properties through a pocket listing, the primary of which include:
- Being able to avoid lengthy and time-consuming bidding wars
- Being able to market to a more limited or exclusive clientele
- Negotiating a somewhat lower commission with the listing agent
- Avoiding the need to display home price reductions while the home is available for sale, which can make some buyers wary of going through with a purchase
- Selling to a buyer that the seller already knows
It’s also common for public figures and celebrities to take advantage of public listings to avoid the publicity.
Pocket Listings vs. Traditional Market Listings
When a property owner wants to sell their property, they can do so by listing it on a multiple listing service or with a pocket listing. Traditional market listings are open to all real estate agents as well as the public, which should result in multiple offers being made and many potential buyers touring the home or property in question.
In comparison, pocket listings are typically only shown to clients who are represented by the agent’s brokerage firm. These listings can also be distributed throughout private agent networks. No matter which method of distribution is used, only a small number of potential buyers will be able to view the details about the property that’s being sold. The seller could also choose to provide people they know with access to the listing of their property.
Another clear difference in these two types of listings involves how the listings are marketed. When a seller places their home or property on a multiple listing service, their property can then be heavily marketed on various listing websites, social media pages, and even a personal website designed solely for that property. A “For Sale” sign will be placed on the property to make sure that anyone who drives by is able to view the sign and make an offer.
On the other hand, pocket listings aren’t heavily marketed, which allows sellers to negotiate with their listing agent about the commission fees they’re expected to pay once the property is sold. Since only a small subset of buyers are able to view pocket listings, marketing is kept to a minimum.
Are Pocket Listings Legal?
Yes, pocket listings are 100% legal. Even though the National Association of Realtors no longer allows their agents to use pocket listings in most cases, these listings are legal in all 50 states. Because of a rule that the National Association of Realtors put into place back in 2019, members of the association are required to post the listings they receive within a single business day after the listing agreement is made.
While the NAR doesn’t support pocket listings, any real estate agent who isn’t a member of the NAR may be willing to create a pocket listing for a seller who doesn’t want their property to be listed publicly. These listings are also completely safe to use if you’re a buyer who has found a property through a pocket listing. Even though there are a few downsides to pocket listings that you should be aware of, these issues don’t outweigh the benefits for the majority of buyers.
Pros & Cons of Pocket Listings
Before you go forward with buying a property or piece of land through a pocket listing, you should be aware of the advantages and potential disadvantages associated with pocket listings.
Advantages of Pocket Listings
Pocket listings can be highly beneficial for the seller and buyer alike. Even though these listings aren’t used as often as traditional ones, they have proven to be effective at helping property owners sell their properties without needing to market them to anyone and everyone. The main advantages of pocket listings include:
- Much less competition for buyers who are able to view pocket listings
- More privacy for the property owner
- It’s possible to test the market at a specific asking price before listing the property on an MLS
- Real estate agents are usually able to keep the entire commission from the sale
- Only a small amount of money needs to be spent on marketing
Potential Disadvantages of Pocket Listings
There aren’t many issues associated with pocket listings. The few potential issues that you might want to take into account include:
- Might not be as many offers on the home
- Sellers might not receive the best price
How to Find Pocket Listings
If you’re searching for a property that you can invest in or develop on, you should know how to find pocket listings. Because these listings are private, you can’t just go online to search for a specific property. The most effective method for finding a pocket listing involves working with an agent who isn’t directly affiliated with the National Association of Realtors.
Keep in mind, however, that there is a small exception to the rule that was adopted by the NAR. If the seller requests that the listing is only marketed in the broker’s firm, the pocket listing would be allowed by the NAR. This is referred to as an “office exclusive” listing. As long as you hire a reputable agent to help you find the right property, you should be able to gain access to some pocket listings.
Jason Somers, President & Founder of Crest Real Estate
With over 15 years of professional experience in the Los Angeles luxury real estate market, Jason Somers has the background, judgement and track record to provide an unparalleled level of real estate services. His widespread knowledge helps clients identify and acquire income producing properties and value-ad development opportunities.