If the old adage is right, you can catch more fish with a wider net. While those words ring true for quantity fishing, are they likewise credible when fishing for the biggest and best game? In fishing, as in life, purpose often determines what techniques and tools are employed. The same holds true in real estate conveyance. Some sellers would rather not wade through a sea of unacceptable offers to find the one they want. Instead, they seek to deal only with the most credible and promising buyers, choosing the best of the best. The pocket listing is a method of getting there.
What Is a Pocket Listing?
In the normal course of residential property transactions, the seller engages a realtor to list the house with a multiple listing service (MLS). Doing so announces to the public that the home is on the market. More precisely, such listing invites other salespeople and brokers to find interested buyers. Should they do so, of course, the seller's agent would share the commission with the purchaser's representative. This understanding is universal among the realtor-participants in the MLS. The network broadcasts the availability of the house. In exchange, often, the seller's agent gives up some of the reward in the interest of continued access to a large pool of prospective buyers.
The pocket listing, by contrast, forbids general public awareness of the property's status. Rather than using the MLS, the realtor markets the home narrowly, sometimes to a few select agents or to a single individual. Any number of reasons could motivate this decision. Some sellers hate the foot traffic public listings attract. Others want to get a taste for how high offers go before formally putting the residence on the market. Still others have a specific buyer in mind -- maybe a family member -- and wish to keep the conveyance between them. The long and the short of it is that buyer agents never know that the house is for sale.
Pocket Listing Pros and Cons
On the one hand, pocket listings spare sellers the inconvenience and annoyance of open houses, constant walk-throughs and the surprise conditions of prospective buyers. The realtor, in addition, retains the entire commission. At the same time, this means only one realtor is at work, deprived of an army of colleagues that would otherwise supply potential purchasers and offers approximating home values. Meanwhile, should the intended buyer withdraw, the seller is left without any market exposure and, consequently, no widespread awareness of the property or its value.
Opposition to Pocket Listings
In November of 2019, at its annual convention, the National Association of Realtors voted overwhelmingly to prohibit the practice of pocket listings among its membership. This was in response to the growing number of "Coming Soon" lawn signs that, in effect, advertise homes without formally listing them. NAR determined that this denied opportunity to minorities and others who live far from the communities in question and would thus never know that the home was available to bid on. Within one day after marketing activity commences -- e-mail blasts, fliers, website displays e.g. -- the agent is required to submit the listing to the MLS per NAR's new rule.
Buyer agent organizations, opposed to pocket listings, are nevertheless skeptical of the NAR resolutions's enforceability. The National Association of Exclusive Buyer Agents, for instance, argues that the ban as conceived by the NAR simply motivates agents to become more secretive and evasive when pocket listing. The effect on home values is unclear but NAEBA contends that home inventories are diminished.