You know about home listings. But do you know what a pocket listing is? If you're thinking of buying or selling a home, then you might want to study up.
What is a pocket listing?
Pocket listings are, put simply, exclusive listings. They're based on a listing agreement between the seller and the real estate agent that says the property's for-sale status will be kept private -- either entirely or at least for some amount of time.
You won't find pocket listings on any multiple listing service (MLS) or websites like Zillow, Trulia, or Realtor.com. Instead, you'll need to go directly to the agents or sellers themselves. There are also some online services that allow you to find pocket listings in your area.
How to buy a pocket listing
For buyers, there are a number of advantages to pocket listings. The biggest? That'd be the potential for a great deal.
Because of their exclusivity, there's naturally less competition for a pocket listing. In fact, without marketing on their side, it could be months before a seller receives even one offer on a pocket listing property.
As such, potential buyers have a little wiggle room in the negotiating department. They might even get away with offering a little under current market value if their timing is right.
Pocket listings also offer a more flexible sales process. With most pocket listings, sellers aren't in a rush (or else they'd want the home properly marketed and advertised), so you typically have some freedom in how the transaction is handled. You may be able to get a later closing date, ask for certain appliances or pieces of furniture, or negotiate the process in some other way.
Finally, if you're in a market that's particularly tight on inventory, pocket listings can be just what you need if you're looking to buy at a price you can afford.
How to find pocket listings
So, how do you find pocket listings? Your first option is a real estate agent with deep ties to the community and a strong network within the industry (the deeper, the better).
Basically, you want someone who knows lots of other brokers and agents in the area -- as well as someone movers and shakers would trust if they wanted to sell their home privately and discreetly.
Outside of an experienced agent, you can also find pocket listings by:
- Calling top agents in your area: If you don't want to use a top agent, consider calling a few up instead. If you're pre-qualified and can prove you're a serious buyer, they'll probably be happy to let you in on their pocket-listing secrets.
- Tapping your own network: Reach out to friends and family members -- particularly well-connected ones -- and ask if they know anyone thinking about selling their home. There's a chance you can get in on the ground floor before they even list it on the open market.
- Networking in the community: Attend community events that you know agents, brokers, and local real estate investors will be present at. Strike up conversations, and try to get the latest on up-and-coming properties in your area.
- Trying a pocket listing service: There are also pocket listing services (like HomeQT, for example) that can connect you with pocket listings from brokerages across the country.
If you've been eyeing a particular home in the neighborhood, you can always reach out directly to the current owner, too. Find out if they'd be willing to sell (and at what price point). This strategy would probably work best with homeowners in retirement or those who have been there a while and could cash in big on their home's increased value.
How to sell a pocket listing
It probably sounds weird that a seller would want to keep their sale private, but it's actually pretty common.
For many buyers, privacy is the motivating factor. The seller could be going through a divorce, legal proceeding, or family matter, and a for-sale property would lay their dirty laundry out for the world. Some high-profile or wealthy individuals use pocket listings to avoid media attention or just to keep lookie-loos and other non-serious buyers from traipsing on their property and interrupting their lifestyles.
Pocket listings also give sellers more control. They can sell on their own terms -- choosing when, to whom, and at what price they're willing to let go of their property. If they're not in a rush to sell, a pocket listing can allow them to hold out for the highest price possible. They might even get a discount off their agent's commission because there's no marketing or extra work required.
Lastly, pocket listings are sometimes used as a way to test the waters. Would buyers be interested in the home at the price its sellers are hoping for? If not, fully listing and marketing the property may not be worth it to them at this time.
The new pocket listing policy from NAR
In late 2019, the National Association of Realtors (NAR) actually voted to ban pocket listings -- at least one form of them. Under the new policy, licensed member Realtors are required to list a property on the MLS within one day of marketing it publicly.
"Public marketing" can mean any number of things, from putting up a yard sign or flyer to sending out an email blast or posting about the home on social media.
With that said, pocket listings aren't dead. Agents can still keep private, exclusive listings. As long as they never technically "market" the properties, then they can keep them off the MLS and other listing services. Again, this might be a homeowner's preferred mode of selling if they're going through a divorce or legal matter or if they're a high-profile person who wants to keep their privacy.
The bottom line
Pocket listings aren't for everyone, but they do have some unique advantages for both buyers and sellers. Thinking of buying a new property and want a great deal? Pocket listings aren't your only option. Government foreclosures, REOs, and these resources on foreclosed homes can help, too.
And remember, physical property isn't the only way to invest. Check out our latest REIT and real estate crowdfunding deals for more ways to invest in real estate.