Up for Debate: Pocket Listings and Their Effect on the Industry

Posted on Sep 27 2014 - 4:29am by Zoe Eisenberg
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coming soonPocket listings--listings sold outside of the MLS—are gaining heat inside the industry. Far from a new concept, they are one of real estate’s biggest in-house controversies, with professionals from across the country taking different stances as to whether or not they help or hinder the market.

So what the heck is a pocket listing, anyway? These off-market listings are never entered into the MLS. Instead, the homes are marketed directly by the seller’s real estate agent or broker, who has complete control over the listing, thus keeping the listing in their “pocket.”

Some real estate professionals argue that pocket listings are harming the market by skewing the overall market image, as homes not listed in the MLS have limited exposure and make it harder to browse comparable homes and prices. Others are frustrated that pocket listings enable the listing agents to take in the full commission; MLS is not only a way to share property information, but also compensation between real estate companies. Brokerages that list homes privately will most likely be completing those transactions entirely in-house, collecting not only the selling commission, but also the commission reserved for the buyer’s agent.

Pocket listings are only allowed if the seller agrees, and those that are pro pocket listings argue that they enable privacy. Perhaps a celebrity or public figure will want to keep the listing quiet to prevent media attention. Or maybe they simply are trying to avoid hundreds of potential buyers traipsing through the home.

Related: Can't make up your mind on pocket listings? Check out our NAR Power Broker Roundtable where Steve A. Brown, Liaison for Large Residential Firms Relations, NAR, leads a discussion with a panel of brokers about the rise of these off-market deals. 

Often, a pocket listing is the product of a casual agreement between a seller and an agent: “If you come across someone who would want to buy it at the right price, then I would be willing to consider selling.”

Additionally, some sellers with commitment issues use pocket listings to “test the water” if they aren’t 100 percent serious about selling.

“Pocket listings are a good segment of our business,” wrote Heather Simmons Rand on the RISMedia Facebook page. “Regarding cons with agents taking in full commissions...we charge a flat rate for our pocket sales, much less than a full percent commission.”

Kristin Lueken, a Broker Associate with Sotheby's International Realty, uses pocket listings as a way to solidify a contract before the seller wants to go live in the MLS and other websites. Lueken lets her office agents know about the listings, alerts her buyers, and posts it on various social media outlets.

Lueken says she will make use of a pocket listing while she sets up official photographers, gets paperwork done and works on her marketing plan. “The sellers love the idea of possibly selling the home before the sign goes into the ground,” Lueken explains, stating that her sellers often enjoy the privacy of pocket listings.

Different states have different views on pocket listings. Tom Wemett ,Broker/Owner of Home Buyers Best Realty LLC in New York, explains that the New York department of state has a dim view on pocket listings.

“It’s is against regulations in New York state to deny a buyer and their buyer agent from viewing a pocket listing,” says Wemett, who noted that several years ago, there was a pocket listing outbreak on Long Island. One broker wanted to show another company’s pocket listing to a buyer but wasn’t allowed. Frustrated, they complained to the DOS, who then issued an opinion letter that said all property listed through a licensed real estate broker had to be available to a buyer and their buyer agent.

“They (the DOS) did go on to say that the listing broker didn't have to compensate the buyer agent,” Wemett notes, which can complicate things, as it leaves the buyer agent looking to the buyer for the fee or including the buyer agent fee in the purchase and sale contract.

While many pocket listings are eventually entered into the MLS, many are closed on without ever going public. While different brokerages have different views on pocket listings, the private listings have been gaining popularity over the past several years, creating a small market of their own.

Zoe_ThumbZoe Eisenberg is RISMedia's Associate Editor. When not searching the web for info on small-space living, Zoe can be found writing fiction and screenplays, cooking and drinking copious amounts of coffee.