What is a Pocket Listing?
A Pocket Listings is a Real Estate Listing that is not listed for public sale on the open market. Pocket listings are not uploaded into the Multiple Listing Service (MLS).
Pocket listings can also be called: Private Sale, Off-Market listings, Quiet Listings, Not in MLS, Sold Before Processing, or Whisper listings.
MLS is real estate industry lingo. The MLS is the public marketplace for real estate listings. It is controlled by a Local Board of Realtors and is an electronic database that member agents access to share listings.
Los Angeles County has several different “MLS-es” (made up that word). I am a member of the Combined Los Angeles Westside (CLAW) MLS. There is also the Southland Regional Association of Realtors (SRAR) for the Valley, and CRMLS for Orange County. It is common for surrounding regions to have reciprocity with one another- so if an agent in Los Angeles travels down to Orange County for business they can access Orange Counties MLS and vice versa.
From the MLS, listings are syndicated to the web. Those listings go to big consumer websites like Trulia, Zillow, Redfin, Movoto, Estately, realtor.com, and 1000’s of other sites- including local real estate agent’s own personal websites (like this one!).
The public has direct access to listings in the MLS, and can shop from home, whenever they want, without the help of an agent.
MLS Listings are worldwide. They reach anyone with an internet connection. According to Google, about 47% of the world uses the internet now. The ones that don’t have an internet connection, probably aren’t buying your property, unless they are on a meditation retreat in Tibet. People on the complete opposite side of the planet can see your listing once it’s in the MLS! I have received calls on my listings from England and France before.
I’m a Seller- Do I have to list in the MLS?
Understandably, some owners, for whatever reason, don’t want that level of exposure for their home. Even if you add a “Do Not Disturb Occupant” rider to your For Sale Yard Sign, sure as day follows night, some nosy homebuyer will wander around your property or even knock on the door with no appointment!
The good news is there is no law that says you have to list your home online or share it with the public if you don’t want to, so the answer is no.
How Common are Pocket Listings?
On Average, about 85% of the properties in Los Angeles sell on the open market, so the vast majority of home sales are public.
Most of the time, it is in the seller’s best interest to list their home on the open market, to get the most exposure, and the highest sales price, but there are exceptions.
Market conditions have the greatest impact on the number of pocket listing sales that occur each year. During Buyer Markets, where inventory is high and it is difficult to sell, the number of pocket listings decreases to 10% or less. During Seller’s Markets, where inventory is low and there is heavy competition among buyers, the number of pocket listings increases, as high as 30%.
I’m a Seller- Should I pocket list?
Privacy is the #1 advantage of Pocket Listing. If you don’t want your neighbors, family members, friends, boss, the media, or everyone else under the sun knowing your business and what you are up to then pocket listing might be right for you. If you are embarrassed about the condition of your home, or the situation that is causing you to sell, a pocket listing will help keep a lid on it. For celebrities, that live their lives in the limelight and headlines, sometimes pocket listing can help lower their profile.
Disadvantage- Less Exposure
Since you are exposing the listing to less potential buyers, this translates into a lower sales price. It is very difficult to get multiple offers with pocket listings. On average, I find pocket listings sell for about 5% less than the market value- sometimes 10% if rushed and in poor condition.
If you own some really expensive things, like a Rembrandt, Renoir, AND a Picasso painting, or have the hope diamond in your jewelry box- you might be nervous showing your home to John Q Public. Pocket Listings give you more control over who sees your house.
Not all buyers are equal. Sometimes you will encounter a highly motivated buyer that has no problem paying a big premium to get what they want. By limiting showings, you might miss this buyer. In addition, since it’s hard to get multiple offers, the sales price almost never goes above list. When you pocket list, you might not get the best price from your buyer, or the market value of your property. For properties that are unique and very hard to value- you may end up selling far below the market value. This can happen in rapidly changing markets during the transition between down markets and real estate booms. A real estate friend of mine says, “you can never list a property too low”. I have found this to be true for public listings. Buyers will step in and bid below market listings up to the market value. You don’t have the same protection with a pocket listing. You are dependent on your agent’s assessment of the property’s value.
Advantage – Less Preparation
If you want to sell your property quick, or don’t have the budget to prepare it- pocket listing might be a good solution. Some sellers take months getting their home ready for sale- painting, staging, landscaping, decluttering and packing, making repairs. All of these things can add up to a large expense. If you can sell the property as it is, without having to do anything, you can save precious time and money.
A lot of pocket listings are listed early before a seller is really ready to sell. If the property sells quickly, like in a few days with a cash offer- the owner might not have a plan in place for where they are going to move next. Hopefully, you can get extra time with a leaseback if you need it. I have heard of pocket listing sellers having to rent a hotel, which is costly because they had nowhere to go.
Advantage- No Days on Market
This is a big advantage of pocket listing. When you are listed publicly, the clock is your enemy, and it’s always ticking. Every day that goes by without an offer means you will sell for less money. Buyers get very suspicious of listings that have lingered on the market for several months. With a pocket listing, you don’t have to deal with questions like- have you gotten any offers yet? why hasn’t the property sold yet? Implying there is something wrong with your property.
Disadvantage- Longer Sale Time
Fewer showings and less exposure, mean longer sale times. Although the number of days it takes you to sell won’t count against you, it will take longer. Want to jumpstart the sale process? Lower the price a little to spark some interest.
Everybody wants what they can’t have. It’s human nature. The clubby feeling surrounding pocket listings makes buyers drunk with power, and agents aren’t immune either. Who doesn’t love to feel smarter than the average bear? And why shouldn’t you? You know about a house for sale that other buyers don’t.
Disadvantage- Less Excitement if Later Listed
The top agents in the neighborhood will know about your pocket listing. When you do come on the market, there will be less of a pop- because many of the buyers in the market who are working with these agents were already exposed to your listing as a pocket.
Advantage- Lower Commission
Owners can save money on real estate commissions by pocket listing. If you list publicly, you usually have to pay 5% or 6% sales commission total. Half of that is a buyers agent commission of 2.5% or 3%. If the listing agent represents both buyer and seller, I know a lot of agents who are happy to give a commission discount- usually 4% but sometimes less. If the seller is a lawyer or part-time real estate agent or has an agent friend who will work for a minimal flat fee or drastically reduced commission- they can get away with offering a buyer’s agent a normal commission and save on the seller side fee. Any way you slice it, the seller usually saves 1% or 2% on commissions when pocket listing, which gets them some of the money back they are giving up by not listing publicly.
Disadvantage- Dual Agency
The two most common causes for real estate lawsuits in California are disclosure and agency. If you are a dual agent, special care has to be taken that both sides are treated fairly. California allows Dual Agency, so it is legal. Real estate boards aren’t overly fond of pocket listings because they work against the spirit of cooperation that the MLS is based on. If there is a dispute later, the fact that the sale was a pocket listing may color an action in a pale light.
I’m an Agent- how do I market a pocket listing?
Pocket listings take away an agents #1 tool in marketing a listing- the MLS, so they are more difficult to sell than normal listings. What marketing you can do depends on what your seller wants. Marketing pocket listings is pretty much the same as what you do for normal listings except with no MLS more or less.
1- Ask the owner for permission to take pictures. Pictures will help you sell the thing.
2- Market the pocket listing to your Sphere of Influence. I always try to sell my pockets to my clients first. Sending out an email blast to your client database, and posting the pocket listing on your website is where I’d start. If you write a monthly newsletter, you could include it there.
3- Didn’t sell it yet? Reach out to other brokers in your office, and in the community that you are friendly with. I would print out a flier of the pocket listing and stick it in every agent’s mailbox in my office. You could also go to a few other offices if your company has multiple locations. If your company has a weekly office meeting- pitch it there. If you have an email list of agents you are friendly with, email blast them. Or if you want to add the personal touch, pick up the phone and make a few phone calls.
4- There are places online you can post a listing that are not the MLS- if the seller allows you. Zillow.com is the first place I would put it online. Many buyers use that site to search for off-market listings, so you will get some exposure there. Craiglist is your next best option. Put it on Forsalebyowner.com, because why the hell not?
5- Private listing groups. There are several different private listing groups for real estate agents to share pocket listings with one another. Top Agent Network, The Pocket Listing Service, and this very popular local Pocket Listing Facebook Group, are a few examples.
6- If the seller gives you permission, install a yard sign.
7- If the seller gives you permission, hold an open house. Place your directional open house signs out on Sunday.
8- You can try to advertise the pocket listing with a print ad or Facebook ad to generate some traffic- or buy buyer leads Zillow, Trulia, Realtor.com, Yelp, or some other place.
I’m a Buyer- where do I find pocket listings?
To find pocket listings, you can basically reverse engineer the marketing guide I gave above for agents. Don’t worry I will do it for you now. You might find this article I wrote about the “7 different types of pocket listings” helpful for understanding the reasons sellers decide to pocket list.
1- Ask a Real Estate Agent. Here is your new favorite question- “Do you have any pocket listings?”. Some real estate agent’s will find that question really annoying- that’s because they don’t have any pocket listings. If you ask enough agents, you are bound to find out about a few pocket listings. Keep in mind that if you are working with an agent, sometimes you can get yourself in a very awkward situation, where another agent knows of a pocket listing your agent doesn’t, they show it to you, and you want to buy it. Then what do you do? Real Estate Agents are still the best people to ask.
2- Ask Brandon Miller. Brandon is one of the hardest working title officers in Los Angeles and he is always posting pockets on his facebook. Title officers are one of the first people agents call when they have a new listing to check the Title, so they can be an excellent lead source
3- Drive around the neighborhood. Sometimes you can catch a listing being staged, a suspicious moving truck, or a seller fixing their place up to get ready to sell. Keep an eye out for a new yard sign going up with a “coming soon rider”.
4- If you can afford new construction- it’s no secret when a property is being built and is close to being finished. Poking around at the job site, you can usually get to the agent or owner after asking a few questions. You can look up the agent the sold the property last because the owner is their client.
5- Check strong agent’s websites for pocket listings. I know several agents/agencies that put all of their pockets online on their website. I can check what they have been visiting them on the web.
6- Search on Zillow
If you have a pocket listing or if you are looking to find one, let’s chat!