What is a Pocket Listing?
A select number of homes are sold before hitting the market. While it may be in the sellers best interest to list their home on the open market, some sellers opt to sell their home as a pocket listing or private sale. A pocket listing is not marketed to the general public. Instead it is marketed to a select number of agents and buyers. A pocket listing gives the seller the opportunity to test the waters before fully committing and allows the seller to be discrete while selling their home.
Pocket listings are also rare. Only 10% of the total number of listings nationwide at any given time are pocket listings. And, last but not least, pocket listings aren’t just for the rich and famous. They have benefits for the regular home seller too. However, since they also have their drawbacks, sellers should be sure to weigh the pros and cons.
What Are the Advantages of Pocket Listings for Sellers?
- Privacy: Whether they are a celebrity or just someone who desires a certain amount of discretion, some sellers just don’t want their neighbors or the public to know they are selling. They don’t want photos of their home on the internet and prefer only pre-qualified, serious, and vetted buyers tour their home.
- To test the market: If a seller only wants to sell their home if they get a desired price, a pocket listing is a great way to go. This allows them to see what the market will bear with little to no risk.
- Marketing: Buyers love when they think they can get something no one else can. Pocket listings have an air of exclusivity. Buyers will often pay a premium to buy something before it is marketed to the public.
- Possible lower upfront costs: When you put a house on the market, you want show it in its best light. That is why sellers often put a lot of money into the preparation of the house for sale. Depending on what the sellers are planning to do, selling the house as a pocket listing before the preparation begins can save the seller tens of thousands of dollars.
- To avoid a negative perception: Listing a property privately helps protect it from the possible stigma that can develop if it has been on the MLS for weeks or months and still hasn’t sold.
What Are the Disadvantages of Pocket Listing for Sellers?
- Missing potential buyers: Even the most well connected agent in the world does not know everyone. There is always a possibility that the perfect buyer for the house never even sees it.
- Never knowing what it could have sold for on the open market: The only way to truly know how much a house will sell for, is to put it on the open market. Putting it on the open market could result in multiple parties being interested in the house which could create a bidding war and drive up the price. While this could also happen with a pocket listing, it is much more likely to happen on the open market.
- Longer time to sell: A property that is listed on the MLS has the potential to be seen by millions. This drastically increases the odds of finding a buyer fast, an advantage you don’t have when you do a pocket listing. But that’s also what makes pocket listings ideal for home owners who don’t necessarily need to sell right away and can wait until they receive their asking price or above their asking price.
What are the Advantages of Pocket Listings for Buyers?
- Avoiding bidding wars: The market is intense and most great listing have multiple offers. A way to avoid getting caught up in a bidding war is to buy a house off market.
- More favorable terms: Since you are not bidding against the masses you are more likely to have favorable terms. This could include longer contingency periods, lower down payment, etc..
- Privacy: Buying a pocket listing will mean photos of the interior have not been posted online. It will also mean that nosey neighbors did not have the chance to snoop through the house during open houses.
What are the Disadvantages of Pocket Listings for Buyers?
- Never knowing if you overpaid: Without any real competition you will never know how the house would have fared on the open market.
- Less flexibility: Sellers of pocket listings usually do not need to move. Because of that they are often less motivated than normal sellers which means they are less likely to be flexible when it comes to negotiating the price or request for repairs.
- Difficult to find: Due to the fact that pocket listings are not publicly listed they can also be more difficult for a buyer or buyers agent to find. A good buyer’s agent will have a broad network of agents, as well as, other sources to find pocket listings.