Benefits and Drawbacks of a pocket listing?

What are the benefits and drawbacks of a pocket listing? When do you recommend taking this approach?

 

A: There are occasions in which selling a home, “off-market” (not exposed to the wider buying public by keeping it out of the MLS) may make sense.

Sellers who do not have the time, energy and/or desire to prepare their home for presentation on the Internet and to the public may prefer the off-market route.

Sellers who prefer a higher level of privacy, wishing to limit access to their homes may choose this route as well.

The potential downsides include a more limited buyer pool, fewer offers and ultimately a lower selling price; likely more true for properties that are not located in the most sought-after locations than those that are.

Whether a pocket listing makes sense depends upon the particular property being sold and the individual needs of the seller.

A: Pocket listings take several forms, but all involve limited exposure, usually outside the MLS.

One benefit is that it protects the privacy of high-profile individuals and high-profile possessions. It also eases burdens on some households and allows sellers to stay in place—not disrupting kids, pets, ill residents, etc. These are the primary scenarios when I might recommend a pocket listing as being in the seller’s best interest. A pocket listing also creates exclusivity: Some argue buyers pay more if they think they are getting a special opportunity. It also speeds the transaction by avoiding full pre-market preparation. Finally, it does not trigger adverse days-on-market stats.

But there are drawbacks. Mainly, sellers will never know what they might have received from full market exposure and possibly multiple offers. Also, capable buyers come from many sources and pocket listings by definition limit the options. This only works in markets with low inventory relative to high demand. Limiting exposure discourages cooperation, and is “anti-consumer.” Pocket listings lack transparency, which may result in discriminatory practices. Some argue primary benefit is to listing agent or broker, who is more likely to represent both sides

This became an even hotter topic as the National Association of Realtors just voted to require all listings to be entered into the local MLS within one day of marketing to the public, starting May 2020. Will that decision be challenged? Will local MLS continue to allow sellers to waive this requirement? Stay tuned.

A: The National Association of Realtors’ board of directors approved MLS Statement 8.0, also known as the Clear Cooperation policy, at its meeting. The policy requires listing brokers who are participants in a multiple listing service to submit their listing to the MLS within one business day of marketing the property to the public. This new rule goes into effect on May 1, 2020 and will impact the number of pocket listings coming on the market.

Why is this Rule somewhat controversial? For years, “pocket” or “off-market” listings have been used in three primary scenarios, enabling sellers to test a list price for a property where relevant comparison properties are difficult to surmise, or to gauge pricing in a saturated market, or lastly the sellers are living in the house and prefer limited showings and/or more privacy during the sales process. It is common for agents to share off-market listings through their brokerages, agent networks, and other groups.

However, this can be perceived as insider-only knowledge and doesn’t always maximize the property’s exposure. This can be limiting for buyers not connected to those information sources, or those unfamiliar with the area. Sometimes the limited exposure of a pocket listing can shortchange the seller, or attach a false stigma that there is something wrong with the property.

In summary, MLS Statement 8.0 will help ensure the fiduciary duty of the agent which is to expose the seller's property to as wide an audience as possible so that they can obtain the highest possible sales price.

By SFGate