The Business of Real Estate

Pocket Listings: Protecting Your Clients and Commission Advance

August 4, 2017
Pocket Listings: Protecting Your Clients and Commission Advance

Pocket Listings: Protecting Your Clients and Commission Advance

By on Aug 4, 2017 in Blog | 0 comments

Anyone who has watched an episode or two of Million Dollar Listing is at least passingly familiar with the term “pocket listing.” These coveted properties are like the unicorns of the real estate world; they’re not listed on the MLS but, instead, hidden away from the masses and sold somewhat behind the scenes. There are many reasons this might happen (more on that below).

What Is a Pocket Listing, Really?

There is no official National Association of REALTORS® definition as to what constitutes a pocket listing — also sometimes called an off-market or office exclusive listing — but the industry widely recognizes the following examples:

  • A property that is sold so quickly the agent doesn’t even have time to complete the corresponding MLS paperwork
  • A home sold privately at the seller’s request
  • A home held back to promote exclusivity and drive up interest — generally reserved for premiere listings with impressive price tags
  • A property with an owner who only wants to consider serious buyers with confirmed financials

There are no NAR guidelines specifically outlining best practices for pocket listings, but agents are still ethically bound to get the best deal for their client, and that’s where issues can potentially arise.

How Pocket Listings Can Negatively Affect the Client — and Your Commission Advance

Generally speaking, the more interest you have in a property, the higher the likelihood you’ll sell that property at or above the listing price. Bidding wars are the gifts that keep on giving, and both agent and seller get to reap the rewards. A pocket listing makes that scenario far less likely as limited visibility almost guarantees a dramatically decreased pool of potential buyers. Keeping a listing off the MLS can also trip up the appraisal process as appraisers often use information from MLS sales as one of their two required data sources.

Are you still getting the best possible deal for your client if you go with a pocket listing? That’s debatable. Respecting the client’s wishes may tie your hands in terms of marketing, as well as influencing your final payday and any related commission advance, but a crafty agent knows that competitive offers are still possible. Your best bet is to be sure your clients understand the potential downsides associated with a pocket listing and leave the final decision up to them.

The Positive Side of Pocket Listings

While keeping a property off the MLS immediately rules out a huge demographic of potential buyers who might otherwise never see the property, for some listings, this more secretive approach can actually be a boon. Buyers with the budget for an ultra-luxe property could be drawn in by the idea of a home accessible only by the elite. It’s like gaining access to the VIP room and leaving the rest of the crowd lingering behind the velvet ropes.

For some sellers, a pocket listing is a passport to privacy. Celebrities and other high-profile people who prefer to keep pictures of their home off the internet are famously fond of pocket listings. It’s also a solid option for sellers who are simply not into the marketing fanfare that comes with a public listing, open houses and lawn signage.

There are plenty of pros and cons that come along with pocket listings, and brokers are understandably wary of what limited exposure could mean for their listing advance. It’s important to remember, though, that agents have an ethical and professional responsibility to clients. Sometimes a quick sale can mean not just a quicker commission advance but also an extremely satisfied seller, and that’s practically priceless.