Pocket listings have recently become a hot topic among real estate professionals. What is a “pocket listing” you ask? It’s when a real estate professional and a seller sign a listing agreement that permits the seller to place their property for sale without adding the information into a multiple listing service (MLS). Many home sellers are attracted to the benefits of a private transaction, however, the practice has some significant downsides as well. This post will take a look at the pros and cons of selling a home via a pocket listing.
The Pros to Selling as a Pocket Listing
The primary advantage of using pocket listings is privacy. There are many sellers who are not fond of the idea of having strangers wander through their homes, especially those who have recently experienced a loss such as a divorce or a death in the family.
If your client is undergoing a life-changing event, they’ll likely wish to sell their property as quickly and for as much money as possible. Pocket listings allow clients to bypass a MLS and place their home in a competitive niche market, which provides them with a jump start.
There are a number of cost benefits to pocket listings. The first is that properties generally sell for full price due to the fact that they’re listed in a defined, focused market. The second is that sellers are able to negotiate lower commissions when a MLS is removed from the transaction.
The Cons to Selling a Pocket Listing
1. Less Exposure
Pocket listings may only be beneficial to your clients if they’re familiar with the local market. If they’re not, listing their property pre-MLS may limit the number of interested buyers. There may be more buyers willing to use a MLS, which is a larger market. Lacking this type of exposure may cause a longer sale than desired and limit the variety of buyer types.
2. Less Competition
This may sound like an advantage, but less competition could conceivably damage a property’s selling price. If your client decides to bypass a MLS, it’s likely that you will find a buyer who will pay a good price for the property. However, because it’s a private transaction sellers miss out on the advantages of competition, which can improve the sale price and the terms of sale.
3. Fair Housing Violations
Your clients should be aware that choosing to sell their home as a pocket listing with the goal of screening legitimate buyers may result in significant consequences. This is a violation of both local and federal Fair Housing Laws and could be interpreted as discriminatory. Therefore, you should inform your pocket listings’ clients that they should do their best to remain impartial.
Are you interested in learning more about pocket listings? Enroll in our course, “Pocket Listings: Is this trend for you?“