Pocket Listings: Everything You Need to Know

Dwayne “The Rock” Johnson paid close to $28 million for a stunning Beverly Park show home through a pocket listing earlier this year.

And while some may feel this strategy is mostly reserved for exclusive luxury homes, the practice of pocket listings is prevalent across price points in our hyper-competitive real estate market.

“Especially in today’s market, [which is] just flooded with buyers and limited inventory, having access to off-market listings gives house hunters a leg up on the competition. Homes are selling in days with multiple offers, so even just getting to see a house before it hits the market gives buyers extra time to decide if it’s right for them. And sometimes simply being the first to make an offer gets you the advantage you need to win a home,” notes one agency COO in Southern California.

What is a Pocket Listing?

The term “pocket listing” was born out of the notion that the listing is kept in the “pocket” of the seller and their agent and not made public.

Sometimes called an “off-market listing” or “hip pocket listing,” a pocket listing is a property that isn’t listed in a multiple listing system (MLS) or another listing website like Zillow, Realtor.com, Trulia, etc.

It refers to a property where a broker has secured a signed listing agreement or contract with the seller but is not advertised.

Are Pocket Listings Illegal?

In a controversial vote at their annual conference in 2019, the National Association of Realtors (NAR) banned pocket listings—requiring licensed member realtors to list a property on the MLS within one day of marketing it publicly.

The rule, which went into practice in May of last year, specifically states: “Within one business day of marketing a property to the public, the listing broker must submit the listing to the MLS for cooperation with other MLS participants. Public marketing includes, but is not limited to, flyers displayed in windows yard signs, digital marketing on public-facing websites, brokerage website displays, digital communications marketing (email blasts), multi-brokerage listing sharing networks, and applications available to the general public.”

A proponent of the regulation, Redfin CEO Glenn Kelman felt it was an appropriate step to avoid discrimination. “We know that the policy is a crucial protection for consumers, especially members of minority groups who, research shows, are often the last to find out about pocket listings.”

All of this said, pocket listings are not illegal. Realtors are able to hold private, exclusive listings and keep them off of MLS as long as they never technically “market” the properties.

Agents can also use the window of time in which a property can be listed as “coming soon” to make an off-market sale, all while still complying with ban guidelines.

Last, non-NAR members aren’t bound to the association’s rules.

We asked investors if the recent move by the National Association of Realtors to make pocket listings illegal has impacted their ability to find profitable pocket listings:

“Since I’m a realtor and can access the MLS it hasn’t hurt me as much as others. I don’t use my license except to have access to the MLS.”
– Kenny Niles

“I wasn’t aware of this move. I think they will still happen behind the scenes.”
– Jen Hejaily

“I think the NAR is interfering, not helping investors or realtors. As long as the seller agrees, I see nothing wrong with pocket listings.”
– Micheal Hader

Advantages of Pocket Listings

Pocket listings can be the avenue of choice for celebrities or other public figures who desire privacy in their home sale. These sellers may not want lookie-loos trekking through their homes with no intention of putting in an offer.

Pocket listings can also appeal to buyers who want exclusive opportunities. Other times, a home may be uber-expensive or so unconventional that it may not perform well on the open market.

Sellers may choose a pocket listing with the hope of a smoother, faster transaction—when the listing agent has interested buyers. No showings to strangers.

No elongated process. No stale listing sitting on the MLS for weeks or months. Agents have also used pocket listings to generate interest and “pre-market” a home while the seller gets it ready for the market.

Seller Benefits

Privacy
Serious buyers only
More control: sell on your own terms
Opportunity to wait for the highest price possible
Can be used as a way to test the waters

Buyer Benefits

Chance to get a great deal
Potential for less competition
More flexible sales process
Creates new opportunity amid tight inventory

Agent Benefits

No marketing investment
Creative way to pre-market a property
Agent entitled to the full commission

We asked investors what they think the benefits of pocket listings are:

“Reduced or no competition for properties that are attractive investment opportunities.”
– Andre Ewing

“Typically there is a motivated seller who doesn’t want to deal with everything that goes along with a public listing (repairs, cleaning, showings, full commissions, etc), and you may not be bidding against others. Sometimes it’s nice for the seller and buyer to make an agreement into a contract and move forward with the sale.”
– Jen Hejaily

How to Find Pocket Listings

It’s worth your time to do some research. The goal is to find agents from large offices with strong networks—we’re talking lots of connections.

You need a pro who has access to a rich Rolodex of buyers, sellers, and other agents and brokers.

These opportunities are largely uncovered through word-of-mouth. In the words of one Texas agent, “Choosing the right realtor, with a large pool of peers to share pocket listings with can be incredibly advantageous. If a buyer chooses a well-connected realtor, they can view the home pre-MLS, then put in an offer the very first day it goes on the market.”

But that’s not the only way. You can also do your own networking and attend events in your community where it’s likely agents and other investors will be.

Talk to your own personal network of friends and family to see if they know of anyone considering selling their home. Social media and sites like Nextdoor are good avenues to explore.

You could even just reach out to notable agents in your area and see if they are willing to share any pocket-listing insight. Services that specialize in pocket listings, like HomeQT, can connect you with opportunities across the country.

We asked investors what the best ways to find pocket listings are:

“Work with realtors that understand the investor approach to property investing.”
– Andre Ewing

“Through realtors that we know, through companies like New Western, through friends and family, and by reaching out to developers that are juggling too much but know of a potential property for sale.”
– Jen Hejaily

Issues with Pocket Listings

Pocket listings aren’t for everyone. Not being on MLS significantly reduces your buyer pool which may lead to a lower sales price, and can take longer.

Lack of available information and photos may eliminate potential online buyers who cannot view a home in person. Also, if no seller is found or the deal falls through, there may be no backups as the property did not have visibility on the market.

Unfortunately, pocket listings have sometimes been used as a way to discriminate against specific buyers with some in the industry raising concerns the approach may violate fair housing laws.

“It’s part of the real estate industry’s dark, smoke-filled room where, when listings are scarce, real estate agents don’t market the home to everyone. They just market the home to their own network,” Kelmen observed.

Also, if a large portion of a neighborhood’s inventory isn’t publicly listed, it may skew local market data.

Agents and home buyers/sellers alike are unable to get an accurate picture of the final sales price for real estate comps—which can ultimately affect property values.

Regional Impact

According to data from Redfin, the use of pocket listings has doubled in cities like New York, Chicago, Orlando, Indianapolis and has quadrupled in Las Vegas—since 2018. “You’re starting to see just the openness of the housing market break down,” Kelman noted.

New York agent Chris Fry says he recommends public listings for most clients but some clients do refuse for privacy reasons. “I think there are 22 contracts out in the West Village that are going to be closing and I’d say probably a third of them to half of them were off-market,” commented Fry on local activity earlier this year.

Finding the Right Opportunity

Unlike most of the housing market, New Western isn’t facing an inventory shortage. As the largest private source of distressed properties in the nation, we offer investors a steady supply of value-rich, off-market homes for a variety of investment strategies. Our agents do the legwork and homework, so you don’t have to.

With unmatched local market knowledge, we consistently source the best deals for you. We also work behind the scenes to deliver a clear title and a seamless process to close.