We find that an exclusive listing agreement with a seller can be very helpful if the property is not quite ready for prime time but there may be buyers anxious to see it. Once the renovations/repairs are complete it certainly makes sense to enter the listing in MLS so that it gets the greatest exposure.

Interesting points, and some that had not occurred to me.

I currently have a "pocket listing". It's in a townhome community where I had a listing that sold earlier this year, and where many buyers missed out, requesting to be notified of any available units with a master on the main. I sent out a letter to the community, sharing the interest if anyone was planning to sell; I had two calls from two sellers.

I've shown one of these unlisted units 8 times to prospective buyers who missed out on my listing. Through networking and word of mouth, an agent from my company has shown it, as well as an agent/friend at another company. The other unit sold By Owner, to a represented Buyer.

In my experience, "pocket listings" are typically those where the seller is preparing, but not quite ready, to put their house on the market...and the agent begins promoting and sharing through networking and word of mouth. Are they that different from a For Sale by Owner? Again, in my experience, the "pocket listing" usually goes into the MLS (here in Atlanta we have two MLS systems!); that is the case in my example...we've had no takers so far and we're listing this week. NAR Stats indicate that most For Sale by Owners also eventually list the property.

Don't appraisers in most markets have their own independent system for sales and square footage data? Are they totally reliant on the MLS system, or do they cross-reference MLS data with their data? It seems to me that Realtors are more reliant on the MLS for access to comparable sales data than appraisers.

Thanks, Steve! Food for thought...looking forward to the conversation!

No matter the excuses from agents favoring "in house exclusive" listings, it does not serve the Seller. We all know the key to selling a home is exposure. What part of limiting a home's exposure serves the Seller?
This is not client-centric, it is all about being agent-centric. Real estate professionals should be all about serving others, not ourselves.

Pocket Listings , serve a purpose for the listing company for 48 hours to give the listing agent and the company a chance to run through the database, business is business. BUT , if the entire market didn't get to see the property then can you really beleive it sold at market price if it sells in that time frame. Secondly , after 48 Hours , no matter what the listing agent convinces the seller of they are at a disadvantage not being in the MLS . Highest Possible Price in the Shortest amount of time can't be achieved without the full market exposure.

Joe (Jim Young). Agree

How can an in-house/pocket listing possibly benefit the seller? With less competition the seller will probably not get as much as they would on the "open" market. Also, to say the agent on the other side is better trained than the average? I have yet to find a company that can claim they don't have their share of less than competent agents.
We owe our clients fiduciary duty, and that means it is more important to get the best outcome for our client than to benefit our own brokerages.

Hi, Steve. I love how you laid this out. One thing. You'll need to add to your assumptions that "the listing isn't an REO listing, where the seller's requirement is fair and equal exposure to all."

Or a short sale listing where the bank is asking that the property be sold at the fairest price possible.

Depending on the market conditions. I would definitely NOT recommend it for any of my coaching clients who are in HOT LOW INVENTORY MARKETS. I just had a client who sold her own listing with a full price offer. 3 months later another neighbor similar house sold for $50,000 because it was exposed to multiple offers. Even worse is the seller is extremely upset at my client the agent. If the seller's number 1 goal is to NOT to get the highest possible price. Then selling it without the open market is OK, but i'm pretty sure that's extremely rare. Keep up the good work KCM Team!

If for some reason your client wants a quick, no-hassle sale and is willing to risk getting less than full market value for their home, then maybe an in-office sale would work for them. Otherwise, do your job and put it on the MLS.

I really can't see any way a pocket listing serves sellers. I would say it serves buyers and their agents. I am a fan of the free market and it's effect on price. If a seller doesn't want to list and is getting ready I would bring them a buyer if I had one, but that would only serve my buyers best interests.

This is a great topic. I am celebrating my 15th year as a Realtor this summer. I am primarily a listing agent. The public and our clients depend on us for the most honest advice . The only way to really determine value is to make the real estate community and public aware of the listing, make sure you have a plan for showings, a certain amount of time on the market and a plan for multiple offer review. If the listing office secures the best, most qualified offer than perfect. If another office brings that offer, great. You do not know what the best offer will be until you know what everyone has to offer.

Showing the house before it is ready just gives the listing more days on the market (please see your MLS for rules on listing date/ MLS entry date) and ultimately hurts the sale momentum.

Once this is explained to the seller I have never had a seller say "No thank you. I don't want the most exposure possible that will ultimately lead to the highest net proceeds."

There are definite benefits to the seller with a pocket listing - 1) Less hassle with numerous showings 2) Most are not in a rush to sell and will get what they want for the house.

On the buying side, this is extremely frustrating. In my market there are a few highly desirable neighborhoods that seem to be going this route and many agents (and their buyers) are in a sense penalized for not being a part of that "exclusive network."

Less hassle with numerous showings? I thought a homeowner put their house on the market to sell. If they aren't serious about selling then it should not be on the market. Plus, it does not look good for the homeowner when the house sits on the market for a long period of time. Agents should not be wasting their time chauffeuring around buyers who aren't qualified to purchase the house. Homeowners should be happy with multiple showings.

While I would agree that a homeowner should be happy with numerous showings, there are some sellers that the thought of many showings simply overwhelms them. This is a nice alternative to it hitting the public. A pocket listing never truly hits the market, so from a public perspective, it does not really become a stale listing since the public does not see it unless directed by an agent privy to it. I don't like it that this is the way things are starting to go, but I think sellers are still getting top dollar by going this route. Six months ago this would not have even been an option in my market. As an agent, I do not like it, especially if you are not part of the network of agents that may have a chunk of these listings.

There's lots of shoulds here. Everyone has their own business models and ideas and methodology and goals when going to market. I often use pocket listings as a seller because I don't choose to go to the open market or I'm looking to make it available to a specific niche.

I beleive its ok with full disclosure to seller...but that full disclosure should include a reprint of this blog!
I do not beleive the seller is best served in this manner.

It's happening all over in our market. There is one company that doesn't put on the MLS and through their other marketing avenues, they tell buyers that call that they can see their exclusive list of homes but only if they work with a buyer's agent from their company. The principals of the brokerage are flippers and own a good portion of the listings. They have a high enough inventory of owned property that they are influencing the overall values in our market. Our MLS does require that they be entered at COE. That's an aside. The arguments pro in house listings is very weak. I could poke holes in each of those points supporting the practice. Fiduciary is the key word. It is very frustrating having such a lack of inventory and a low chance of getting an accepted offer unless it's high and cash. However, we do still have a fiduciary responsibility. Except in special circumstances, not putting a listing on the MLS is self serving and has little benefit to the seller.

Wow Steve! I was just talking to someone about this the other day. I think that homeowners need to be educated more by the agents that truly know what fiduciary responsibilities are. Even though we as Licensed Real Estate Salespeople have to follow the Code of Ethics, many walk a fine line. It comes down to greed and all of the nonsense about not cooperating with other Brokers just hurts the reputation of the Salespeople who have the best interest of the Homeowner and it definitely does not help the Seller. If someone needs to sell their home, it should be exposed to everyone!

At our company we have developed an internal communication tool that allows agents to communicate with each other based on needs vs. mass emails. Our agents used to get 200-300 emails a day. Mixed in with all of the emails about "who has a great electrician?" and "My sister is opening up a new hair salon", were emails from agents talking about new listings they had coming on the market. The problem was, that no one ever saw those new listings because agents were mass-deleting their emails.

The Agent app allows an agent to identify their interests, and then get notified when someone posts something that matches their interests. This is particularly useful in our current market where buyers are losing out on deal after deal. If they hear about something before it hits the market, they are all over it. It benefits both buyers and sellers.

There are benefits to doing both. When we post a listing on the app, buyers who
get a chance to preview know that the home is not yet available on the MLS,
this creates a greater sense of urgency. If they like the property and it
fits their needs, coupled with the fact that they may have lost out already in
a multiple bid or were not able to get into a property before it sold, they are
more likely to not only pay asking, but also will be less demanding during
the inspection and attorney approval period. There have been some
listings that have sold for asking from the app, but when put in the MLS
produced very few calls. One of our agents sold a condo in Wicker Park
through the app at full price (he was shocked) but only got one call when put
in the MLS ,and it was active for a few days. Another benefit is that the
seller does not need to accept an offer they are not comfortable with. If
nothing comes from the pre-marketing that they are satisfied with, they can
test the MLS driven market. But, if they do find a solid buyer early, it
alleviates multiple showings and the hassle that goes with them, open houses,
and the thought that they might actually get less and be in a weaker position.
So, because they don't have to accept any deal presented, I think that
this process puts the seller in the drivers seat during a sellers market even
more. At the same time, a lot revolves around the listing agents
ability to properly price the home for the benefit of the seller.

At the end of the day I think we are offering the sellers the best of both worlds.
If they want to participate in the pre-marketing through the app they
can. It's also a great way to test a higher price before blowing it by
posting in the MLS at a price that is already proven ineffective, at least in
our sphere which is the largest in most neighborhoods.

Make
sense?

Good way of covering Pocket Listings Steve. Quite smart actually.... I've heard many angles in the 25 years of being an agent and really the best thing to do is maintain the highest ethical standards as a Realtor with your clients. Make decisions from this point of view.

By coincidence, I drove by a couple pocket listings with my buyers and we came in to see and while my buyers are registering, the listing agent asked if they are represented by a realtor. My buyers said yes and he said "We are not cooperating with any realtor or broker". I was going to show my card but when I heard his response, we left. There were no buyers and the listing agent has to put on MLS and then no selling for 2 weeks, has to reduce the price a couple times. It will get sold eventually but the seller is missing out on the early exposure opportunity. I don't know if the seller knows that he/she had to sell low due to "pocket listing" and if they understand what's that meant.
Even in a seller market, the seller wants exposure and to avoid many people come in in too many days, they can have 2 days open houses only and by announcing on MLS people will show up all at once. But it is more of the listing agent wanting to share or not and double ended the commission.

Every so often this issue comes up and I think it's funny because in order for it to even be questioned, people have to have forgotten why MLS systems were created in the first place. Pocket listings harken back to the old days when buyers would have to go from company to company, like bees in a meadow, in the hopes of finding a company that had a home they would like to purchase. This is not good for buyers who would seek to have buyer agency representation. I think most people would agree that from the consumer's standpoint, it's in their own best interest to find a capable professional that they want to work with before starting the home search process. Because of MLS, access to inventory is no longer an issue, so it doesn't factor into the decision making process for finding the best buyer agent. Pocket listings could make access to inventory part of the equation again. So, is that good for the consumer? I say no. The entire profession said no loud and clear when they created MLS systems years ago. On the seller's side of things I think it's pretty clear to see the arguments against pocket listings. If you have to explain to the consumer why it's good for them, if it's not clearly self-evident, then you're probably not doing what's in their best interest. The argument of "more control" and minimizing the chances of a sub-par agent being involved on the buy side is a hollow one. The reality is that pretty much every company out there has their fair share of sub-par agents. That's a fact. And the statement that because demand is high it won't affect pricing is a guess at best. The market is either open or not. There is no gray area.

What I am seeing in my market is that pocket listing - non mis exposed listing are usually SHORT SALE LISTING where "the seller doesn't care how much the house sells for". That's the agent's mindset and excuse. As more and more equity sellers come into the market, we see less and less pocket listings, as MOST SELLER's want the most they can get. (We are seeing remarkably little showing availability,but it's still available.)

So let me get this straight, agents are sitting in front of their clients and telling them.. I'm not going to put your home in the MLS and this will benefit you by having it hidden from the general buying public so that you probably won't get the highest price in the least amount of time....no wonder we among the most hated and distrusted professions year after year in the Harris poll. (Google Harris poll of most hated professions)

Bottom line: If you are thinking about selling, be aware that pocket
listings restrict the audience for your property, and possibly your
maximum price. If that's fine with you, and you understand the potential
conflicts of interest when brokers represent both the seller and the
buyer (to keep full commissions on both sides) in a real estate transaction, then go for it.

Siloh Moses
Las Vegas Real Estate Wholesaler

Reduced exposure because of a pocket listing is not a benefit to the seller. When the home goes on the market openly, the sellers learn exactly what the response to their property will be in the current market -- I seem to recall that the buyer establishes the market value and price. So, how would the seller know what offers would or wouldn't be received if the majority of the market doesn't even know about it? And better yet, the agents that counsel a seller to agree to this approach -- how do they know the seller has gotten the best result? Are they super agents with a crystal ball? -- or perhaps they are just super at convincing a seller there's some benefit. Sellers aren't the market experts; we are. The agent is no longer serving or facilitating the sale for the good of the client; they are controlling it like they're the seller. To me, it's obvious the agents are trying to double-end because of a tight market or keep the biz within one brokerage. It never serves the consumer when monetary gain is foremost over ethical service.
One of my favorite sayings: "When getting help with money, whether it's insurance, real estate, or investments you should always look for someone with the heart of a teacher, not the heart of a salesperson." (Dave Ramsey, Financial Guru)

I can see why realtors are doing this. As long as the seller has full disclosure it makes sense. Properties are getting bid so far past a reasonable appraisal price that financing falls through. Just because someone offers 300k on a 250k listing doesn't mean it will appraise as such. Sellers get their hopes up. The buyer spends money on an inspection and appraisal and it falls through.

on the other hand the seller doesn't get the most money they could have.
I think expectations should be set and options laid out to the seller.