Every once in a while, I come across a letter in my mailbox or a neighbor will bring a letter to me promising “private placement” or “exclusive showcase” listings from a real estate agent. This service, promising privacy and discretion in listing your home, is commonly referred to as a pocket listing.
In essence, a pocket listing is one that does not place your home on the open market, or the multiple listing service (MLS). In the D.C. area, real estate agents’ MLS affiliate is known as the Metropolitan Regional Information System or MRIS. Pocket listings are not put on the MRIS, and as a result, the listing is not seen by an open market of buyers who are actively in the market. In return, sellers operate by a much more discreet set of rules to sell their home. The buyers who see the home are normally limited to the network of the listing agent and listing brokerage.
Let’s be honest, the theory behind a pocket listing is beautiful: full privacy, less stress in scheduling showings to the public, no open houses or signs on the yard, and a greater chance to dictate a price above market value to a buyer who truly wants your home. However, I would argue that the consequences far outweigh the benefits.
One of the greatest myths of a pocket listing is that a private listing will generate more buzz to buyers who have already seen everything that is on the market. However, common sense and a little bit of research into how an open market works will tell you otherwise.
For instance, D.C. is considered a seller’s market, meaning that the inventory of homes is outpaced often times by demand to purchase. Thus, there are at most times more buyers than sellers. When you put your home on the market as a pocket listing, you lose the majority of your audience by limiting the eyes that can see your home. Thus, the idea that fewer buyers may mean greater price is automatically incorrect because limiting your market automatically decreases demand for your home. A buyer who sees your home as a pocket listing will also have access to search for comparable homes, many of which may have sold for less than your asking price.
Moreover, the listing agent and listing brokerage are often times the most benefited by a pocket listing. Whereas the MRIS allows all real estate agents to see your listing, a pocket listing is only limited to the network of the listing agent and listing brokerage. This means that the total commission normally ends up in the hands of the agent and the broker. While this commission is certainly negotiable, putting your listing on the market allows for much more exposure and creates an atmosphere where a buyer’s agent will work harder to show your home.
Finally, one of the most important drawbacks for a pocket listing is the days it spends on the market. While pocket listings are not advertised based on the number of days on the market, it is common for many to sit without showings for months at a time due to the lack of supply of buyers from the listing brokerage. For many popular listings on market, it isn’t unusual to see a home go from active to contract within seven days.
In all, pocket listings are outweighed by their negatives; in truth, the one who benefits the most from this type of sale is the listing agent and listing brokerage. Even in a market as fast-paced as the D.C. area, it still does take an open market and as many eyes as possible on a home in order to sell it in the shortest time for the highest price.
Tim Savoy is a real estate agent with Coldwell Banker Residential Brokerage, Dupont Circle. Reach him at 202-400-0534 or firstname.lastname@example.org.