Does A Pocket Listing Help Or Harm Home Sellers?

I came across an article about the use of a pocket listing when selling a home that could very well shed some light on why closed home sales continue to increase, all the while new contracts continually post lower numbers. In case you missed our first article in this series, please see the start of my quest to expose the reason for the mysterious trend in the Tallahassee real estate market.

The term "pocket listing" is used to describe a situation where a real estate agent is marketing a home for sale, but not in the Multiple Listing Service (MLS).

If you are thinking about selling a home in the near future, you would be well served to form a strong opinion about the benefits and liabilities of working with an agent who boasts an inventory of pocket listings.

How A Pocket Listing Occurs

There are a few good reasons for a real estate agent to work with a homeowner as a pocket listing, but none of them are in the best interest of a home seller who wants to get the top dollar possible in a reasonably timely manner. Typically we see them occur when:

  • A seller decides to remove his home from the market after failing to sell, but tells the agent to show it any time somebody might be interested (Over-priced sellers who are tired of being for sale at a price the market will not bear)
  • A homeowner with a less than cooperative tenant in a home which has many more months remaining on the lease
  • Special circumstances ... like a home builder living in a home that she built and who would be willing to move if a high enough price was brought in an offer

I am sure there are numerous other reasons that could have been identified, but regardless of the reason for it, a pocket listing will not be as well exposed to potential buyers than will a home marketed with a progressive home selling plan.

Modern Real Estate Marketing

The internet has changed everything for those of us who market homes for sale.

If you are not actively promoting your listings online every day to the 94% of home buyers who use the internet, you are not working to get top dollar for your home sellers.

And if you are a seller who is considering working with a real estate agent in a pocket listing arrangement, you have to ask yourself if you are likely to get the same exposure as you would get working with full internet marketing plan for your home. I just don't understand the benefit of "hiding" your home from the market if you no longer want to own it.

Statistics from the Tallahassee MLS support the fact that real estate agents are attracting buyers through "other than pocket listings" on a greater scale today than in the past when there was no internet.

Realtors Selling Their Own Listing

In the real estate graph above, the blue line measures the percentage of homes sold by the company that had the property listed (meaning the real estate company worked with both the seller and with the buyer), while the red line shows the percentage of homes sold by the agent that had the property listed for sale.

Both trends are on the decline over the past ten years, and while many factors can be found to contribute to the declining double-sided transactions, the primary reason is due to the strength and speed of internet marketing.

We explain to our sellers that we plan on selling a home in 4 to 14 days, as 95% of ready buyers will see our listed properties on the internet by the 4th day of our marketing plan. There is no need to sell via a pocket listing when we can basically "tell the world" in less than a week.

Contracts Versus Closings

If we were seeing more and more pocket listings, it could explain the reason the MLS is reporting fewer contracts yet higher closings. Just as we addressed listings with zero days on the market in our last post, pocket listings would create an environment for more of these types of sales to occur. Obviously, the trend is going in the other direction.

The Mystery In The Tallahassee Real Estate Market

We have now examined the use of a pocket listing as well as zero days on the market listings, but we have yet to identify the reason for this new trend. Do our other readers have any other theories or suggestions? If so, let us know with a comment below and we'll use it to conclude this series of articles on the mystery in Tallahassee.


#1 By Robert Drummer at 7/11/2017 3:48 AM

Trying to put all sellers in the same group may be a mistake. There are different motivations for selling including: sell fast, sell for the most possible and/or keep it under the radar, among others.

You have to ask questions and listen to your seller's need before providing the marketing plan.

There is no one-size-fits-all in real estate so be open to alternative marketing options depending on what your seller's needs are.

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