What A Pocket Listing Is, And Why You Should Avoid Them

Most agents are probably familiar with a pocket listing, but if you aren’t an agent, you may not know what that is. Even if you do know what it is, you may not realize why they’re a problem. A pocket listing is a listing that is temporarily exclusive, before a delayed release into the open market. At first glance, this can seem like a win-win-win situation. Sellers don’t need to do as much preparation and their agent can vet the buyers for them. Buyers don’t have to deal with nearly as much competition. The agent gets double the commission by representing both sides.

However, it’s not all upside. There are also plenty of cons to pocket listings, and they may outweigh the benefits. A big problem is that pocket listings simultaneously skew the market while not being governed by the market. Not listing the properties on the market reduces inventory values, which skews both competition and prices upward, significantly hurting buyers overall. You may think this benefits the seller, but it actually doesn’t. Because the pocket listing isn’t governed by this upwardly skewed market, the buyer of a pocket listing is likely to pay significantly less than the distorted high prices. In fact, because of the total lack of competition, they’re likely to pay less than the actual market value. For the agent, being a dual agent is a lot of work and stress, and it’s only increased by attempting to make it a pocket listing. In the event the seller suggests a pocket listing, this isn’t as much of an issue. But an agent truly can’t push for a pocket listing without breaching their fiduciary duties to the seller, which include taking reasonable steps to locate a buyer. Even if it’s on the seller’s suggestion, there will always be a conflict of interest when representing both sides that the agent will need to delicately navigate.

Photo by Sasun Bughdaryan on Unsplash

More: https://journal.firsttuesday.us/the-many-pitfalls-of-pocket-listings/89065/