There’s a raging battle happening over pocket listings again.
You know when you drive by a house and suddenly there’s a sold sign in the yard, but you never even knew it was on the market? That’s a pocket listing.
Pocket listings (also sometimes called quiet, off-market, or exclusive listings), are when a home seller lists their home with an agent privately, refraining from putting the home on the MLS. Essentially, these listings are kept private from both other brokerages and all buyers outside the listing agent’s network.
In 2019, the National Association of Realtors (NAR) introduced the Clear Cooperation Policy (CCP). It required all Realtors to place their listings on the MLS within 24 hours of signing a listing agreement.1 Enforcement of the CCP began in 2020.
After 4 years, this policy is coming under fire.
The groups who support the CCP argue that the policy promotes transparency and is better for both buyers and sellers.
The groups who are opposed to the CCP argue that the policy harms sellers and infringes upon their marketing options and free choice.
Who is right?
Well, the truth is, when a pocket listing works, the buyer, the seller, and the agent are all pretty damn happy.
The unhappy parties are the buyers who didn’t know about the listing and the agents who didn’t get their cut.
Let’s examine this tangled mess from each party’s perspective.
Pocket listings, from a home seller’s perspective
As a home seller, I think pocket listings are incredibly attractive. The reason that I’d choose to utilize a pocket listing is for privacy purposes.
First of all, I might not want my home posted online for all people to see. It invites the attention of looky-loos, potential burglars, and the judgment of my nosy friends and co-workers.
The privacy factor becomes an even bigger one for high paid executives, celebrities, and other luxury homeowners. I cannot imagine a single one of those people wanting to post their home on the internet.
Secondly, the MLS, Zillow, Redfin, and every other real estate platform will list the number of days a home has been on the market. This could bring financial harm in the form of a lower offer. Pretending that I’m in a “soft” sell position, where I don’t need to sell but I’d consider it for the right offer, posting my listing days is not beneficial to me in any way or form.
Thirdly, here’s the truth nobody wants to say out loud– if I list my home privately, I will save myself a lot of money by paying a smaller commission percentage. This is because the only time an agent will negotiate a commission percentage is when they’re acting as dual agents. Dual agents receive both the buyer commission and the seller commission. A dual agent might charge 4 % overall as opposed to 6 (which is split between 2 agents). As a pocket listing, my agent (who is acting as a dual agent), will make more money because they receive both the seller and buyer commission. Therefore, they will negotiate their commission with me. In the end, this could save me a lot of money. Not to mention, the communication is much clearer when there is only one agent involved, rather than two.
Fourthly, a benefit to sellers engaging in pocket listing is less foot traffic. Perhaps I don’t want to deal with the constant disruption of the broader market traipsing through my home. It’s an enormous pain in the ass and also a time-suck. Especially when you don’t know if other agents are showing your home for comparative purposes or just simply to appear busy.
Lastly, there is very little downside to listing a home privately. After all, if I want or need to, I can list it publicly later.
However, some will argue that if I list my home privately, I will receive a lower price. This is simply a game of risk. Sure, it might look like I’ve left some money on the table, but looks can be deceiving. If I knock 10,000 off the price of my home (compared to listing publicly), but instead I saved myself the hassle of foot traffic, I saved myself the hassle of negotiations, home inspections, etc, then who cares? To me, that 10,000 dollar loss wasn’t a loss at all. And I’d be happy that the buyer got a slight discount. And the buyer would be happy too. As would the agent… Which is my point– when pocket listings work, they work.
Pocket listings from a home buyer’s perspective
Now, as a buyer, I’m not always a fan of pocket listings. It creates intense fomo. Like- intense. And this (reasonable) fomo is one reason why I abhor the idea of signing a buyer’s agreement which resigns me to one agent only.
Let me tell you a short little story from before the CCP had been enacted:
We had been house-hunting for about 3 years. I was looking for something very specific. And there was a house in my hood that I loved but it wasn’t for sale. This house I was in love with, it checked all my boxes. I knew because it had been listed 6 years earlier. I had fallen for the house then but we couldn’t afford it. Now, I thought we could. And we were ready to settle down for a long time.
One day I was out on a walk when I saw several cars at the house and I knew that one of the vehicles belonged to a Realtor I knew (who wasn’t my agent). Now, the house wasn’t listed. But I just knew the owner was selling. We’d spoken with her before and she was from out of town, here for a job. It made sense that she’d leave.
I internally freaked out because I couldn’t call this other agent. I was committed to a family member out of a different brokerage. When my husband came home that day of my walk, I told him what I’d seen. He went and knocked on the owner’s door and asked her if she was selling. She was. But it was too late. She had signed an agreement earlier that day and it was all but a done deal. The buyer was serious and locked in.
Now, it sounds dumb, but I was super upset. I’d been so on top of it and I knew everything for sale. I’d made house hunting my fucking job. And I still lost out on the house that I’d loved- and because it was a damn pocket listing. Anyone who’s been house hunting for a long time knows how frustrating it can become.
But here’s the thing. It turns out that I know the person who bought the house instead of us. Her aging father lived a street over and his back yard butted right up to her new back yard. It couldn’t have been a more perfect fit for both of them.
Imagine how her story must differ from mine… the dreaminess of finding the most perfect house that allows her to care for her father and all she has to do is walk out her back yard! She never would have gotten that house if it had been on the open market–at least not at that price and definitely not without a shit-load more stress. Because I would have been bidding against her. And it would have sucked for both of us, regardless of who got the house in the end. And it would have been a lot more work by both our agents.
One could argue the seller left money on the table. Perhaps that is true. But given that the seller needed to move quickly and didn’t have time for hassles, I’d bet that she felt pretty good about her quick and easy sale.
So you see, these two very different buyer perspectives show that there is no easy answer where everyone is happy and where everything is fair.
And here’s the real kicker- Pretend that the CCP had been enacted and that agent had to post the house within 24 hours of signing a listing agreement. It wouldn’t have even mattered. Because that agent got the seller an offer faster than 24 hours anyway.
Before we examine the agent’s perspective, I do want to say one last thing. As a seller, having the number of days your home has been listed isn’t great because if a house sits, it increases the chances of a low-ball offer. But as a buyer– you’re damn right I want to see how long your house has been listed. This desire isn’t just for negotiation purposes either. It helps me gauge how hot/cold the market is and it helps inform my pricing strategy (this applies to agents of course too.) This is yet another example of how buyers and sellers have different needs and, in order to fix the system, the market should either be de-coupled or mediated. (see my post on re-framing the agent for more about this)
Pocket listings, from an agent’s perspective
Considering that same story from the agent’s perspective you can see how things also shift. The agent got a higher commission cut from the pocket listing, and also did less work.
If the agent had listed the house and it got into a bidding war, wouldn’t she get more money? Not necessarily.
First of all, I had a different agent. This means that the listing agent would have gotten 3% and my buyer agent would have also gotten 3%. Her commission would have been cut in half! Nor do we live in California, where bidding wars get out of hand. Here, things are relatively stable and even a bidding war between us wouldn’t have increased the price to some crazy amount.
As previously mentioned, sometimes agents will charge a lower overall percentage on pocket listings like that. So maybe she’d charge 4 or 5% total instead of 6%. But, even if the agent had that lower commission fee, she would have saved herself a ton of work and hassle.
Once the house is on the open market, that agent must deal with all the other agents who have clients asking to walk through. She must maintain communication with those other agents and that can take up a ton of time. Also, once offers are on the table, that agent must go over the detail of each and every one with her client. This is incredibly time consuming and stressful for everyone involved. It can also involve days and weeks of back-and-forth negotiation. Additionally, if offers come from other buyer agents, she might not know their buyers. Are they solid? Will they be unreasonable later? Will they find a way to back out? Lose their financing?
If the house sells as a pocket listing, the agent has much less work to do and certainly less worrying and stress to contend with. To any good and busy agent, that ease is worth a lot.
On the other hand, pocket listings mean that buyer agents are missing out on more housing options for their clients. Sometimes, this can be as frustrating for the agent as it is for the buyer. Especially when listings are scarce or the market is hot.
So who’s right?
I’m not sure that anyone can be right because each situation is unique and complex.
But the truth is, pocket listings are never going away. They exist even today, despite the enactment of the CCP.
There are homeowners out there who will never ever sign a listing agreement. They will tell an agent that they can bring a client over and if they can sell the house, great. They’ll sign that listing agreement when they have an offer in front of them and no sooner.
There are also instances like my story above– When an agent lands a great listing, they’re going to show their own clients within that first 24 window and if it’s a great house, they’re probably going to get an offer before they have to post the listing live. When the listing does go live, it will already have a “pending” status and the only thing other agents can do for their buyers is ask if those pending homes are accepting back-up offers.
So does it matter who’s right? I’m not so sure.
Thanks for reading,
HouseRat Zero
- I should remind you the difference between a Realtor and a real estate agent. A Realtor is a licensed real estate agent who has become a member of the NAR. Realtors must abide by NAR rules, regulations, and ethics. In exchange, Realtors get access to the MLS (multiple listing service). Not all licensed real estate agents are Realtors. The NAR says that Realtors are held to a higher standard than unaffiliated real estate agents. I call bull shit. In reality, the NAR is trying to force as many licensed agents as possible to joint their club so they can maintain their own interests. They get away with this because unaffiliated real estate agents are hamstrung– they can’t do their jobs properly without MLS access.
In 2020, NAR made 269 million from membership dues
In 2021, NAR made 284 million from membership dues
In 2022, NAR made 285 million from membership dues ↩︎