Pros and Cons of Pocket Listings

Fair market value is that price a qualified, reasonably knowledgeable buyer will pay to a seller not under duress, after the property has been fully exposed to the market.
What was once an unusual way to market homes – outside of MLS – has become much more common. The question is: does this make sense for most sellers?

There are basically three reasons for trying to sell your home as what is variously called a pocket, off-market or off-MLS listing:

  1. Your highest priority and primary concern is confidentiality and privacy: you absolutely do not wish it to be public knowledge that you are selling your property.
  2. You don’t want to prepare your home for showings, have open houses or really make any effort at all. Perhaps you don’t even need to sell, but if someone is willing to pay you a certain price that you’ve already decided on, taking the property as-is, then you will be completely satisfied selling at that price.
  3. You believe that marketing and selling your home this way achieves the highest sales price, because buyers who do learn of it believe they’re getting a special inside shot at buying and step up aggressively.

Those are all valid reasons, but you should be aware of the potential trade-off you’re making.

One thing has become clear in the current red-hot market: it is not uncommon for one, specific buyer to be willing to pay significantly more than anyone else when they’re competing with other buyers. The reason behind comprehensive marketing, including listing the property in the Multiple Listing Service – which is probably the single best way of getting the word out to buyers and their agents – is firstly, to reach that highest paying buyer (in the effort to reach every possible buyer), and secondly, to orchestrate as big a competitive bidding situation as possible – or at least the fear of impending competition in that buyer’s mind. This typically brings about the best result for the seller.

Without comprehensive marketing, it is much less likely that this single buyer will hear of your home being for sale in the first place, as well as being much less likely that a dynamic competitive bidding situation can be orchestrated. In either or both of those cases, it is quite possible you will sell your home for less, and perhaps significantly less, than you could have.

If you do sell your home “off-MLS” in this market, it’s quite conceivable that you’ll find a buyer who will pay what appears to be a very good price. But there is simply no way to tell if you are getting the best price achievable, or even, by definition, current fair market value. This is especially true in a rapidly appreciating market. Might there have been somebody else, who, if they knew about the opportunity, would have paid more? There’s no way to know.

So, there are valid reasons to make the conscious decision to go the pocket listing-off market-off MLS route, as long as you realize that you might not get as high a price as you could have otherwise. What are not valid reasons are your agent or broker desiring, by not publicizing the listing to other agents, to “double-end” the sale (i.e. represent both you and the buyer) and thus earn twice the commission, or your agent preferring not to spend the time, effort and money to comprehensively market and show your home. In both those scenarios, your agent is putting their interests above your interests – which, by the way, is a violation of their legal, fiduciary duty – and you should find another agent to represent you in the sale of your home.

The quality of the agent working on your behalf—his or her competence, integrity,
work ethic and commitment to your interests—can make an enormous difference
in the outcome of your home purchase or sale: in money, stress, time, future happiness.