5 truths about ‘pocket listings’

Sellers will bite at the right price, but there are ground rules

When is a house for sale — but (sort of) not for sale?

When it’s what’s known in the real estate business as a "pocket listing," a house that may be marketed by an agent, though it’s not to be found among other homes for sale in a multiple listing service — it’s in the agent’s "pocket," instead.

They’re more common than the average consumer might think, according to James Kinney, vice president of luxury home sales for Baird & Warner Real Estate in Chicago, but they can be tricky for both the agent and the homeowner.

Five things to know about pocket listings:

1. Homeowners try them out for various reasons, but mostly they’re motivated either for reasons of privacy or because they’re not terribly serious about selling, Kinney said.

"Some of the sellers are what I call ‘fear of commitment’ people," Kinney said. "They’re not quite ready to sign a listing agreement and go official. They say, ‘Before I sign a listing, let’s date.’ "

Others are concerned about their privacy, he said.

"Sometimes, if they have a certain amount of notoriety, maybe a recent, very public divorce or have had a recent tragic accident, or if they’re just a famous person and they feel like part of the traffic (of potential buyers) they’re going to get are really just curiosity seekers, they’ll want a pocket listing," he said. "Sometimes, maybe they just don’t want their ex-wife to know the house is for sale."

2. A true pocket listing is when a homeowner and an agent have a casual agreement that if the agent comes across someone who might be a candidate to buy, the agent will bring that person to see the house.

"You might have a seller who says to the agent, ‘For the right price, I would sell, but I don’t want 800 people coming through on a Sunday or to deal with somebody who offers me a lowball offer because he thinks I have to sell,’ " he said.

"They say, ‘If I got the pie-in-the-sky great offer, I’ll move, so if you know anyone who wants to pay, say $3 million for this house, then we’ll show it and I’ll pay you a commission.’ "

It’s probably wise in those cases, Kinney said, that if the agent does produce just such a candidate, the agent and the homeowner sign a "single-client" agreement that covers just that instance. Not only does it entitle the agent to an agreed-upon commission should a deal transpire from the showing, but the homeowner also would know, upfront, the agent’s expectations.

3. Some sellers are more intent than those "maybe, someday" pocket listings, but they’re still not ready for all of the commitments of being listed, he said. They want the agent to engage in at least some marketing of the house — but to keep it out of the local multiple listing service.

In such a case, the agent might put the word out to other agents that the house is available, or maybe even advertise it (in general terms) online, but still without the agreement. Again, the "single-client" agreement would be in order for these cases, he said.

4. Then there are the cases where there’s a signed listing agreement and the homeowner wants active marketing but still doesn’t want to be in an MLS. Such listings aren’t true pocket listings, but they’re listings that are "exempt" from MLS rules, Kinney said.

Most multiple listing services have agreements with participating agents that require every listing to go into the MLS data base, so in exempt listings, the agent will need to obtain a letter from the seller that formally asks the house to be left out, he said.

5. Pocket listings can have their advantages, but generally they’re not the best tactic for most sellers — or for most agents, Kinney said.

The negatives for the agent are the aforementioned misunderstandings that might occur with sellers when the terms of what, exactly, the agent will do and how he or she will be compensated aren’t spelled out, he said.

It’s also frustrating when the agent has done some work to find a buyer but there’s nothing in writing to induce the homeowner to stick to the plan — and he ends up going with another agent, he said.

"Some agents go along with a pocket listing to ‘train’ a seller to be a seller," he said. In those cases, the homeowner has more time to get the house ready for the broader market and to get used to the idea of people coming into their home, he said.

And, he said, as a longtime agent and as a former president of a MLS, he said he’s personally sold on the notion of putting the house "out there" for as many consumers to consider as possible by putting it into the MLS.

"And if you (as a seller) think you’re going to keep it a secret that you want to sell your house" by going with a pocket or exempt listing, forget it, Kinney said.

"All you have to do is tell just one person," he said. "It will be out there. In reality, in two seconds, they’ll find out."

Mary Umberger is a freelance writer in Chicago.

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