When it comes to selling a home, most homeowners choose to market their property through a traditional way: by listing their property in the open market. However, sellers may prefer to use a lesser known strategy that provides increased privacy, the ability to test the market and more — what’s known as a pocket listing.
Success as a real estate investor hinges on your education, and that includes understanding the different methods a seller can list a property, including the nuances of a pocket listing. The best way to use a pocket listing is to know what it is, and how it applies to your investing parameters.
That’s exactly what we’ll look at in this article. If you’re ready to learn more about real estate investing and pocket listings, let’s begin!
What Is A Pocket Listing?
A pocket listing is an exclusive off-market property listing.
For a seller to list their property as a pocket listing, the property owner first informs the real estate agent about their intention to sell their property and states that they do not want it to be listed in the MLS or any public domain.
Because of this, the status of the property listed for sale is kept private. The duration for keeping the property status private may be until the property is sold or for a certain period.
A pocket listing is one way to keep the sale of the house entirely private, or test the market to see if the house can generate any interest at the seller’s asking price.
Advantages of a Pocket Listing For a Real Estate Investor
So what are the advantages of a real estate investor buying an investment property listed as a pocket listing?
Here are a few.
A pocket listing offers reduced competition to a real estate investor, because they have little cause for worry about being able to close a deal and avoid a bidding war.
In some cases, a particular real estate investor may be the only one aware of the property sale.
Increased chances of buying the property below the market price
Since competition leads to an increase in price, reduced competition may also cause the property's price to be lower than the actual market price when it is listed in the open market.
This is an advantage for a real estate investor, because he or she could buy the property for much less than if a bidding war had driven up the price.
Increased flexibility of the process
Properties listed in a pocket listing offer more flexibility in:
- price negotiation
- furniture negotiation
- moving out dates
- and more
Disadvantages of a Pocket Listing For a Real Estate Investor
Insufficient marketing information
With a pocket listing, a real estate investor will have to physically access the property since it is not listed on MLS.
Real estate investors may also not be able to go back and access the listing photos if the information on the pocket listing is not online.
The unwillingness of property owners to negotiate a price
Some property owners utilizing a pocket listing may not be willing to negotiate the price of their property, whereas owners who list their house through a more traditional route might.
Also, some may not be ready to sell and could be only trying to test the market to know the marketability of their properties, making it difficult to actually purchase the property.
How to Find Pocket Listings
How can you find pocket listings as a real estate investor? Here are a few ways.
Contact a Real Estate Agent
When looking for pocket listings, you first have to find a real estate agent with a strong network in the real estate industry and deep ties to your community.
If you already have your real estate license, it’s important to build connections so that if someone decides to list their home as a pocket listing, you can have access to it.
Try a Pocket Listing Service
Pocket listing services, such as HomeQT can help you find pocket listings from different brokerages.
You can find out from friends and family about available pocket listings by networking or attending events where brokers, agents and real estate investors may be present.
Pocket Listing FAQs
Here are a few commonly asked questions about pocket listings.
Are Pocket Listings Unethical?
Pocket listings are not unethical. It is up to the property owner to decide whether you want your property to be listed in MLS or maintain privacy.
Are Pocket Listings Legal?
Pocket listings are legal since you are dealing with a licensed real estate agent. You are not breaking the law by using pocket listings to buy or sell properties.
Pocket listings offer advantages for real estate investors — but not every pocket listing may be suitable.
Whether or not you decide to buy an investment property using a pocket listing in the future, ensure that you are continuing your education, so that when you come across less traditional methods, such as a pocket listing, you have the knowledge to make a wise investing decision.