Should You Buy Your Home with a Pocket Listing?

You’ve probably heard at least one story about a househunter losing out on several homes on the open real estate market and finally buying his/her dream home after pursuing a private listing. Off-market opportunities—properties not published on multiple listing services—are more common when competition for housing is fierce. Not surprisingly, they’ve increased 67% over the past two years. Going off-market certainly has attractions for buyers and sellers—but it’s no silver bullet, nor does it work for everybody.

Private listings are controversial. Sometimes called “pocket listings,” these opportunities risk violating Fair Housing laws because they may allow bias to creep into the market. In 2019, the National Association of Realtors banned pocket listings, but many brokers continue to offer off-market opportunities while adhering to the letter of the law.

They favor sellers. Most homeowners who go this route don’t need to sell and instead tell a broker, “If anyone’s interested in paying X amount for my house as is, I’ll sell.” And X amount tends to be high. Sellers know that exhausted, burned-out buyers will pay top dollar to avoid competition and heartache. Off-market sellers also like to set their own terms—eschewing prep work to make the property “showable,” refusing inspections and setting their own timelines.

Key downside to selling off-market: The pool of buyers is severely restricted, which could lower the chance of sale from around 90% to 50%.

The only advantage for buyers is avoiding competition. If you pay the asking price, you’ll never know if the seller would have gotten that much on the open market—but at least a bidding war did not drive the price higher. If you’re a first-time home buyer and in no hurry, the risk of overpaying isn’t worth the benefit of bypassing competition. The ideal purchaser of an off-market property is a mature buyer seeking a “forever home” who takes the long view that in 10 or 15 years, it won’t matter that he/she has overpaid.

How to go about it: If you’re a buyer—it’s as easy as asking your broker about unlisted properties. If you’re a seller—approach one to three brokers who do a lot of business in your area and tell them on what terms you’re willing to sell. They’ll have you sign an agreement to share the property with people within their network. If you’re serious about selling, make a backup plan to hit the open market if your place hasn’t sold in two or three months.