Learn How To Start Investing In Real Estate
Learn How To Start Investing In Real Estate

Lack of Housing Supply Results in Pocket Listing Trends

Written by Paul Esajian

Positive trends in the housing sector have reestablished the practice of “pocket listings,” as agents continue to reserve homes for certain buyers. While different than traditional conventions, that witness homes placed on the multiple listing services (MLS), pocket listings reserve select properties to facilitate the sale of expensive homes. However, luxury clients are no longer a niche market for this proposal. With demand outpacing supply, more agents are practicing pocket listing methods to please a broader clientele.

According to Richard Smith, CEO of Realogy and the parent company of several real estate brokerages, pocket listings were typically reserved for high-end buyers. High priced properties are kept secret from the general public, while brokers proceed to show them to people they expect to close a deal with. Exclusivity, however, almost made pocket listings irrelevant, as some believe the MLS is a better method.

“High-end sellers often don’t want to have the world coming to their property,” said Michael Izquierdo, a Los Angeles-based real estate agent and acquisitions manager. “When it’s put on the MLS, sometimes the next morning you see people standing outside the property, hoping to talk to the sellers.”

It appears, however, that the trend of pocket listing is making a comeback. No longer are these practices reserved for high society. The recent supply and demand crisis facing our housing market, in which demand greatly outnumbers supply, has made pocket listings more popular amongst more moderately priced homes. Los Angeles and Manhattan, in particular, have seen an increase in pocket listing trends. These locations have seen pocket listings for as little as $500,000.

Contributing to the recent trend, are those looking for a reason to move. According to Wei Min Tan, a real estate agent in Manhattan, “these are not motivated sellers. They’re saying, ‘Get me a good price.’”

Contradictory to those supporting the idea of pocket listings, are those who feel the practice harms the industry. Pocket listings in New York may violate the Universal Co-Brokerage Agreement, as it is only permitted if sellers insist.

Some believe that pocket listing remains in its own gray area. Some agents may use the ambiguity presented by pocket listings to their advantage. Agents may try to convince sellers to use pocket listings in order to double their commissions by acting as agent for both the buyer and the seller.

“That’s where it starts to get into the gray area,” said Neil Garfinkel, a counsel for the Real Estate Board of New York. “If an agent is putting their own economic interest ahead of the seller’s, it’s a violation of state law.”

The National Association of Realtors does not currently have a policy against pocket listings. This particular practice is often ethical and fair to both buyer and seller.